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Higher Education Support Amendment (Australia's Economic Accelerator) Bill 2022



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BILLS DIGEST NO. 60, 2021-22 31 MARCH 2022

Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 Dr Hazel Ferguson

Social Policy Section

Contents

Purpose of the Bill .............................................................3

Background .......................................................................3

Australian Government expenditure on research and development ....................................................... 3

Table 1: Australian Government research and development expenditure and percentage of GDP, years ending June 2014-2022 ($ million) ........ 3 Australian Government funding for university research ..................................................................... 4

The dual funding system .......................................... 4

Table 2: Australian Government higher education research expenditure, years ending June 2014-2022 ($ million) ...................................... 4

Funding for research collaboration and translation ................................................................ 4

Total higher education sector research and development expenditure .......................................... 5

Total expenditure and source of funds ..................... 5

Types of activity and main fields supported ............. 6 Table 3: higher education expenditure on R&D by type of activity, 2014-2018 ($ billion) ................. 7 Recent Australian Government research policy ......... 7 Low levels of research-industry collaboration .......... 7 Coalition Government policy 2013-2019 ................. 8 Table 4: research commercialisation outcomes, 2017-2020 ............................................................... 9

Coalition Government policy from 2020 .................. 9 The University Research Commercialisation Action Plan ............................................................... 10

Date introduced: 17 February 2022

House: House of Representatives

Portfolio: Education, Skills and Employment

Commencement: The day after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at March 2022.

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Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 2

University Research Commercialisation Action Plan ........................................................................ 10

The National Industry PhD Program ....................... 11

The AEA Program ................................................... 11

Committee consideration ................................................ 12

Senate Standing Committee for the Selection of Bills ........................................................................... 12

Senate Standing Committee for the Scrutiny of Bills ........................................................................... 12

Policy position of non-government parties/independents ..................................................... 12

Position of major interest groups .................................... 12

The value of research translation funding for universities ............................................................... 12

Relationship to the broader innovation system ....... 13 Financial implications ...................................................... 13

Statement of Compatibility with Human Rights ............... 14

Parliamentary Joint Committee on Human Rights ... 14 Key issues and provisions ................................................ 14

Funding provisions ................................................... 14

Administrative arrangements for AEA program ....... 15 The research commercialisation strategy and investment plan ..................................................... 15

The research commercialisation strategy ............. 15 The investment plan ............................................. 16

The AEA Advisory Board ......................................... 16

Purpose ................................................................ 16

Membership ......................................................... 16

Disclosure of interests .......................................... 17

Renumeration and allowances ............................. 17

Annual reporting .................................................. 18

Priority Managers ................................................... 18

Disclosure of AEA program information ................... 18 Concluding comments ..................................................... 19

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Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 3

Purpose of the Bill The purpose of the Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 (the Bill) is to amend the Higher Education Support Act 2003 (HESA) to enable grants to be paid to universities and other eligible bodies through the National Industry PhD Program and Australia’s Economic Accelerator (AEA) program.

The Bill also details administrative arrangements for the AEA program, including an Advisory Board, research commercialisation strategy and investment plan, and annual reporting requirements, and creates a new offence relating to inappropriate disclosure of program information.

Background

Australian Government expenditure on research and development In 2021-22, Australian Government expenditure on research and development (R&D) is forecasted to be $11.8 billion across 12 different portfolios.1 This includes major investments in national science research centres and agencies such as the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and business support through the R&D Tax Incentive, as well as support for university research, which is the subject of this Bills Digest.2

As shown in Table 1 below, the forecasted 2021-22 expenditure is slightly below 2020-21 expenditure in nominal terms, but otherwise above recent years. Despite this, spending has not kept pace with growth in gross domestic product (GDP), with R&D expenditure reaching a low of 0.51% in 2019-20, the lowest recorded since the beginning of the data series in 1978-79, with some limited recovery since.3

Table 1: Australian Government research and development expenditure and percentage of GDP, years ending June 2014-2022 ($ million)

2014 2015 2016 2017 2018 2019 2020 2021

(forecast)

2022

(forecast)

R&D expenditure (nominal)

9,838.0 9,781.2 9,593.2 9,517.3 10,255.9 9,968.2 10,321.3 12,016.0 11,831.8

R&D expenditure (inflation adjusted, 2019-20 dollars)

10,848.4 10,844.4 10,694.1 10,229.4 10,818.0 10,167.5 10,321.3 11,694.4 11,573.0

Nominal expenditure as a percentage of GDP

0.62 0.60 0.58 0.54 0.55 0.51 0.52 0.58 0.56

Source: Department of Industry, Science, Energy and Resources (DISER), Science, Research and Innovation (SRI) Budget Tables, December 2021, Sector Table.

1. Department of Industry, Science, Energy and Resources (DISER), Science, Research and Innovation (SRI) Budget Tables, December 2021, Foreword; R&D Table and Sector Table. 2. DISER, Science, Research and Innovation (SRI) Budget Tables, Foreword. 3. DISER, Science, Research and Innovation (SRI) Budget Tables, Sector Table.

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Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 4

Australian Government funding for university research

The dual funding system Undertaking research is a condition of registration as an Australian university.4 The contribution to this investment from the Australian Government is provided through a ‘dual funding system’, comprising:

• performance-based research block grants (RBGs), made up of:

- the Research Training Program (RTP), which supports research training through research student stipends and tuition fee offsets and - the Research Support Program (RSP), which supports the systemic costs of research, including the indirect costs of competitive grants, through a general grant to universities and • national competitive grants for research programs, projects or fellowships, such as those

provided by the National Health and Medical Research Council (NHMRC) and the Australian Research Council (ARC).5

As shown in Table 2 below, Government investment in university research has been relatively static in recent years, except for a one-off increase in RBG funding in 2020-21 ‘to safeguard Australia’s research sector against the impacts of the COVID-19 pandemic’.6 In 2021-22, funding is estimated to return to just above 2019-20 levels.

