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Is smashing CSIRO the answer to the research funding crisis? Public lecture, Robertson Lecture Theatre, Australian National University.

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Thursday, 7 August 2003

Senator Kim Carr

Shadow Minister for Industry, Innovation, Science and Research Shadow Minister for the Public Service


If current trends in workforce participation continue, in 40 years Australia will see a fall from 64% to 56% in the labour force participation rate. Increases in the participation rate will not be sufficient to bring about the necessary economic growth.

Measures to increase productivity will be essential to sustaining competitiveness and growth. Productivity growth requires continuing investments in education and skills to enable the generation and application of new knowledge in smart new ways.

Australia risks being locked out of the next generation of world knowledge and technology. We could join New Zealand and South Africa in going backwards from “second world” status rather than forwards to “advanced economy” status. The gap between the northern hemisphere (especially north America, Europe and China) and southern hemisphere countries in the levels of investment in science and technology and their associated productive capacities is widening rapidly.

To remain a high wage country, Australia must form tight ties with the north through knowledge networks. To achieve this, we need to strengthen our domestic performance in research and innovation. The status quo is not

sufficient. By international standards, Australia is slipping behind our OECD competitors.

Australia’s gross expenditure on R&D, as a percentage of GDP, has fallen as a percentage since 1997. Australia’s GERD to GDP ratio of 1.53% is well below the OECD mean of 2.1%.

The story is similar with business expenditure on R&D (BERD). Figures released today, while showing a welcome small rise in BERD (to 0.78% of GDP), remains well below the historic highs of the mid-’nineties, when the equivalent figure was 0.87%.

In an international context, the comment of the ABS is revealing: “Australia’s BERD/GDP remains relatively low when compared with other OECD countries.” (ABS, Research and Experimental Development, August 2003, page 4.)

At best, we are standing still, confirming our relative disadvantage in private sector R&D.

New Zealand has been regarded, during the last two decades, by conservative Australian governments as a social laboratory. They have looked across the Tasman for inspiration on a broad range of public policy issues, including education, research, economic policy and cultural activities.

When these ideas have been applied in Australia, the consequences have invariably been regressive. New Zealand’s former Department of Industry, Science and Research (DSIR) is a case in point.


A decade ago, this successful, integrated research agency was split up into nine competing Crown companies. Each competed with other Crown companies, universities and the private sector for research revenue.

What has been the result of this competitive market structure?

Two, if not three, of the Crown companies have virtually withdrawn from research altogether (to become technical service providers) - the quantum of research has declined, and in recent months the New Zealand Government has deliberately begun to retreat from the competitive model.

This experience illuminates a conversation I had recently:

A few months ago a very senior university administrator leant across the table to me and asked, seriously, “Why do we need the CSIRO?”

To me there is a direct and non-negotiable answer to this question.

In strategic and applied research, across a huge spectrum of areas of crucial importance to our economy, CSIRO serves a purpose that cannot be duplicated by universities, whose main responsibility lies in basic research.


The solution to current dilemmas is not the destruction of CSIRO, but the enhancement of collaborative arrangements between the different players in R&D. I will refer later to the concept of clustering, which provides a possible structure and conceptual framework for this approach.

The idea of research clusters is, I think, an extraordinarily useful way to bridge the chasm that, in Australia, right now, exists where research should be transformed, via innovation into application.

A recent survey, by one of our leading employers (AIG) drew our attention to the fact that, in Australia, only four out of 100 firms spent any money at all on research and development. Of the four, only one percent had any collaboration with a publicly-funded research agency, be it a university or CSIRO.

In terms of both R&D investment and collaboration private sector activity increases with the size of the company. While, clearly, some firms have very significant and effective research programs, survey results suggest that a

significant proportion of companies continue to view R&D activity in terms of a cost rather than an investment in future growth.

Changing these attitudes should be a key policy objective of government.

The Government’s strategy

The Government, behind the scenes, recognises that there is a crisis in innovation policy.


To address this crisis it has established no fewer than twelve reviews in the general area of R&D policy. The sheer number of current reviews is remarkable. The purpose of the reviews is to set the scene for

implementation of its own predetermined agenda - set out in chilling terms in its internal documents - that I will describe in a moment.

