Coalition of the Willing: Innovation Policy for a Changing Australia

Jane O'Dwyer, 17 June 2025

In this Insight, Jane O'Dwyer, CEO of Cooperative Research Australia, argues that Australia's 2025 federal election has created a genuine opportunity to transform innovation from rhetoric into substantive economic policy. With a stable majority government and a more workable Parliament, the conditions are right to build effective coalitions for structural reform.

Jane highlights Australia's innovation paradox: while we excel at research (particularly in areas like quantum technology), we lag in commercialisation and translation compared to other OECD nations. Business R&D spending has declined for over a decade, and promising research often fails to bridge the "valley of death" between discovery and commercial application.

The current system is fragmented—over 150 programmes spread across 14 portfolios, with no central coordination. Innovation lacks a proper institutional home in Government, making it "everybody's problem and nobody's responsibility."

Jane sees promise in Minister Tim Ayres' vision, which links innovation to the "Future Made in Australia" framework and the Prime Minister's focus on productivity. She highlights proven models, such as the Cooperative Research Centres programme, which has delivered billions in economic benefits through sustained industry-research partnerships.

Jane's reform agenda centres on five key areas: establishing national innovation coordination, scaling successful translational models, reforming government procurement, supporting place-based innovation, and shifting cultural attitudes towards risk and failure.

Finally, Jane emphasises the urgency of action, noting that global forces—geopolitical shifts, technological acceleration, and climate transition—won't wait for Australia to get organised. The country has the capability and talent; what's needed is the political will to capitalise on this moment for generational reform.

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Something remarkable happened in the 2025 federal election. Australia returned a majority government with a historically large majority, the Senate became more navigable, and the crossbench remained in double digits. The Opposition, taking stock of the political landscape, is under pressure to edge closer to the centre.

For the first time in many years, there is a genuine opportunity to move beyond the oppositional politics that have hindered structural reform. This new parliamentary composition—more diverse but potentially less fractious—opens the door to building coalitions of the willing for major national reform.

Nowhere is that opportunity clearer, or more urgent, than in innovation policy. For too long, Australia has treated research and innovation as ‘nice-to-have'. If we are to solve our productivity challenge and position Australia well through an era of rapidly changing geoeconomics and geopolitics, that must come to an end. It’s time to declare innovation as a core economic policy and build a system that delivers prosperity, resilience, and improved productivity.

As Dr John Howard argues in his paper, Innovation Policy Design, innovation in Australia has become “rhetorically central but administratively marginal”. It is a word used often, but defined loosely—“a banner for consensus that evaporates as soon as concrete action is required.” This vagueness has real consequences, diffusing responsibility across the system and allowing inertia to masquerade as strategy. If we are to grasp this political moment, we must also confront the structural ambiguity that has long undermined innovation policy in this country. 

Innovation is Economic Policy

Australia’s long-term economic success hinges on key questions, including: can we turn more of our excellent research into real-world outcomes? Can we commercialise ideas, build new industries, and compete globally across a broader suite of industries?

That latter question should now sit at the centre of economic strategy, and there are signs of that happening as the Government turns its focus to productivity. The Commonwealth should set a clear national target for R&D intensity—3% of GDP is a highly ambitious but worthwhile goal—and embed innovation metrics into core economic reporting.

 This isn’t a radical proposition. It is economic common sense. Countries that compete and thrive are those that invest in innovation and make choices in that investment. They have more diverse economies as a result. We only need look to our near neighbours in Singapore, and our major trading partners South Korea, Japan, the United States and the UK see it. We know we need to do the same—but we haven’t acted on it on a national scale.

What’s Holding Us Back?

The diagnosis is clear, and it’s been repeated in review after review.

Australia excels in research and, in some areas, including quantum, is among the best in the world. But our performance on translation, adoption, and commercialisation is among the worst in the OECD. Business expenditure on R&D has fallen for over a decade. Collaboration between researchers and industry is low. Promising ideas often fall into the “valley of death” between research and commercial scale.

Our innovation funding landscape is fragmented: over 150 programs spread across 14 portfolios, with no central strategy. That is just at the Commonwealth level. The R&D Tax Incentive, our largest innovation policy tool, is blunt, complex, and could be better targeted. Government procurement—a powerful lever for early-stage innovation—is not being used effectively. And critically, we haven’t prioritised long-term, mission-driven collaboration between government, business, and research institutions.

The conceptual and structural gaps run deeper still. As Howard highlights, innovation lacks a home in the machinery of government. No department has formal responsibility for it, and AAOs don’t even mention it. Innovation is “everybody’s problem and nobody’s job.” 

