The ¡°poison¡± of cross-subsidies and ¡°15 years of bipartisan disinvestment¡± have produced a ¡°broken¡± research funding system in Australia, a Canberra forum has heard.

UNSW Sydney economist Richard Holden said Australia had taken a ¡°huge strategic risk¡± by allowing itself to become ¡°addicted¡± to funding research through international tuition fees at ¡°a time of global uncertainty and upheaval¡±.

¡°It places a ticking time bomb¡­beneath Australia¡¯s security and prosperity,¡± Holden told the National Press Club. ¡°Generating and applying knowledge is the cornerstone of rising living standards. Sovereign research capability is built over decades but it can be lost in months.¡±

Holden, immediate past president of the Academy of the Social Sciences in Australia, shared the stage with former Australian National University vice-chancellor Brian Schmidt to outline the key problems facing Australia¡¯s research funding system.

51³Ô¹Ï

He?said Australia¡¯s research and development spending was one-third higher, as a percentage of gross domestic product, during the Labor Party¡¯s last term in office. ¡°Over these 15 years, business expenditure is down and government expenditure is down. Only university expenditure on R&D has risen, and that increase has been almost entirely funded by foreign student fees.

¡°Cross-subsidies muddy the price signals that best guide resource allocation decisions. They produce a lack of transparency, and they create significant incentive problems. When we have a huge misalignment between the source of revenues and the use of revenues, well, we¡¯re just asking for trouble ¨C and trouble is what we¡¯ve seen.¡±

51³Ô¹Ï

He said research overheads such as buildings, electricity, scientific equipment and technicians absorbed roughly 55 cents for each dollar of direct research funding but the federal government only covered about 20 cents in the dollar ¨C leaving universities to bridge the gap using unreliable income from international student fees.

The problem was getting worse, because overheads were bankrolled from a ¡°common pool¡±?that had not grown in real terms while more entities ¨C the Department of Defence, the Medical Research Future Fund, state governments, businesses and philanthropic bodies ¨C provided direct funding for research.

¡°As more things get added to the pool, the overhead rate drops for everything,¡± he said. ¡°This is the very definition of a broken system.

¡°Funding research properly is not so much about more money, it¡¯s about the right money. By better aligning the incentives of universities and the desires of the public, we can turn what has too often been zero sum conflict into a mutually beneficial joint enterprise.¡±

51³Ô¹Ï

Schmidt, a Nobel prizewinning astronomer,?said Australia needed ¡°continuity¡± in its research funding arrangements rather than the ¡°year-to-year wallpaper job¡± of partial reform.

He said the current strategic examination of R&D was needed to design a ¡°complex ecosystem¡± for research ¨C for the first time since 2001 ¨C and then the government needed to ¡°operationalise the ecosystem¡±. But its instinct was to ¡°just do little bits and pieces of it, and then commission a new report a year and a half later and redesign it again¡±.

Schmidt said Australia was ¡°particularly bad¡± at backing research. ¡°Europe does this. The UK does this. China is doing exactly what I would tell them to do. We¡¯re going to either be left behind or we¡¯re going to pedal hard.

¡°We are at a place where I think we can design the system. I am hopefully encouraging the designers¡­to think big and think holistically. Then we naturally need to do it¡­then look at it after five years. Fix the things that aren¡¯t working, keep the things that are ¨C and provide some continuity.¡±

51³Ô¹Ï

john.ross@timeshighereducation.com