The Howard Government uses one kind of language behind the scenes, and quite another in public. Its language in private is harsh and stark: the public, by contrast, is presented with a picture of an open, inclusive, caring government.

To the public, it has said (here I am quoting from the Government’s recently-released Issues Paper for the Review of Collaboration between Universities and Publicly-Funded Research Agencies):

“The Government has no preconceived view on these issues and wants all aspects of the question examined to be in the position to make a fully informed decision…”

But, to quote Christine Keeler, “The Government would say that, wouldn’t they?”

Here we have a government that:

• To win an election, is prepared to fabricate a story about asylum-seekers throwing their children overboard - and then to muzzle attempts to expose its actions;

• Is totally complacent about the fact that the decision to follow the US into a war with Iraq was based on utterly false information about the existence of weapons of mass destruction, and

• Has suppressed a report to the Health Department that slams the Government’s “zero tolerance” approach to injecting drug use as in large part responsible for an epidemic of Hepatitis C across the country.

• Has in recent times censored and suppressed research reports within the Department of Education on the access and equity effects of HECS that it finds unpalatable.

• On ethanol, has attempted to conceal relationships between the Prime Minister and beneficiaries of government largesse.

In this context, I challenge the Government’s claim that it has an open mind about the outcome of its multiple reviews and hence about the future of university research and that of Commonwealth research agencies.

For a start, while indignantly denying that it has already made up its mind about whether to smash CSIRO, it has already decided to bring another major Commonwealth scientific agency - the Australian Institute of Marine Science (AIMS) into “closer association” with James Cook University in Townsville, to be known as “AIMS at James Cook.”


This decision was announced in the 2003 Budget. The aim here is, despite the Government’s protestations, essentially an amalgamation of two organisations with completely disparate basic orientations: the core business of AIMS, as with CSIRO, is strategic and applied research, while that of a university is basic research.

Dr Nelson also has plans on the drawing board to snatch CSIRO’s rainforest research facility, on the Atherton Tablelands behind Cairns, to create the illusion that JCU up at Cairns has more research resources.

We have the Minister for Forests, Senator McDonald, suggesting that CSIRO’s forest laboratories would make another fine campus for James Cook!

Further, CSIRO has already been stripped of its measurement laboratories in order that the government can create a new National Measurement Institute within the Department of Industry.

So the Government has already pre-empted its own review of the public research agencies’ relationship with universities. It did so in the same breath as the announcement of the review itself - in the 2003 Federal Budget context.

But then of course there isn’t really a problem with pre-empting your own review: to do so is completely in line with the advice given by that consummate civil servant Sir Humphrey Appleby to a green and naive minister named Jim Hacker. As Sir Humphrey said, you should never announce a review unless you already know what its findings are going to be. If you’re forced to have a genuinely independent review, you make sure it is run by “sound people”.

Presumably following that advice, the Minister didn’t announce in the Budget a review of CSIRO and the other Commonwealth scientific research agencies without being very sure what the review would recommend. So acting on its recommendations before it’s even commenced shouldn’t raise an eyebrow.

The game plan and its outcome

So what is the Government’s agenda? As part of the Crossroads review, submissions from the ARC and from at least one university (Edith Cowan) suggested that there should be a research funding regime that was much more performance-based, much more competitive. The ARC argued for an end to block funding for universities, and Edith Cowan said that universities should get access to the funding of the Commonwealth research agencies.

In February 2003 (according to press reports), the Minister, Dr Nelson, told Cabinet that all commonwealth funding for higher education research would either be competitive or performance based. In order to focus on commercialisation and application of research from public research agencies, and to identify and exploit potential synergies between agencies and universities, the Minister also established a high level task force to examine


models for “closer integration” between universities and public research agencies and to develop alternative funding models to develop excellence across the national research effort.