Table 2: Australian Government higher education research expenditure, years ending June 2014-2022 ($ million)

2014 2015 2016 2017 2018 2019 2020 2021

(estimated actual)

2022

(budget estimate)

ARC 883.3 852.9 815.3 743.7 758.0 753.4 762.5 806.4 814.6

NHMRC 640.3 677.8 615.0 627.9 635.6 630.5 671.7 664.1 647.9

RBG 1,685.7 1,755.9 1,829.9 1,777.9 1,943.2 1,921.1 1,938.4 2,973.3 1,999.8

Other 275 230.9 230.3 229.3 236.6 242.1 238.5 260.7 259.2

Total 3,484.30 3,517.50 3,490.50 3,378.80 3,573.50 3,547.00 3,611.10 4,704.50 3,721.50

Source: DISER, Science, Research and Innovation (SRI) Budget Tables, December 2021, Sector Table.

Funding for research collaboration and translation University-led research collaboration and translation (which involves putting research insights into practice, such as moving ideas from the lab to the clinic in medical research) is supported via several mechanisms in the dual funding system.7 These include:

• The ARC Linkage program funds university-led research collaborations with business, community organisations and publicly funded research agencies through sub-schemes such as:

- Linkage Projects funding of $50,000 to $300,000 per year for two to five years supports the establishment or development of research collaborations which serve as a basis for skills and knowledge transfer and

4. Higher Education Standards Framework (Threshold Standards) 2021, Part B1.3.6 and B1.3.16-19. 5. A detailed overview of funding for university research is provided in Hazel Ferguson, A Guide to Australian Government Funding for Higher Education Learning and Teaching, Research paper series, 2020-2 1 (Canberra: Parliamentary Library, 2021). 6. Hazel Ferguson, ‘Higher education research and teaching’, Budget Review 2020-21, Research paper series, 2020-21,

(Canberra: Parliamentary Library, October 2020), 42-43; Australian Government, ‘Part 2: Expense Measures’, Budget measures: budget paper no. 2: 2020-21, 79. 7. ‘Research translation’, Department of Health, 11 December 2019; ‘Considering the quality of research and its translation to engagement and impact’, Au stralian Research Council (ARC), 15 April 2018.

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Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 5

- ARC Centres of Excellence funding of $1 million to $5 million per year for up to seven years supports significant collaborations in areas of national priority that maintain or develop Australia’s international standing in that area.8 • The NHMRC supports collaboration and translation of health and medical research through, for

example:

- Development Grants, which support researchers to undertake health and medical research at the proof-of-concept stage (that is, testing to determine if an idea is practically feasible) with the aim of achieving a commercial outcome within a foreseeable timeframe and - Partnership Projects, which support researchers and policy makers to work together on

research questions, research, interpret findings and implement findings into policy and practice.9 • The RBG programs also incentivise collaboration through funding formulae that include, among other measures, engagement income (that is, research income earned from projects with non-university public sector bodies and industry).10

In addition, universities receive funding from Government programs for industry-led research. Most important among these is the Cooperative Research Centres (CRC) Program. The CRC Association states that its members ‘represent an estimated $4 billion in collective investment in innovation and commercialisation by industry, universities and other research institutions, and the Australian Government’.11 The CRC model provides both Centre (up to 10 years) and Project (up to three years) funding, allowing for longer-term as well as short-term collaborations, which are easier for small to medium enterprises (SMEs), which make up a high proportion of Australian businesses, to engage with.12

However, while playing an important role in fostering collaborative research activity and translating research into practical outcomes, the CRC Program is not as prominent in the university research funding system as programs designed to support university-led research such as those through the ARC and NHMRC. In contrast to the figures shown in Table 1, in 2020, universities received $108.3 million through the CRC program, $63.9 million of this from the Australian Government, $32.4 million from industry, and the remaining $11.9 million from other sources.13

Total higher education sector research and development expenditure

Total expenditure and source of funds While Australian Government funding for higher education research remained relatively static between 2014 and 2018, higher education expenditure on R&D (HERD) increased by over $2 billion, from $10.1 billion to $12.2 billion (Table 3 below).

The latest statistics from the Australian Bureau of Statistics (ABS) estimate that HERD accounts for approximately one third of gross expenditure on research and development (GERD) in Australia (HERD is estimated at $12.7 billion, and GERD at $35.6 billion in 2019-20).14

8. ‘Linkage Program’, ARC, 26 June 2018; ARC, Grant Guidelines for ARC Centres of Excellence commencing in 2023, (Canberra: GrantConnect, 27 May 2021), 10. 9. ‘Development Grants’, National Health and Medical Research Council (NHMRC), n.d.; ‘Partnership Projects’, NHMRC, n.d. 10. ‘Calculating Research Block Grants’, Department of Education, Skills and Employment (DESE), 17 December 2021. 11. Cooperative Research Centres Association (CRC Association), University Research Commercialisation (Canberra: CRC

Association, 9 April 2021), 1. 12. CRC Association, University Research Commercialisation, 1-2. 13. ‘Research Income Time Series’, DESE, last modified 17 December 2021. These figures have been calculated by totalling

research income reported for all universities in 2020 for total CRC income (column AS) as well as each sub-category of CRC income (columns AP, AQ and AR), as presented in the ‘Research Income - table format’ tab of the DESE data source. 14. Australian Bureau of Statistics (ABS), Research and Experimental Development, Businesses, Australia, 3 September 2021.

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This growth appears to have been largely enabled by increased revenue from student fees. In 2018, the largest contributor to higher education expenditure on R&D was general university funds, at $6.8 billion.15 Estimates (prepared by Andrew Norton, Professor in the Practice of Higher Education Policy at the Australian National University) show the main source of these general funds is likely to be student fees of $1.1 billion from domestic bachelor degree students (as of 2018), and $3.3 billion from international students.16 In comparison, $1.7 billion of higher education R&D expenditure was from Australian Government competitive grants, $1.9 billion from other Australian Government schemes, and a minority of funding was from other sources, including $521.9 million from business.17

Types of activity and main fields supported Higher education sector R&D investment represents a mix of basic and applied research and experimental development (Table 3 below) and is concentrated in medical and health sciences (30.6%), engineering (10.2%) and biological sciences (7.9%), with all other fields represented, but receiving less than 5% of total investment each.18

The proportion of expenditure distributed between pure basic and applied research has remained relatively stable since 2014, while experimental development has attracted a slightly increased share of spending, and strategic basic research has seen a fall. In 2018, applied research accounted for 48.4% of spending ($5.9 billion), while pure basic research accounted for 22.8% ($2.8 billion), strategic basic research accounted for 17.8% ($2.2 billion), and experimental development 11.0% ($1.3 billion).

