Why sovereign research is critical to Australia’s economic future

The Trump administration’s attacks on research funding could see some of the world’s top academic talent head to Australia, but only if it boosts investment in research

Australia’s capacity to independently fund and conduct research – our sovereign research capability – is essential for our economic and national security. This is the view of one of Australia’s leading economists, Professor Richard Holden, Scientia Professor of Economics at UNSW Business School, and Nobel Laureate Professor Brian Schmidt AC, former Vice-Chancellor of the Australian National University.

The pair recently addressed the National Press Club of Australia, warning how Australia’s sovereign research capability, which spans numerous fields from quantum computing and green energy to water management and advanced manufacturing, is at risk and how it must strengthen in the face of global uncertainty.

However, shifting geopolitics – including US President Donald Trump’s hostility towards universities – also presents Australia with a once-in-a-generation opportunity to attract international research talent.

“What’s happening to US research and researchers is shocking,” Prof. Holden told the Press Club audience. “But this act of American self-harm is our opportunity. And it’s an opportunity that has never arisen before and may never arise again.”

As Prime Minister Anthony Albanese’s newly elected government seeks to supercharge national productivity, Prof. Holden argued that sovereign research capacity was the most underleveraged driver of Australia’s economic resilience.

“It’s not an overstatement to say that generating and applying knowledge is the cornerstone of rising living standards,” Prof. Holden said. “Countries that consistently do it better can provide their citizens with more public goods like health care and high-quality education, more opportunities for social mobility, and better lives.”

Prof. Schmidt said that ideas generated from research brought about prosperity and improved lives, mentioning breakthroughs in his area of astroparticle physics as laying the foundation for breakthroughs in consumer technologies like the iPhone. However, not enough was being done in Australia to support the long-term ecosystem from basic research to R&D intensive companies that Australia needed to boost productivity.

“We need entrepreneurs to take new ideas and work on the ‘good stuff’, but we also need to have a sea of ideas that is continuously replenished from which the innovators can fish for the next big thing,” Prof. Schmidt said. “This public-good basic research is a classic market failure and a place where governments need to intervene.”

A new research funding model is needed

Prof. Schmidt said Australia’s policy environment did not fully support our aspirations. For example, AUKUS was also meant to create advanced capabilities in the physical sciences and engineering. Similarly, our critical minerals strategy required expertise across geology, geochemistry and engineering.

“As someone who recently finished leading a university that worked in all of these disciplines, let me tell you that current policy environment is forcing universities to divest and do less in these areas, not more,” Prof. Schmidt said. “Infrastructure and equipment, materials, and buildings of these subjects are the most expensive of any research areas and are not paid for by the Commonwealth.”

Australia has had 15 years of disinvestment in research expenditure relative to GDP. Australian R&D spending was a third higher when Kevin Rudd was prime minister than in 2023, Prof. Holden said.

Learn more: Sustaining Australia’s economic success: A roadmap for the future

“Over these 15 years, business expenditure is down, and government expenditure is down,” Prof. Holden said. “Only university expenditure on R&D has risen, and that increase has almost entirely been funded by foreign student fees.”

He also said international students were incredibly valuable for Australian universities and Australia, helping fund better instructors and resources, world-class education for Australian undergraduates and generating financial benefits beyond the university campuses. However, cross-subsiding research with international student fees was unsustainable and strategically risky.

“When we have a huge misalignment between the source of revenues and the use of revenues well, we’re just asking for trouble, and trouble is what we’ve seen,” Prof. Holden said. “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 for the benefit of the nation.”

The Trump challenge and opportunity

Prof. Holden said Australia was not immune to the carnage in US higher education, which had included $2.7 billion in funding stripped from Harvard University.

The Australian Academy of Science estimated that more than $300 million in funding for Australian university researchers was already in jeopardy, he said.

“This has serious implications not only for the research involved, but for Australian researchers, especially those at earlier stages of their careers,” Prof. Holden said. “It will damage – perhaps shatter – long-standing and valuable collaborations between Australian and US researchers.”

But, Prof. Holden said, the attacks on research could also create opportunities here, with many leading scholars questioning the US as the “cradle” of intellectual innovation. If Australia had a robust and appealing research ecosystem, it could become a beacon for some of the world’s great minds. 

“With the US stepping back from its leadership role, Australia has a chance to step up,” Prof. Holden said. “In the coming months and years, many leading US researchers may be looking to move their labs, their families, and their lives abroad. If we act decisively, Australia can be as, or more, attractive a destination for those researchers as Europe.”

Securing or surrendering research sovereignty

Prof. Holden said Australia had a chance to become a leading country in high-tech, high-wage advanced manufacturing of precision goods. However, “ideas” – the kind generated through research – were just as crucial to delivering economic growth and raising living standards.

“A future 'made in Australia' can, and should be, one where we manufacture ideas, not just physical goods,” Prof. Holden said. “We live in a rapidly changing world – a world whose technological possibilities, economies, and social interactions will be shaped by the ideas we create and implement.”

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Prof. Schmidt said investing in Australian astronomy research facilities, for example, while expensive, had broader benefits. The challenge, however, was thinking about the returns in decades rather than election cycles.

“We provide great value to the nation through a range of spillovers that include some of the most significant Australian innovations, but a range of less direct things with respect to skills, capability, relationships, and public engagement – those all come from our global excellence,” Prof. Schmidt said. “Our past has demonstrated that public investment was actually useful, and we have plans to do even more into the future.”

Prof. Holden said the current “technological moment” Australia was living in would bring about significant change. While it’s uncertain exactly what the moment would bring, Australia could choose to meet the opportunity or miss it.

“We can secure our research sovereignty or surrender it,” Prof. Holden said. “I hope we’ll do the former.”