The Government was concerned that Backing Australia’s Ability would reach a “funding cliff” when its programs were to conclude in 2005. In the end Nelson was obliged to extend ARC funding for another year, and to fund the chief investigators’ salaries out of ARC grants. This was a long way short of what observers had expected. What’s not generally known is that Dr Nelson also proposed

It was his plan for Australia’s universities, dressed up as conclusions drawn from the Crossroads review. Of course, the Crossroads process being defined by the Government as a “review”, the conclusions were not in fact genuinely drawn from the evidence presented to the review panel, but were part of a game plan at least partially determined long before - some say as far back as the time of the infamous leaked Kemp Cabinet Submission of 1999.

The Backing Australia’s Future papers, released with the Budget, virtually ignored the matter of university research. But the February basket of proposals did not.

As you will know, the package as it appeared in the public realm did not contain the research sweeteners that the Vice-Chancellors wanted - and that most were expecting.

Nelson’s plans included a package worth an additional $114 million p.a. for university research. This involved a rolling together of the currently existing research grants - the Research Infrastructure Block Grants Scheme and the

Institutional Grants Scheme.

Nelson’s February proposals also included more general plans for the future of the nation’s Commonwealth-funded science and research capacity. These go to the future of research agencies including pre-eminently the CSIRO.

The plans to revamp university research funding involved a single funding model allocating resources on a purely competitive basis, and the consequences for all but the biggest and the oldest universities of such a proposal are potentially dire. While the ANU would fare comparatively well under such a research funding model, it would nevertheless lose out compared to those universities that I have dubbed the “megafauna” - the four universities that currently share over 40% of all university research funding, both competitively allocated (through the ARC) and allocated as block grants with a moderated performance-based mechanism.

Those universities are:

• The University of Sydney

• The University of NSW

• The University of Queensland; and

• The University of Melbourne.


The Group of Eight universities, which includes the ANU, now receives 60% of Commonwealth research grants, but you don’t have to be a genius at mathematics to work out that this means that the four Go8 institutions I

haven’t yet named - Adelaide, Monash, UWA and ANU - at the moment get only half, on average, of what each of the four megafauna attracts by way of Commonwealth research funding.

How they would fare under Nelson’s model isn’t clear, but the four universities in the “outer circle” of the Go8 might find themselves disadvantaged compared to the voraciousness of the megafauna institutions.

Dr Nelson has delayed announcements about the future of university research funding, and the future of the Commonwealth-funded scientific research agencies, until after the completion of a series of reviews.

The Reviews

At the moment the Government has in train, or due to report, a staggering twelve reviews that go directly to the issue of university research - twelve.

Why would it do that?

The answer is clear: following Sir Humphrey and Jim Hacker, Dr Nelson has a radical plan in mind and is using these reviews as means to “justify” what he proposes to do - the sweeping changes he wants to institute.

Reviews in detail

All of these reviews are due to report shortly. In the case of some, their official reporting dates have already passed. Let’s look at the more important of these reviews:

• Review of research collaboration between universities and publicly funded research agencies: This is the review set up to “examine the scope for greater collaboration between universities and publicly funded research agencies (CSIRO, AIMS, ANSTO, DSTO), including investigation of “alternative funding models”, meaning access to competitive funding schemes, and “structural and other barriers” to such collaboration.

• Mapping of Australia’s science and innovation system: to identify weaknesses and gaps, and to feed into the review of Backing Australia’s Ability.

• Evaluation of Knowledge and Innovation reforms: looking at the BAA reforms in the university sector, including the block grant schemes, RTS and the inclusion of ANU’s Institute of Advanced Studies in the block grant schemes and ARC funding.

• Evaluation of BAA and related policy areas: a cross portfolio exercise, monitoring and evaluating the impact of the BAA package.


• National strategy on research infrastructure

• Review of implementation of the National Research Priorities: this is looking at the extent to which current plans of the major research bodies actually support the Priorities. Conducetd by a committee headed by the Chief Scientist, Robin Batterham.

• Evaluation of the CRC Program: an assessment of the program’s “effectiveness”, including administrative arrangements, and consideration of any changes necessary to the objectives of the program.

• Study on the return on investment in ARC-funded research: developing a methodology for analysing return on this investment and estimating economic impacts and spillover.

• Evaluation of the National Biotechnology Strategy: examining its efficiency, effectiveness and ongoing appropriateness.

• Review of the Defence Science and Technology Organisation: conducted by Ernst & Young.