15. Hazel Ferguson, University Research Funding: A Quick Guide, Research paper series, 2021-22 (Canberra: Parliamentary Library, 2022), 2. 16. Andrew Norton, ‘How profitable is university teaching?’, Andrew Norton blog, 19 May 2020; Andrew Norton, ‘How reliant is Australian university research on international student profits?’, Andrew Norton blog, 21 Ma y 2020. 17. More detail is available from Ferguson, University Research Funding: A Quick Guide, 2. 18. Creative arts and writing (1.3%) and philosophy and religious studies (0.7%) attracting the lowest levels of funding. See

Ferguson, University Research Funding: A Quick Guide, 3-4. In addition, many fields do not require large research grants to support much of the work undertaken—in these fields, researchers’ time, in the form of research allocations in academic workload models, is the major source of support, and is not captured by the expenditure data.

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Table 3: higher education expenditure on R&D by type of activity, 2014-2018 ($ billion) Type of activity Activity definition 2014 2016 2018

Pure basic research

Research for the advancement of knowledge, without seeking long-term economic or social benefits or making any effort to apply the results to practical problems or to transfer the results to sectors responsible for their application.

2.4

(23.3%)

2.5

(22.8%)

2.8

(22.8%)

Strategic basic research

Experimental and theoretical work undertaken to acquire new knowledge directed into specified broad areas in the expectation of practical discoveries.

2.0

(19.5%)

2.0

(18.6%)

2.2

(17.8%)

Applied research

Original investigation undertaken to acquire new knowledge directed primarily towards a specific, practical aim or objective.

4.9

(48.7%)

5.3

(48.5%)

5.9

(48.4%)

Experimental development

Systematic work, drawing on knowledge gained from research and practical experience and producing additional knowledge, which is directed to producing new products or processes or to improving existing products or processes.

0.9

(8.4%)

1.1

(10.1%)

1.3

(11.0%)

Total 10.1 10.9 12.2

Sources: Australian Bureau of Statistics (ABS), Research and Experimental Development, Higher Education Organisations, Australia, 2018 (Canberra: ABS, 2020, Table 1 (summary statistics)); ABS, Research and Experiment al Development, Higher Education Organisations, Australia, 2016 (Canberra: ABS, 2018, Table 1 (summary statistics)); ABS, Research and Experimental Development, Higher Education Organisations, Australia, 2014 (C anberra: ABS, 2016, Table 1 (summary statistics)).

Definitions are taken from ABS, ANZSRC - Australian and New Zealand Standard Research Classification, 2020 (Canberra: ABS, 2020).

Notes: Figures are not adjusted for inflation. Figures may not sum due to rounding.

Recent Australian Government research policy

Low levels of research-industry collaboration Australian Government R&D policy has long been characterised by efforts to address low levels of research-industry collaboration, with the aim of increasing innovation and driving productivity gains.19 However, over the last four decades, innovation policy initiatives have, for the most part, either focused on supporting short-term projects or single fields of research or been discontinued before long-term outcomes could be realised.20 As a consequence, despite some stand-out exceptions:

There is still quite limited knowledge and understanding in Australia of what drives success in terms of governance and leadership, organisational frameworks, systems and processes, and relationships with a host university. A visionary strategy is vital, but unless the management framework, including shared interests and incentives for collaboration, is given appropriate attention, achieving outcomes will continue to be a challenge.21

Australia currently ranks last in the Organisation for Economic Co-operation and Development (OECD) for business collaboration with higher education and government institutions on innovation—1.6% of Australian businesses innovating in 2016-17 collaborated with either the research or government sectors, well below the OECD average of 14.2% and in marked contrast to leaders like the United Kingdom (36.4%) and Finland (25.1%).22

19. Amanda-Jane George and Julie-Anne Tarr, ‘Addressing Australia’s collaboration ‘problem’: Is there a Brave New World of innovation policy post COVID-19?’ A ustralian Journal of Public Administration 80, 2021, 179-200. 20. John Howard and Roy Green, Challenges for Australian Research & Innovation, Background Paper for UTS Innovation Roundtable, (Sydney: University of Technology Sydney, 10 April 2019), 25-26. 21. Howard and Green, Challenges for Australian Research & Innovation, 26. 22. ‘4.4 International Comparison’, DISER, n.d.

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Coalition Government policy 2013-2019 In late 2014, the newly elected Coalition Government’s response to the collaboration deficit began with the release of the Boosting the Commercial Returns from Research (BCR) discussion paper, as part of its Industry Innovation and Competitiveness Agenda.23

The discussion paper cited insufficient knowledge transfer between researchers and business as a key driver of a lack of research commercialisation, arguing that addressing this issue would ‘…help drive innovation in Australia, grow successful Australian businesses, and boost productivity and Australia’s exports, ensuring the competitiveness of the Australian economy into the future’.24

The paper canvassed a range of options, including changes to university research policy and funding. Consideration was given to the RBG funding formulae, research training, ARC grants assessment, and intellectual property (IP) arrangements, and work on an assessment of

engagement and knowledge transfer, to better support, recognise and incentivise industry engagement by university researchers.25

In July 2015, the Review of Research Policy and Funding Arrangements (the Watt Review) was commissioned to consider arrangements for university research in greater depth, including the RBG programs, competitive grants, and business collaboration programs.26 The Watt Review recommendations, released in November 2015, covered similar ground to the BCR discussion paper, detailing proposed changes to RBG programs, competitive grants, IP arrangements, and research assessment, as well as additional funding for collaboration with business.27

In December 2015, the $1.1 billion National Innovation and Science Agenda (NISA) was launched.28 For universities, NISA built on BCR and the Watt Review, and included changes to research funding arrangements for universities.29 From 1 January 2017, six RBG programs were consolidated into the current RSP and RTP, with more emphasis on engagement income in the funding formulae. An Engagement and Impact (EI) Assessment and continuous submission and assessment for Linkage

Projects w ere also introduced through the ARC to better meet the requirements of industry and community partners.30 The EI Assessment was new, while the other changes were revisions of existing programs.

