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As we start to return the economy to growth, it is tempting to focus only on measures and investments that will deliver jobs in the near term. This would be a mistake.

In parallel with that important task, we must lay the foundations for the future industries that will drive Australian jobs and prosperity over the medium to long term.

In the debate over international student numbers and government funding, it’s easy to forget that Australia’s universities do more than train graduates and generate export dollars. They play a central role in creating the nation’s new technologies and the intellectual property which will underpin our future successful companies – the next Cochlear or ResMed. As universities face a funding crisis and government seeks to prioritise new and competing demands in the face of mounting national debt, we ignore this at our peril.  

More than $7BN is invested into both pure and applied research at Australian universities every year. This investment has built globally competitive institutions and world-leading research capabilities. Only the US and UK had more academic institutions in the top 100 in the recent QS rankings.

This investment should have sponsored a thriving deep-technology ecosystem. Yet we have not managed to replicate the successes of the US and the UK in bringing new technology from the university bench to commercial success at scale.

Why not?

It is easy to blame funding. More money would help, yes, but there are also tough reforms needed to drive real change.

The issue is not in knowing what the technologies are – pick up any recent innovation report. We know they will be in clean energy and green manufacturing, AI and quantum computing, electroceuticals and biotechnology – all areas where Australia has strong research capabilities.

Nor is it in a shortage of inquiries into our innovation system. We have received well considered and practical recommendations from numerous officially commissioned reports, which have consistently pointed to the need to define clear priorities and adopt an integrated investment strategy to ensure that Australia remains globally competitive.

Yet too often, implementation has been piecemeal as vested interests have resisted wholesale change.  A national innovation system needs to be integrated all the way from mechanisms for government funding of research at the front end, through to the attraction of growth capital for new technology companies. 

As funds become scarcer, they must be better directed. The current crisis gives us an opportunity to get it right.

Our work at IP Group with leading universities in the UK, US and Australia including Oxford, Cambridge, Princeton, Columbia and the Group of Eight has led to the following conclusions on the actions that we should take in Australia:

We must better align the mechanisms of university funding with likely successful outcomes. We should be unafraid to prioritise investment into areas aligned with national priorities and to reward commercial as well as academic success. This includes funding translational research to ensure that the results of pure science work are accessible to industry partners.

We would do well to enhance the incentives for individual researchers to look beyond the university and engage with industry partners.  Contributing to new spinout companies should be viewed as an important part of the role of the academic and recognised through financial reward and opportunities for career advancement.

We must continue pursuing closer links between universities and experienced investors willing to fund early-stage spinout companies. There is a clear opportunity for government to assist further with appropriate and cost effective changes to the taxation and regulatory regimes for early investment vehicles. 

For a good example of what is possible, we can look to the UK.  It has created a thriving deeptech ecosystem through measures including the creation of UK Research and Innovation and Innovate UK to align research and innovation priorities, providing tax incentives to attract new capital to the sector through the Enterprise Investment Scheme, and the creation of British Patient Capital to provide funding support for the venture industry.  

As a result, in 2019 the UK saw £1.24B (A$2.4B) invested in 334 university spinout companies and the emergence of a growing number of deep technology unicorns. In contrast, we estimate that in Australia we saw less than A$100M invested across fewer than 30 companies.

As we emerge from COVID, growth will be essential to relieve the burden of debt on our children’s generation.  Alongside shovel ready infrastructure and manufacturing projects, let us also refine our approach to university research.

Building future industries takes ambition, imagination, long-term patient investment and a concerted effort across government, industry, universities and the financial sector. We should seize this moment to do so.

 

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Dr Michael Molinari is Managing Director, IP Group Australia