I have only listed the most important and relevant reviews. CSIRO tells me that the organisation is currently participating in 16 review processes that directly impinge on it.

So what is going on?

Government’s agenda

I put it to you that the Government has a clear agenda. Following the advice of Sir Humphrey, it not only already knows the general outcomes of most of these reviews - because most of policy framework has been predetermined by Cabinet.

It knows that there is a national crisis in research funding, and that as a nation we have lost our way in terms of research and innovation policy. Backing Australia’s Ability has failed to deliver.

BAA failed to deliver because it was short-sighted, piecemeal, locked up research funding in the competitive schemes of the ARC and even there restricted additional funding to the flawed National Research Priorities - most areas of research are failing to benefit.

The Government realises this. It knows. So, it has set itself on a course of action that, far from solving its policy problems and making Australia more internationally competitive, will prove disastrous.

Its aim, as I indicated earlier, is to render all university research funding100% contestable, and to tear apart the publicly-funded research agencies, essentially putting their funds into the same competitive bucket.

The Government has in essence an atomistic R&D policy - one that lacks a national vision, especially a vision that recognises the integrity of our national


research institutions. The Government has no appreciation of the potential of institutions and systems, and of research and innovation networks - the added strengths and resources that exist when atomistic elements combine.

The Government’s failures - ten problems

The quality and diversity of Australia’s research outputs has declined. Research infrastructure across the country is deteriorating. We are losing our talented students and researchers. Our public research agencies are deprived of the resources they need. A blinkered policy approach to research concentration and commercialisation is fragmenting the national research

fabric. The national innovation system lacks coherent policy direction.

The Howard Government has consistently pursued a narrow policy agenda in R&D, valuing short-term commercially-oriented research. This has led to reduced funding for long-term research and for the Humanities and Social Sciences. It has failed to encourage collaboration, instead pursuing competition as an ideological icon.

Here are what I see as the problems plaguing and undermining our national research effort, across both public and private sectors:

1. deteriorating research infrastructure: our research infrastructure is in disrepair and disarray. Scientists have to use patched-up and makeshift equipment: increasingly they are leaving our shores in despair, to find state-of-the-art facilities overseas. Our access to bandwidth is up to 1000 times behind our competitor countries, with connections almost non-existent in some regions. University libraries are reeling under the effects of funding cuts and have drastically cut back on acquisitions and services. Top researchers from overseas laugh in the faces of Australian recruiters. Other OECD countries invest 50 to 75% more than we do (as a proportion of GDP) in knowledge.

2. weakening research capability in many universities: I noted earlier that Commonwealth research funds were already concentrated in just a few, established, inner-metropolitan universities. Regional institutions, and newer ones in outer-metropolitan areas, are especially badly hit by the skewing of research funding - exacerbating the city-bush divide. As this trend gets worse, the knowledge base to address problems, and create jobs, in regional areas will disappear.

3. erosion of public research agencies: Nowhere is this more obvious than in CSIRO, where 250 jobs are to go and Divisions are cutting back on their core activities as the agency is forced to rely ever-more heavily on commercially-generated funds.

4. declining national investment in R&D: there has been a direct correlation, since 1996, in private-sector investment in R&D on the one hand, and the fall in tax concession levels. This trend stands in marked contrast to those in other countries (Canada, UK, Singapore


and the US) where this investment is increasing fast. In the global economy, large corporations have no incentive to invest in Australian research.

5. slippage of Australia’s research performance and attractiveness: top research students and researchers won’t come to Australia, and many of our own are leaving. Our collective position on the international citation index is falling and our participation in international research projects comparatively low.

6. wastage of national IP: we are failing to commercialise the fruits of our research. Or we are doing so inappropriately, and at the wrong time, because we can’t afford to wait. This leads to business losses and missed opportunities. Fundamentally, there is no understanding that knowledge management is crucial to business success, economic growth and to improvements in the quality of life for Australians.

7. poor uptake of research by Australian industry: companies are not aware of the potential benefits of R&D, nor of the imperative to invest in it to stay a player the global economy. Academic researchers, in turn, communicate poorly with business. These twin failures mean lost opportunities for product and service innovation and productivity improvement.