In the years following NISA, some growth in commercialisation of publicly funded research is evident, as shown in Table 4 below. However, it is important to acknowledge that this is not necessarily attributable to NISA. During this time, universities continued to receive research funding from other Government sources and devote significant additional resources to research, as discussed above. Continuous assessment of Linkage Projects was amended in 2020 in response to an evaluation which found the process did not appear to have ‘incentivised increased

23. ‘Discussion paper on Boosting the Commercial Returns from Research’, DESE, 5 December 2014. 24. Department of Industry and Department of Education, Boosting the Commercial Returns from Research, ([Canberra]: Department of Education, [2014]), 4. 25. Department of Industry and Department of Education, Boosting the Commercial Returns from Research, 22-24. 26. Ian Watt, Review of Research Policy and Funding Arrangements, ([Canberra]: [Department of Education and Training],

November 2015). 27. Watt, Review of Research Policy and Funding Arrangements, v-ix. 28. ‘Boosting innovation and science’, DISER, 7 March 2022; ‘New research funding arrangements for universities’, Australian

Government, National Innovation and Science Agenda, archived page 27 February 2016, via the Internet Archive Wayback Machine; Watt, Review of Research Policy and Funding Arrangements, 16-26. 29. ‘New research funding arrangements for universities’, Australian Government; Watt, Review of Research Policy and Funding Arrangements, 16-26. 30. ‘Measuring impact and engagement of university research’, Australian Government, National Innovation and Science Agenda ,

archived page 27 February 2016, via the Internet Archive Wayback Machine; ‘Linkage Projects scheme’, Australian Government, archived page 27 February 2016, via the Internet Archive Wayback Machine.

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Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 9

participation by business and industry partner organisations’.31 Ultimately, the departments with leadership of NISA stated that the total package was too small, and its measures too disparate, for their economy-wide impact to be adequately evaluated against the Government’s stated goals.32

Table 4: research commercialisation outcomes, 2017-2020 2017 2018 2019 2020

Invention disclosures 1263 1362 1355 1393

New non-patented IP 294 330 363 261

New patent applications 454 428 455 427

New licences, options, and assignments 588 567 609 626

New spinouts and start-ups 43 48 42 54

Active spinouts and start-ups 199 217 231 256

Equity held by research organisations in spinouts and start-ups $146 M $178 M $262 M $555 M Commercialisation revenue $452 M* $119 M $179 M $242 M

Source: Knowledge Commercialisation Australasia (KCA), Survey of Commercialisation Outcomes from Public Research 2020 Report (Melbourne: KCA, 9 September 2021), 7-8.

Notes: This data is from up to 25 universities, 10 medical research institutes, the Australian Nuclear Science and Technology Organisation (ANSTO), the Commonwealth Scientific and Industrial Research Organisation (CSIRO), Meat and Livestock Australia Limited (MLA) and the Grains Research and Development Corporation (GRDC). 2017 to 2019 data is based on 34 respondents, and 2020 data is based on 39 respondents. Not all respondents reported data for all measures.

* The 2017 commercialisation revenue figure is an outlier due to $325 million received by the Walter and Eliza Hall Institute of Medical Research from the partial sale of royalty rights in anti-cancer treatment venetoclax—a result of collaboration with companies Genentech and AbbVie.

Coalition Government policy from 2020 2020 marked a turning point for the higher education sector, with declining international student numbers due to COVID-19, and the announcement of the Job-Ready Graduates Package, which aimed to align funding for domestic students more closely with the cost of delivering services from 2021.33 Both changes likely reduced the additional revenue available for R&D investment by the higher education sector from general university funds, which depend heavily on student fees.

In response to the pandemic, the 2020-21 Budget provided a one-off increase in RSP funding for 2021, but also signalled the Government’s continued focus on research collaboration and commercialisation.34 The balance of funding for the ARC’s Discovery and Linkage research programs changed from 64:36 to 60:40 (that is, a greater proportion of ARC research grants funding than previously expected would go to Linkage, which funds collaborative research).35 Additionally, $5.8 million was provided to scope a University Research Commercialisation Scheme, discussed in the next section of this Digest.36

31. ‘Evaluation of the Implementation of the Continuous Linkage Projects Process: Final Report’, (Canberra: ARC, May 2019), 14; ‘ARC response to the Evaluation of the implementation of the continuous Linkage Projects processes’, ARC, 19 December 2019. The amendment consisted of introducing three selection rounds, with published deadlines each year—applicants can continue to submit applications at any time, but assessment is no longer undertaken on a continuous basis.

32. Australian National Audit Office (ANAO), Design and monitoring of the National Innovation and Science Agenda, ANAO report no. 10 of 2017-18 (Canberra: ANAO, 2017), 27. 33. Ferguson, A Guide to Australian Government Funding for Higher Education Learning and Teaching, 3. 34. ‘2020-21 Budget Research Package’, DESE, 9 February 2022; Ferguson, ‘Higher Education Research and Teaching’, Budget

Review 2020-21, 41-45. 35. Hunter Laidlaw, ‘Science and Research’, Budget Review 2020-21, Research paper, 2020-21, (Canberra: Parliamentary Library, October 2020), 64. 36. Ferguson, ‘Higher Education Research and Teaching’, Budget Review 2020-21, 44.

