Universities Urged to Lead National Innovation Strategy Amid Economic Reform Talks

Australia’s Productivity Stalls as R&D Investment Hits Two-Decade Low

Australia’s economic trajectory has come under increasing scrutiny as observers highlight a prolonged stagnation in productivity growth. Despite ongoing national debates focused on industrial relations, tax reform, and migration, leading experts contend that the country has failed to prioritise a more decisive and transformative force, innovation. This oversight, they argue, poses significant risks to Australia’s long-term prosperity and global competitiveness. A senior academic with over three decades of experience in engineering, materials science, and university leadership across Singapore, the United Kingdom, and Australia suggested that research and talent had the power to transform industries and economies. With the rapid rise of artificial intelligence (AI), it was emphasised that the world stood at a pivotal moment, and Australian universities had a critical role to play in helping the nation achieve a leap in innovation and productivity.

It was pointed out that the Federal Government’s forthcoming Economic Reform Roundtable offered a timely opportunity to reframe the national conversation on productivity. Experts proposed that if Australia genuinely wished to reignite economic momentum, it must make bold investments in research, innovation, and talent, placing universities at the centre of its productivity strategy. Analysts drew comparisons with the United States, where approximately 85 per cent of long-term productivity growth was said to stem from technological innovation rather than labour or capital inputs. Professor William Press was cited as having observed that technology not only created wealth but also enabled further technological progress, thereby generating a cycle of exponential growth. It was suggested that Australia must initiate a similar virtuous cycle.

However, Australia’s current investment in research and development (R&D) was described as inadequate. At just 1.79 per cent of GDP, it had reportedly fallen to a two-decade low, significantly below the OECD average of 2.7 per cent. This underinvestment was linked to a $24 billion annual productivity gap, declining business innovation, and a growing risk of falling behind in frontier technologies such as AI. Despite having world-class universities and researchers, Australia was said to have failed to fully connect the relationship between innovation, productivity, and long-term strategy. Experts agreed that while the country possessed the right ingredients, it lacked the political will to act decisively. Universities were described not as peripheral institutions but as central to the innovation challenge, generating talent, producing research, and driving industrial progress. Analysts insisted that they should be treated as national assets and funded accordingly.

Examples from other countries were cited to illustrate how strategic innovation could yield transformative outcomes. India’s success in mobile banking and Estonia’s leadership in e-government were presented as models of how nations could leverage their strengths to leapfrog in technology adoption. It was suggested that Australian universities could similarly focus on high-impact fields such as AI, clean energy, mining, agriculture, and healthcare.

Policy experts recommended several measures to strengthen Australia’s innovation ecosystem. These included tripling the number of AI-skilled graduates by 2030, embedding AI literacy across all levels of education, supporting workforce reskilling through microcredentials, and enhancing collaboration between universities, TAFEs, industry, and government. Additionally, they proposed scaling up industry-linked PhDs, suggesting that 10,000 such scholarships could be supported annually through R&D tax credits. This, they argued, would foster stronger ties between research and business, with industry benefiting from PhD-level talent engaged in applied innovation.
A recent report commissioned by the Business Council of Australia, Cochlear, and Atlassian was said to have reinforced the economic case for such investment. It found that every $1 of government support for business R&D generated a $5 return across the economy, while also opening new industries and career pathways for students wishing to study in Australia.

Attention was drawn to the University of Wollongong, Australia (UOW Australia), which was described as already translating this vision into practice. Within its Faculty of Engineering and Information Sciences, researchers were said to be applying AI to real-world challenges, ranging from navigation tools for the visually impaired to ocean monitoring via satellites and predictive safety systems for infrastructure and maritime operations. These projects were presented not as theoretical exercises but as socially valuable innovations rooted in UOW’s research and carried out through international collaboration. The university’s reputation for impactful research and industry-linked learning was cited as a reason why it frequently appeared in discussions of the best universities in Australia and among the top universities globally. For students considering education in Australia, institutions in Wollongong were described as models of how academic learning could be aligned with practical outcomes.

It was stressed that Australia had abundant data, deep domain knowledge, and globally respected universities. Yet without decisive action, the country risked becoming an “AI colony”, dependent on imported technologies that may not reflect its unique needs or values. Experts concluded that the next industrial revolution should be powered by Australia’s own data, developed in its own laboratories, and delivered by its own graduates. Australian universities, particularly leading institutions such as the University of Wollongong, must be recognised not as costs but as engines of innovation, resilience, and national prosperity. Australia’s future productivity depends not on debate, but on bold investment in its own knowledge economy.

Editor’s Note

Australia’s prolonged slowdown in productivity growth demands urgent attention. While the national debate often centres on taxation, migration, and industrial relations, the more decisive factor, innovation, has been neglected for too long. The evidence is clear: technological progress, not incremental inputs of labour and capital, is the true driver of sustained prosperity. Australia’s investment in research and development sits at just 1.79% of GDP, well below the OECD average. This underinvestment has created a $24 billion annual productivity gap and risks leaving the nation dependent on imported technologies in critical areas such as artificial intelligence. If unchecked, this path could reduce Australia to an “AI colony,” reliant on systems designed elsewhere and ill-suited to national needs.

The role of Australian universities in reversing this trajectory cannot be overstated. Institutions such as the University of Wollongong are already demonstrating the impact of research-led innovation, from AI solutions for the visually impaired to predictive safety tools in infrastructure and maritime operations. These are not abstract projects but practical, socially valuable applications that prove why universities must be regarded as strategic national assets. What is needed now is a clear national commitment. Policy discussions must focus on four priorities: lifting R&D expenditure to global benchmarks, embedding AI literacy across all levels of education, expanding industry-linked PhD programmes to build innovation pipelines, and strengthening collaboration between universities, industry, and government. Each of these measures would directly enhance Australia’s competitiveness and resilience.

According to Skoobuzz, Australia must act decisively now, as innovation is crucial for future prosperity. We need to invest significantly in our universities, researchers, and graduates to realise this potential. The decision is whether Australia will lead the next industrial revolution or fall behind.