8. imbalance between short-term and long-term research: there is too much “short-termism”, emphasising immediate applications, at the expense of long-term inquiry. This tendency is heavily influenced by the short-term funding cycles for research agencies, CRCs and much university research. Narrowly-defined research, commissioned by a single potential user, carries a risk of conflict of interest problems. The Humanities and Social Sciences miss out as funding priorities - we need to advance knowledge in these fields in their own right, but people forget that they are also crucial to the innovation process (for example behavioural psychology, understanding of foreign business cultures, organisational management, economics).

9. declining quality of maths and science teaching in schools: the teacher shortage in these areas isn’t looming - it’s here. In Victoria, 40% of secondary school maths classes are taught by teachers not qualified in mathematics. We must act urgently to train new teachers in these areas, to retain existing teachers in our schools, and to remove disincentives for those entering the profession.

10. atomisation of relations between research funding agencies, the Commonwealth, researchers and institutions: policy-making is ad hoc. There has been a monumental failure, on the part of this Government, to develop a whole-of-government approach to R&D policy. Indeed, it seems hell-bent on rushing in the opposite direction.

Some solutions


Now for a possible way forward.

First, I believe that we have to acknowledge the reality that our economy is small and that we are at the opposite end of the world from most major consumption and investment markets. We have to be selective in how we invest in R&D, but we must do so judiciously.

To maximise our effectiveness, we must have a national, whole-of-government approach to research and development. We simply cannot afford the atomistic, individualised, laissez-faire policy offered to us by the current government.

We have to use our resources in such a way as to obtain the maximum possible research and innovation outcome for our dollar. That means identifying ways productively to combine the potential of institutions, firms, government and individual researchers - so that the result adds the most possible value.

Each piece of the equation is equally important. But it’s in how they combine and collaborate that we find the key. A national government has a clear role in both regards.

International experience, in countries such as the Netherlands and Norway that are surging ahead in R&D, shows that the clustering of players and agencies has exciting possibilities. Here, the whole generates more value than the sum of its parts. A cluster is not just a coming together of individuals.

Clusters and knowledge networks

The concepts of Research clusters and knowledge networks form a context for research and innovation, and a possible conceptual framework for a national policy.

Clusters include networks and groupings of independent firms and strategic alliances between companies, universities, research agencies, knowledge-based business services, bridging institutions and clients or customers. Clusters have inherent properties conducive to innovation and growth. Clusters emerge and grow through the interaction of specialised individual players, each of whom adds unique value to the task at hand. The result is not only enhanced creativity, but increased efficiency.

The role of government in supporting clusters could be seen as that of a facilitator. Government’s most obvious responsibility is that of ensuring the effective participation of universities and public research agencies in research clusters - and that entails providing them with appropriate levels of financial support and, in turn, with a satisfactory, transparent policy framework of their own in which to operate.

But governments also have a role as intervenors in the capital formation process - for the translation of knowledge generated by research into


commercial products and social and economic gain. Any research and innovation policy must concentrate on these three elements.

Strong universities, strong public research agencies

The Commonwealth Government’s primary responsibility lies in supporting the publicly-funded sites of research: universities and Commonwealth research agencies.


A government that is serious about research will need, as a priority, to raise the infrastructure component of competitive grants. It should be committed to the renewal, as quickly as possible, of university infrastructure - this is a big-ticket item, but one that’s central to the health of our university research effort.

University operating grants need to be indexed to the Wage Cost Index - as outlined in Labor’s higher education policy document, Aim Higher.

Bandwidth connectivity must be urgently improved - with substantial increases in capacity.

Regional universities should be supported in their research capacity - rather than ripping this capacity out of them, as Nelson’s policies will inevitably do. In regional areas, the idea of networks and clusters has particular appeal, and regionally-based initiatives could be funded and encouraged, in order to make the best of the resources available in each region, as well as by linking regional institutions, organisations and companies to players in metropolitan centres.

