AUSTRALIA RAMPS UP INNOVATION SPENDING

UNCLAS SECTION 01 OF 02 CANBERRA 000489

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SUBJECT: AUSTRALIA RAMPS UP INNOVATION SPENDING

REF: A. 08 CANBERRA 984

B. CANBERRA 456


1. (SBU) Summary. Australia has committed A$8.6 billion
(current exchange rate is $.78) between now and 2013 to
upgrade its national innovation systems. The Rudd government
released its policy response paper on May 12, alongside the
federal budget, to highlight the substantial increase in
funding for research and development, university research,
tax incentives, and new targeted Super Science Initiatives,
including climate, space and marine sciences. The innovation
agenda is intended to help reverse a slide in research and
development, and R&D earnings, in Australia identified last
year in the VenturousAustralia report issued by the Cutler
Review (ref A). End Summary.


2. (SBU) Powering Ideas: An Innovation Agenda for the 21st
Century, was released by Minister for Innovation, Industry,
Science and Research Kim Carr on May 12. While the release
of the Rudd government's second budget stole the spotlight,
the new innovation agenda represents a significant increase
in funding to restore Australia's flagging innovation
networks. As pointed out in the Cutler Report, Australia has
slipped from fifth to eighteenth in the World Economic
Forum's Global Competitiveness Index over the last eight
years. Commonwealth spending on innovation and science has
fallen 22 percent as a share of GDP since 1994. Australia's
R&D spending has increased eight percent a year since 1996,
compared to 22 percent per year in China. The nearly A$9
billion in funding over the next four years in the 2009-2010
budget represents a 25 percent increase over the previous
year, and several structural reforms intended to reverse the
recent trend. The increase in funding is being billed as A$3
billion in new funding to improve Australian competitiveness
and productivity.


3. (SBU) Key elements of the plan include:

-- A$703 million in new funding for Australia's university
system. The focus of the bulk of this funding will be to
address the gap in funding for indirect research costs by
more than doubling the support for research infrastructure
block grants.

-- A$802 million in new funding for universities and research
institutions under Round Two of the Education Investment
Fund. The major focus here is on infrastructure investment
and rebuilding university research capacity.

-- A$400 million for the Clean Energy Initiative (ref B).

-- A$93 million in new funding for the Australian Research
Council work on information and communications technology.

-- A$50 million for a research program on a bionic eye. This
project was a Rudd campaign pledge, aiming to recapture the
success of Australia's research into cochlear implants.

-- A$15 million for upgrading the Royal Institution of
Australia as the instrument of formal international science
exchanges.

-- A$15 million for bushfire research. This is a necessity
given the horrific wildfires that struck Victoria in February.

-- A$225 million increase in the research and development tax
concession for industry. This will also support the
conversion of the tax concession into a tax credit.

-- A$160 million for space and astronomy. The major focus
here is on supporting Australia's Square Kilometer Array
radio telescope bid, taking over operation of the
Qradio telescope bid, taking over operation of the
Anglo-Australian Observatory, and establishing a unified
government Space Policy Unit.

-- A$387 million for a new Super Science Initiative on marine
and climate sciences.

--A$504 million for a new Super Science Initiative on Future
Industries. Key focus areas are molecular biology, new
nuclear science facilities for the Australia Nuclear Science

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and Technology Organization, and nanotechnology research.


3. (SBU) Econoff met with Tim Murphy, senior adviser for
innovation to Minister Carr, on May 15. Murphy said that
there had been a great deal of debate on how to respond to
the Cutler report, and when. In the end, it was decided that
the linkage with the budget was more important than
attracting attention for the innovation agenda itself. The
focus on space, clean energy, marine sciences and climate all
responded to specific areas where Australia had a competitive
science base and a strong political incentive to invest.
Murphy said that the government had committed to ramping up
funding for university research, and Carr and Education
Minister (and Deputy PM) Julia Gillard had worked jointly to
build this effort into the budget. The establishment of a
space policy unit within the Department of Innovation,
Industry, Science and Research as intended to improve
coordination on civil space research and business, Murphy
said, and bring the civil side more in line with the vastly
more-coordinated Australian approach to military space
issues. The conversion of the tax concession (rebate) into a
tax credit was among the most important elements in
encouraging enhanced commercial R&D in Australia, Murphy
said, pointing to several decisions by major companies to
reduce or shut down their R&D efforts in Australia.


4. (SBU) Comment: The boost in R&D funding will certainly
help stabilize the unsteady state of Australia's
international innovation efforts. The tax changes reaffirm
Rudd's commitment to the pro-growth wing of the Labor party.
Whether this amount of support can be maintained over future
budgets, or can reverse the long-term structural problems in
Australia's global competitiveness, is less clear. End
Comment.

CLUNE