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In December 2021, in a letter to the Chief Executive Officer (CEO) of the ARC, Stuart Robert, the Acting Minister for Education and Youth, reiterated the importance of 40% of ARC grant funding being allocated to Linkage, and asked the ARC to:

• bring forward a proposal ‘to enhance and expand the role of the industry and other end-user experts in assessing the NIT [National Interest Test] of high-quality projects’ and

• ‘review the operation of the College of Experts and brief me on options for expanding the pool of people who participate in the College to include experts from backgrounds beyond universities, in particular those from industry and other end-user groups’.37

The University Research Commercialisation Action Plan

University Research Commercialisation Action Plan On 1 February 2022 the Prime Minister announced a University Research Commercialisation Action Plan ( the Plan) to ‘focus the considerable research power, our smartest mind[s] of our universities, on Australia’s national economic priorities’.38

The Plan is the outcome of the scoping work announced in the 2020-21 Budget.39 Public consultation, undertaken from February to April 2021, included a consultation paper, 14 expert panel meetings, 80 round table and other discussions, five international bilateral discussions, 15 analytical studies, and 171 public submissions.40 According to the Department of Education, Skills and Employment (DESE):

93 submissions emphasised the importance of focusing on national priorities in driving a focus on research commercialisation, while 88 submissions endorsed a stage-gated approach to funding projects along the technology readiness level (TRL) scale.

Improving university-industry collaboration more generally was emphasised as being vital to supporting research commercialisation, with university researcher incentives and Intellectual Property suggested as key areas for improvement.

Most agreed that there is no ‘silver bullet’ solution to improving research commercialisation outcomes, and that new reforms need to be integrated across the whole research commercialisation ecosystem. 41

The Plan, detailed in the University Research Commercialisation Action Plan paper, comprises:

• the Trailblazer Universities Program to support select universities to work on research commercialisation with industry partners—this program was announced in November 2021, ahead of the rest of the Plan, and amendments to HESA to enable this funding are before Parliament separately, in the Higher Education Support Amendment (2021 Measures No. 1) Bill 2021

• the AEA program, the centrepiece of the Plan, a stage-gated program dedicated to funding translation and commercialisation in the six National Manufacturing Priority areas, as well as the expansion of the CSIRO Main Sequence Venture Program

• Industry PhD and research fellowship schemes, which aim to change promotion and reward structures in universities, and enable more mobility between universities and other research employers and

37. Stuart Robert (Acting Minister for Education and Youth), ‘Letter of Expectations from Minister to ARC’, 6 December 2021, 2-3. 38. Scott Morrison (Prime Minister), Address to the National Press Club, Canberra, speech, 1 February 2022, 11. 39. Ferguson, ‘Higher Education Research and Teaching’, Budget Review 2020-21, 43-44. 40. ‘Consultation on university research commercialisation’, DESE, 3 February 2022. 41. ‘Consultation on university research commercialisation’, DESE.

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Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022 11

• a new IP framework for universities, including standardised terms, clauses, and agreements for collaboration on IP licensing, options, and assignment, which is currently the subject of consultations.42

This Bill deals only with arrangements for the AEA program, and funding for Industry PhDs through the National Industry PhD Program.

The National Industry PhD Program According to DESE:

The National Industry PhD Program will support PhD candidates to undertake industry-focused research projects and be equipped with the knowledge and skills to better translate university research into commercialisation outcomes, with the strong potential to work at the interface of research and industry, and across the sectors in future.

The National Industry PhD Program consists of two streams:

University-led Industry PhDs: Outstanding PhD candidates undertake research projects co-designed by university and industry

Industry-driven Researcher PhDs: Highly capable industry professionals who are supported by their employers to undertake PhD projects in partnership with a university.43

The AEA Program Although the Australian Government already provides some research collaboration and translation funding, what distinguishes the AEA program is its specific focus on the ‘valley of death’:

Promising early-stage university research is frequently not progressed to later stages of development. Businesses cannot justify investment in these projects given the relative risk of investing during the early stages of development; and current funding programs for universities are directed towards discovery. This results in a gap in funding for this development work and consequently a gap in taking promising opportunities to commercial readiness.44

The details of the program are to be set out in the Other Grants Guidelines (Research) 2017, but broadly:

Grants under the AEA program are available in two stages. Stage 1 grants are for proof-of-concept (Technology Readiness Level 3-5) projects. Up to $500,000 is available per project. Projects must be completed between 3 months to 1 year from the project’s commencement. Stage 1 applications must demonstrate some industry engagement, which may include matched funding or in-kind support. Projects with commercial investment partners will be prioritised.

Stage 2 grants are for proof-of-scale (Technology Readiness Level 5-7) projects. Up to $5 million is available per project. Projects must be completed between 3 months to 2 years from the project’s commencement. Stage 2 applications must demonstrate a formal partnership and committed co-investment from an industry partner.

… $446.6 million in grant funding will be available over four years from 2022-23. Up to $500,000 is available per Stage 1 project and up to $5 million is available per Stage 2 grant. Stage 2 grants will commence in July 2023.45

42. ‘University Research Commercialisation Package’, DESE, 8 February 2022. 43. ‘National Industry PhD Program’, DESE, 7 February 2022. 44. DESE, University Research Commercialisation Action Plan (Canberra: DESE, February 2022), 50. 45. DESE, Australia's Economic Accelerator - Frequently Asked Questions (Canberra: DESE, 2 February 2022), 2.

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Committee consideration

Senate Standing Committee for the Selection of Bills At the time of writing, the Senate Standing Committee for the Selection of Bills had not considered the Bill.46

Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills Committee (Scrutiny of Bills Committee) made some comments on the Bill in its second Scrutiny Digest of 2022.47

The Scrutiny of Bills Committee expressed some concerns that the research commercialisation strategy and the investment plan for the AEA program (discussed below in this Digest) will not be legislative instruments. The Scrutiny of Bills Committee sought advice from the Minister on why this is the case and whether the Bill could be amended to ensure parliamentary oversight and at minimum require tabling of the documents in both Houses of Parliament within 15 sitting days of ministerial receipt of the strategy or finalisation of the investment plan.48

The Scrutiny of Bills Committee also expressed concerns in relation to the reversal of the evidential burden proof at proposed section 181-15 of the Bill.49 This is discussed below in the ‘Key provisions and issues’ section of this Digest.