Universities are already major employers, not only in regional areas but in the big cities as well. Monash and Melbourne Universities, for example, are among the ten largest employers in Victoria. The potential for universities to act as magnets for employment - both directly, and through their commercial and spin-off companies arising from their R&D efforts - is often underestimated and unrecognised. Generally speaking, a successful and coherent national research and innovation strategy has the potential to create many thousands of jobs in high value-added industries.


The research facilities of Commonwealth-funded agencies such as CSIRO and AIMS, located in regional areas, should be maintained and developed to enable them to play their part. These agencies have a role quite distinct from

that of universities - concentrating as they do on strategic and applied research, rather than basic research. But the complementarities and synergies that can arise from cooperative interplay between the agencies and universities embody great potential.

CSIRO, in particular, must be saved. Its public interest role should be clearly and transparently articulated. Funding should be restored. The


Government’s planned merger between AIMS and James Cook University should not proceed.

CSIRO is unique in that it is a unitary, comprehensive national scientific research agency.

The Australian public values CSIRO, even if the Government doesn’t. That of itself does not provide a justification for its preservation as a unitary organisation. Its national and international standing, however, and its credibility in the international scientific community, does depend to a large extent on the fact that the research it produces carries the imprimatur of the organisation itself.

Some people might want to say that CSIRO is nothing more than an unwieldy monolith - a kind of mammoth that has had its day. On the contrary, I consider that its size and scope - far from being a liability, is an advantage and a protection. It lends weight to the organisation as it attempts to negotiate with the Commonwealth over funding. The fact that, within Australian science, CSIRO’s size means you can’t miss it - that fact helps to protect it in the jungle of the Budget process.

As we have seen over the last 18 months in the media, the fact that CSIRO is a national icon, and a big one, has served to protect it. This Government’s efforts to undermine the organisation, and even to smash it, have been met with outrage all over the country. Size can be a protection.

But size can also make an organisation vulnerable.

Dr Nelson’s eye, when he looks at CSIRO, is an avaricious eye. He is eyeing it off. His plan is to break up the organisation and cannibalise it to bolster universities’ research resources and capabilities. We must stop him: Labor intends to stop him. CSIRO is central to a Labor plan for a national research

and innovation strategy.

Incentives for commercialisation - the private commercial sector

We need to provide incentives for commercialisation.

We should revamp the tax concession schemes surrounding innovation and commercialisation, to encourage the commercial sector to be part of the research cluster approach. There is a range of ideas we might pursue here, and there will be a cost. This, however, should be regarded as an essential aspect of the national investment in Australia’s research and innovation. We should also look to increase the philanthropic support for innovation. One role for government here is to match potential philanthropists with researchers and research institutions.

Links between business and universities

A Labor whole-of-government approach would identify ways to bring the cultures and resources of business and universities closer together. One idea


might be a scheme to place researchers in companies - salary subsidies to put research graduates within businesses, along the lines of the UK “Teaching Company Scheme”.

Universities themselves need better to understand the commercial world and the process of start-up and commercialisation. Venture capital should be available from government, possibly through a trust that would become self-financing in time.

Other specific initiatives

There are some other things that a Labor Government might do.

My colleague Jenny Macklin has already announced that Labor will provide additional publicly-subsidised HECS places for students of maths and science in our universities.

We need to support research in the humanities and social sciences - this might take the form of a scheme similar to the CRC program, but complementary to it.

Time constraints won’t allow me to float more ideas - but I assure you that there are more.

No need to smash CSIRO

To return to the title of my talk, I don’t believe, and Labor doesn’t believe, that there is any need to smash, cannibalise or tear apart the CSIRO. This organisation, and its counterparts AIMS, DSTO and ANSTO, are central to a Labor strategy for a whole-of-government approach to research and innovation.

Public agencies - universities and public research institutes and organisations - are complementary to each other and require a balance in the provision of Commonwealth resources.

Australia needs a policy designed to bring out the utmost from the potential and resources of all possible partners in innovation. The Howard Government’s blinkered, atomised approach is leading us into a cul-de-sac. If our nation is to take its place in the global economy and community, we have to be serious about this, above almost all else.

That is why I am honoured and exited by my new portfolio of Industry, Innovation, Science and Research. This portfolio I regard as the key to a healthy, prosperous, socially just future for our country.