Government sees itself as a funder of R&D and commercialisation, rather than a powerful driver and participant in innovation.

A Moment of Change—and a government prioritising productivity

At last month’s Collaborate Innovate 2025 conference, the new Minister for Industry, Innovation and Science, Senator the Hon Tim Ayres, laid out his vision. “Applied research,” he said, “is fundamental to achieving Australia’s big, transformational, national interest goals… It is the bedrock of strategic capability.”

The Minister understands that innovation is not a sideshow but a sovereign capability. Ayres called for “coordination, delivery and impact” and pledged to “join up our research and innovation system with our Future Made in Australia framework.” The significance of this linkage cannot be overstated—it signals that research, transition, and industrial policy are not separate pillars but part of one national mission.

That clarity is also reflected in the momentum building around the Strategic Examination of R&D. Established to take stock of and improve a fragmented system, this changed political landscape and a Prime Ministerial-led focus on improved productivity, meant it has the potential to be a blueprint for once-in-a-generation reform: embedding innovation as a core function of government, aligning incentives and responsibilities, and supporting a system that serves future generations.  

The Prime Minister’s Productivity Round Table, announced in his National Press Club address this week, needs to include those who represent Research and Development and Commercialisation in Australia. They are the bedrock upon which Australia will build a more diverse and productive economy.

What Works—and Where to Build

We already have some proven tools in hand. The Cooperative Research Centres (CRC) Program, now more than 30 years old, is one of them. It has delivered billions in economic benefit by bringing industry, researchers, and government together to solve problems—whether in advanced composites for aviation, clean energy, rural innovation, or medical technology.

These are not theoretical successes. They are real-world impact stories:

• The CRC for Advanced Composite Structures laid the groundwork for Boeing’s $5 billion Australian manufacturing contract.

• The Data to Decisions CRC gave rise to Fivecast and NQRY—companies using AI to protect national security agencies around the world.

• The HEARing CRC helped Cochlear in its journey to become a global medtech leader with over $20 billion in exports and 5,000 employees.

What do these models have in common? Long-term partnerships. Industry-led problem definition. Shared risk. Focus on translation, not just discovery.

This is what works. And it’s where policy should now focus: refining and scaling what we know delivers impact, being unafraid to try new things, and to taking strategic risks.

A Coalition for Change: What Policy Must Do

If we’re serious about structural reform, then there is some low-hanging fruit. There has been consistency in resolution at the past three National Innovation Policy Forums that Cooperative Research Australia has hosted, bringing together business, research, government and boundary-spanning organisations:

1. Establish a national innovation coordination mechanism.. One body with the authority to align strategy across portfolios, States, and to reduce duplication, and track system-wide outcomes.

2. Scale and sustain translational models. Update and invest in what we do well – for instance, lifting the CRC Program to $250 million. Embed the models of Australian collaboration across portfolios—health, defence, environment—not just industry.

3. Reform procurement. Introduce a national Small Business Innovation Research (SBIR)–style program to create early markets for Australian innovation.

4. Fund innovation precincts, Regional research hubs, and place-based collaboration. Support Indigenous-led innovation, such as that pioneered by Ninti One and the Desert Knowledge CRC.

5. Change the culture. Embed innovation in education, celebrate success, and de-stigmatise failure. This isn’t about startups alone—it’s about the national mindset.

 These are not niche ideas. They are the foundation of a modern economy.

 Who Leads the Coalition of the Willing

The makeup of the Parliament and the potential within it move towards a more collaborative style of politics, gives means the Government can build a coalition of the willing across party lines, empowering the Commonwealth to use its convening power to shape our national agenda and culture. But the coalition of the willing must go beyond that.

To succeed, we need to harness the States and territories to encourage a coordinated and complementary approach, businesses willing to co-invest and take risks, universities and research institutions prepared to align with national missions and a public service that invests in policy innovation, enabled well beyond policy administration.

Australia has missed too many innovation moments. Let’s not miss this one.

We have a rare political window to fix the system—to turn innovation from a buzzword into a national capability. That means investing in what works, aligning around shared goals, and building a culture that rewards doing, not just talking.

The world is not waiting. Geopolitical shifts, technological acceleration and climate transition are tectonic forces. Our innovation system, our economy, and our community must be ready.

We have the capacity, talent and wealth to act. And for once, we might have the politics.

Now we need the will.

#InnovationPolicy #AustralianEconomy #Productivity #R&D #FutureMadeInAustralia #PolicyReform #ResearchCommercialisation