Policy position of non-government parties/independents At the time of writing, no non-government parties/independents have commented on the Bill.

Position of major interest groups Major interest groups have been supportive of the additional funding announced as part of the Plan, whist also expressing concerns or making recommendations about a number of its policy features, as detailed in this section.

The value of research translation funding for universities Major interest groups are united in their support for research translation funding.

The Group of Eight (Go8) representing the major research-intensive universities, in contrast to recent statements about the ARC, suggesting its model is ‘broken’, welcomed the announcement of the commercialisation funding, stating:

The Go8 has long advocated for funding for early-stage research commercialisation, a translational research fund and closer cooperation between universities and industry.

That the Government has adopted our key recommendations is recognition of the important role research-intensive universities will play in the future prosperity of the nation. This new funding strategy for research and commercialisation will deliver gains for universities, business, our economy and most importantly the Australian population.50

46. Senate Standing Committee for the Selection of Bills, Report, 1, 2022, 10 February 2022. 47. Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 2, 2022, 18 March 2022, 38-41. 48. Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 39-40. 49. Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 40-41. 50. Tim Dodd, ‘”Broken” ARC needs a full overhaul: Go8’, The Australian, 2 March 2022, 21; Group of Eight (Go8), ‘University

Research Commercialisation is Crucial for Economic Growth and Prosperity’, media release, 1 February 2022.

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The Australian Academy of Science (AAS) has also long called for the establishment of a science translation fund for university and science agency research. In its 2022-23 Budget submission, it suggested such a fund should be modelled on the Medical Research Future Fund (MRFF) and apply

to sciences not currently covered by the MRFF, stating:

Support for translation of all research will be critical to maintain the knowledge pipeline for future Australian manufacturing opportunities and mitigate sovereign risk.51

Likewise, in its 2022-23 Budget submission, Science and Technology Australia (STA) called for ‘a new $2.4 billion Research Translation Fund to turn more of Australia’s science into applications that will generate returns on investment’.52 Following the announcement of the Plan, STA called the announcement of the AEA program and industry scholarships and fellowships a ‘game changer’ that ‘could turbo-charge Australia’s research commercialisation success’.53 STA estimates, based on its experience with the ARC Centre of Excellence in Nanoscale BioPhotonics, that ‘even if only half the outlay in the new fund - $800 million - delivered a similar rate of return, it would generate a $17.6 billion return on investment to Australia’s economy’.54

Relationship to the broader innovation system The AAS, while welcoming the Plan, has also raised concerns about missed opportunities, citing that Australia has ‘over 200 schemes and programs’ to support research and industry engagement, and stating ‘it is unclear how the new scheme will work alongside existing programs’.55 Further, it raises the plan’s lack of incentives for industry to engage with researchers as a potential limitation, and recommends that knowledge brokers could be supported to improve connections between industry and researchers.56

Roy Green, special innovation advisor at the University of Technology Sydney, has raised similar concerns, and is reported as saying the scheme is:

… a welcome announcement because it will plug some gaps in the commercialisation structure, but at the same time it’s still based on a linear, lab-to-market model rather than a comprehensive approach to the development of innovation ecosystems with an institutional policy structure that lasts beyond individual projects…57

Similarly, the Australian Academy of Technology and Engineering (ATSE) has also welcomed the announcement but cautioned ‘…it is also important not to neglect curiosity-driven research which creates the ideas for new commercial opportunities’.58

Financial implications The Explanatory Memorandum to the Bill states that net expenses from 2021-22 to 2025-26 will be $505.2 million for the AEA program and $52.4 million for industry PhDs.59

51. Australian Academy of Science (AAS), Pre-Budget Submission to the 2022-23 Budget, (Canberra: AAS, January 2022), 3; ‘About the MRFF’, Department of Health, 23 July 2020. 52. Science and Technology Australia (STA), ‘Budget 2022: Time to ‘double down’ on our science investment’, media release, 26 January 2022; STA, 2022-23 Pre-Budget Submission (Canberra: STA, 21 January 2022), 4. 53. STA, ‘Research commercialisation fund could be a game-changer’, media release, 1 February 2022. 54. STA, Return on Investment in Research Commercialisation (Canberra, STA, March 2022), 1. 55. AAS, ‘Positive measures and missed opportunities in University Research Commercialisation action plan’, media release,

3 February 2022. 56. AAS, ‘Positive measures and missed opportunities in University Research Commercialisation action plan’. 57. Denham Sadler, ‘Govt research commercialisation focus is “too narrow”’, InnovationAus, 1 February 2022. 58. Australian Academy of Technology and Engineering (ATSE), ‘New research commercialisation fund a welcome step to bolster

Australian skills and jobs’, media release, 1 February 2022. 59. Explanatory Memorandum, Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022, 2.

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Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.60

The Government states that the Bill engages the following human rights:

• the right to work - Article 6 of the International Covenant on Economic, Social and Cultural Rights (ICESCR)61 and

• the right to education - Article 13 of the ICESCR.62

However, the Government considers that the Bill is compatible with human rights because ‘it promotes the right to work and the right to education’.63

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights had no comments on the Bill.64

Key issues and provisions

Funding provisions Most Australian Government funding for higher education is provided under HESA, including general course subsidies under the Commonwealth Grant Scheme, and student loans through the Higher Education Loan Program (HELP). Targeted priorities are supported through the Indigenous Student Success Program in Part 2-2A, as well as various grants under the Other Grants provisions in Part 2-3.

Items 1 and 2 of the Bill amend the Other Grants provisions to enable funding for the National Industry PhD Program and the AEA program.

Rather than detailing arrangements for specific programs in Part 2-3, HESA lists the broad purposes for which Other Grants may be made and the bodies to whom the grants can be paid, with administrative details set out in the Other Grants Guidelines (currently the Higher Education Support (Other Grants) Guidelines 2022 and Other Grants Guidelines (Research) 2017).

These purposes currently include:

• grants to support research by, and the research capability of, higher education providers

• grants to support the training of research students and

• grants to encourage higher education providers to engage with industry.65

The Higher Education Support Amendment (2021 Measures No. 1) Bill 2021, which is also currently before Parliament, proposes to add ‘grants to assist higher education providers to translate research into commercial outcomes, including through collaboration with industry’ to Part 2-3 of HESA.66

60. The Statement of Compatibility with Human Rights can be found at page 4-6 of the Explanatory Memorandum to the Bill. 61. International Covenant on Economic, Social and Cultural Rights, opened for signature 16 December 1966, ATS [1976] 5 (entered into force for Australia on 10 March 1976). 62. Explanatory Memorandum, Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022, 5. 63. Explanatory Memorandum, Higher Education Support Amendment (Australia’s Economic Accelerator) Bill 2022, 6. 64. Parliamentary Joint Committee on Human Rights, Human Rights Scrutiny Report, 2, 2022, 25 March 2022: 66. 65. HESA, section 41-10. 66. For further information, see Hazel Ferguson, ‘Higher Education Support Amendment (2021 Measures No. 1) Bill 2021’, Bills

Digest, 40, 2021-22, (Canberra: Parliamentary Library, 2022), 5.

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The current Bill would add the following grant purposes to Part 2-3:

• ‘grants to support arrangements to increase industry-led study and postgraduate research’ (item 1) and

• ‘grants to assist higher education providers to undertake programs of research, in areas of national priority, that progress development of technologies and services to a state of commercial investor readiness’ (item 2).

All Australian universities, as well as bodies corporate specified in the Other Grants Guidelines, would be eligible for grants for both purposes.67

Item 8 amends section 206-1 of HESA with the effect of providing that a decision not to approve the latter kind of grant is a reviewable decision, and therefore subject to internal review by the Minister (who is also the original decision-maker, although this power may be delegated68) and review by the Administrative Appeals Tribunal.69 HESA does not currently specify any Other Grant decisions are reviewable decisions.70

Administrative arrangements for AEA program The bulk of the remainder of the Bill deals with arrangements for administering the AEA program.

Item 3 inserts Division 42 at the end of Part 2-3 of HESA. The proposed division contains most of the substantive amendments relevant to the administration of the AEA program, and is comprised of three subdivisions:

• subdivision 42-A deals with arrangements for the development and publication of a research commercialisation strategy and investment plan for the AEA program

• subdivision 42-B establishes an AEA Advisory Board (the Board), and specifies its functions, reporting obligations, and membership arrangements and

• subdivision 42-C specifies that the Secretary may engage ‘Priority Managers’ to assist the Board.

Items 4 to 7 insert Division 181, which deals with AEA program information, and make related consequential amendments.

Other consequential amendments at items 9 to 11 are not discussed in detail in this Bills Digest.

The research commercialisation strategy and investment plan Under subdivision 42-A, the direction for the AEA program is to be provided by a research commercialisation strategy and investment plan.

The research commercialisation strategy A five-year written strategy (the ‘research commercialisation strategy’) is to be made by the Board as soon as practicable after the commencement of the Act.71 It will:

• outline the vision, aims and objectives for translation and commercialisation of university research in areas of national priority

• identify new and emerging technologies in areas of national priority and

67. The full list of universities are set out at sections 16-15 and 16-20 of the HESA. 68. HESA, sections 41-20 and 238-5. 69. HESA, sections 209-5, 209-10 and 212-1. 70. HESA, section 206-1. 71. HESA, proposed section 42-1.

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• identify and propose ways of addressing regulatory, financial and cultural barriers to translating and commercialising research in areas of national priority.72

The Board is to provide a copy of the strategy to the Minister, who will provide a copy to each House of Parliament.73 Despite this tabling requirement, the strategy is not a legislative instrument.74

The investment plan The Board will also be responsible for developing an AEA investment plan for each year, dealing with:

• areas of national priority

• total amount of funding available

• other matters considered appropriate by the Board to assist with meeting the AEA objectives.75

The investment plan is to be consistent with the research commercialisation strategy, and Board members must act in accordance with any policies formulated as part of the investment plan.76

The AEA Advisory Board

Purpose Under proposed subdivision 42-B, the Board is established to:

• advise the Minister in relation to translation and commercialisation of university research

• advise the Minister in relation to the AEA program, including its objectives, conditions of eligibility and conditions of grants

• oversee the performance of Priority Managers

• undertake any other functions conferred by HESA or the Other Grants Guidelines and

• do anything else incidental or conducive to the performance of its other functions.77

Membership The Board will be made up of six to eight members: the Chair; the Deputy Chair; and four to six other members.78 These members are to be appointed by the Minister by written instrument, on a part-time basis, for a period of up to five years.79

In appointing members, the Minister must:

• not appoint a member for more than three consecutive periods

• specify appointment of a Chair and Deputy Chair (who will act as Chair during any period when the role of Chair is vacant or the Chair is absent or unable to fulfill their duties)

72. HESA, proposed subsection 42-1(1). 73. HESA, proposed subsections 42-1(4) and (5). 74. HESA, proposed subsection 42-1(6). 75. HESA, proposed subsection 42-5(1). 76. HESA, proposed subsections 42-5(2) and (3). 77. HESA, proposed sections 42-10 and 42-15. 78. HESA, proposed section 42-25. 79. HESA, proposed subsections 42-30(1) and (2).

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• ensure that members collectively possess experience and knowledge in research and its commercialisation and translation, as well as representing government, industry, business, and research.80

Membership of the Board may be paused or ended via:

• a leave of absence granted by the Minister on terms and conditions determined by the Minister81

• written notice of resignation from a member to the Minister82 or

• termination by the Minister if the member:

- is unable to perform their duties due to physical or mental incapacity - becomes ineligible for membership due to bankruptcy or related actions - is absent without leave and/or - fails to meet disclosure obligations to the Minister or the Board.83 If any other terms and conditions not specified in HESA apply to an appointment, they must be determined in writing by the Minister.84

Disclosure of interests Members are to be responsible for disclosing interests relevant to their functions to the Minister and the Board:

• written notice of direct or indirect pecuniary interests that conflict, or could conflict, with the member’s functions must be disclosed to the Minister in writing85

• if a member becomes aware of an interest (pecuniary or otherwise) relevant to a Board decision about grant approval or any other matter considered by the Board, then the member must disclose the interest to a meeting of the Board as soon as possible.86 Unless the Board determines otherwise, the member is not to be present during any deliberations relating to the matter or take part in any decisions.87 The disclosure of the interest and related determination by the Board about the member’s ability to take part in any deliberations/decisions regarding the matter must be recorded in the minutes of the meeting.88

Renumeration and allowances Renumeration for the Board is to be determined by the Remuneration Tribunal, and allowances prescribed by the Minister in a legislative instrument.89 In the absence of a determination by the Remuneration Tribunal, renumeration will also be as per the legislative instrument made by the Minister.90

80. HESA, proposed subsections 42-30(3) to (5) and 42-35(1). Proposed subsections 42-35(2) and (3) of the HESA also provide for the Minister to appoint an acting member of the Board, or to appoint a member as acting Deputy Chair when a position is vacant or the Deputy Chair or a member is not performing their duties, including due to the Deputy Chair acting as Chair, or a member acting as Deputy Chair. 81. HESA, proposed section 42-45. 82. HESA, proposed section 42-60. 83. HESA, proposed section 42-65. 84. HESA, proposed section 42-70. 85. HESA, proposed section 42-50. 86. HESA, proposed subsections 42-55(1) and (2). 87. HESA, proposed subsection 42-55(4). 88. HESA, proposed subsections 42-55(3) and (6). 89. HESA, proposed section 42-40. 90. HESA, proposed subsection 42-40(1).

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Annual reporting At the end of each financial year, the Board will be required to provide an annual report to the Minister, for presentation to Parliament.91 The report is to cover the Board’s achievements and outcomes in translating and commercialising university research in areas of national priority, as well as regulatory, financial, and cultural barriers to these activities, and proposed ways of addressing these barriers.92

Priority Managers Unlike the Board, Priority Managers are not a requirement of the AEA program. However, proposed section 42-75 allows the Secretary to engage Priority Managers to assist the Board by providing technical and specialist advisory services, and performing other functions conferred by the Other Grants Guidelines.93

The terms and conditions of Priority Managers’ engagement are to be determined by the Secretary.94

Disclosure of AEA program information Item 7 inserts Division 181, which creates a new type of information under HESA, Australia’s Economic Accelerator program information (AEA program information).95 This is defined at proposed section 181-10 as any information obtained or created by an officer for the purposes of the AEA program.96

The Bill creates a new offence, with a penalty of up to two years imprisonment, for officers who disclose, copy, or otherwise record AEA program information for a purpose not related to their employment.97 The offence only applies if:

• the information is ‘personal information’ under the Privacy Act 1988

• the officer’s actions cause or are likely to cause competitive detriment to a person and/or

• the action leads or is likely to lead to an action by a person for breach of duty of confidence.98

Additionally, a defendant may be able to rely on the following exceptions, if they can establish that:

• the person to whom the disclosure relates consented to the disclosure99

• the disclosure is required by Commonwealth law100 or

• proposed Division 181 authorises the disclosure (that is, disclosure by an officer to the Minister or their staff, or disclosure by the Minister for the purposes of publicising an approved grant).101

91. HESA, proposed subsection 42-20(1). 92. HESA, proposed subsection 42-20(2). 93. HESA, proposed subsection 42-75(1). 94. HESA, proposed subsection 42-75(2). 95. Item 4 amends section 179-5 of the HESA to specify this information is not personal information, and items 5 and 6 specify

that it is not HESA information. As such the existing provisions in the HESA that apply to these types of information (such how it is disclosed and accessed) do not apply to AEA program information. 96. Section 179-15 of the HESA defines ‘officer’ to include a ‘Commonwealth officer' (see subsection 179-15(2)) and an ‘officer of a higher education provider’ (see subsection 179-15(3)). 97. HESA, proposed subsection 181-15(1). 98. HESA, proposed paragraph 181-15(1)(d). 99. HESA, proposed subsection 181-15(2). 100. HESA, proposed subsection 181-15(4). 101. HESA, proposed subsection 181-15(3); proposed sections 181-20 and 181-25.

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The Bill provides that in order to rely on the above exceptions the defendant bears the evidential burden of proof.102 The Scrutiny of Bills Committee noted that 'it is ordinarily the duty of the prosecution to prove all elements of an offence’ and expressed concerns regarding this ‘reversal’ of the evidential burden.103 The Committee requested the Minister’s detailed justification as to the appropriateness of these provisions and suggested that it may be appropriate to reframe the offences so that these matters reflect the elements of the offence.104

Additionally, the Minister must not disclose information if a person demonstrates to them that the information is not in the public domain or readily discoverable, its release would cause competitive detriment to the person, and it is not required to be disclosed under another law of the Commonwealth or a state or territory.105

Concluding comments Research policy and funding in Australia is characterised by a wide range of initiatives with diverse purposes across multiple portfolios, and a long history of attempts to improve research collaboration and commercialisation.

Although the new research funding enabled by this Bill has been widely welcomed by the higher education sector, concerns remain about how this investment will fit with other features of Australia’s innovation system, especially funding for basic research and industry incentives.

Ultimately, the success of the initiatives in this Bill may rely as much on the future focus and size of Australian Government R&D expenditure, and funding for higher education research, as the implementation details of these specific programs.

102. See Notes to proposed subsections 181-15(2)-(4). 103. Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 40-41. 104. Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 41. 105. HESA, proposed subsection 181-25(2).

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