“Let’s look at some more recent spin outs out of CRCs,” Jane O’Dwyer said. “Take Fivecast and NQRY which went through the Data to Decision CRC. I talked to both those CEOs. They'll tell you that part of their challenge is procurement. Where do they find that first hungry customer? That's a role the Australian government can play.”
Related articles
Dive deeper into the key themes, bold ideas, and policy recommendations shared at the ACS 2025 Election Forum.
Introduction
Australia is home to some of the world’s leading research institutions and produces a disproportionately high share of global research. Yet we sometimes fall short when it comes to turning that knowledge into commercial outcomes. This longstanding translation gap isn’t the result of a lack of ideas or talent, but of structural and cultural barriers that limit our ability to scale innovation.
Early-stage ventures often struggle to secure capital, intellectual property is siloed within institutions, and research-industry collaboration remains weak by international standards. These problems are compounded by a risk-averse investment culture and the absence of medium-sized firms that can serve as a bridge between startups and large corporates. Governments have introduced programs and reforms over the years, and there are genuine signs of momentum. But as the world changes quickly, now is the time to get this right.
In the lead-up to the 2025 Federal Election, the Australian Computer Society (ACS) hosted a panel of experts to explore how to convert research into national advantage. This policy analysis draws on that discussion and offers five practical recommendations for the next government.
Recommendations:
Treat the national R&D review as a priority reform process by acting on its recommendations and explaining any decisions to diverge from its findings.
Develop of a National Innovation Strategy that is not subject to election cycles, recognises that innovation policy is economic policy, and positions Australia to lead in areas of strategic and comparative advantage.
Enhance CRC business models to foster enduring collaboration between academic, industry, and government.
Leverage public procurement to stimulate innovation and support Australian businesses.
Support scalable, sustainable funding through co-investment models, enabling institutions to share risk with private capital and reinvest returns into new innovation.
Lost in Commercial Translation
Despite only having 0.33% of the world’s population, Australia produces about 3.4% of global research papers yet many of the attempts at turning that research into products falls short. This is a known problem, often referred to as the “valley of death”. Early-stage ventures struggle to secure funding once initial research grants end but before they have a market-ready product. Entrepreneurs finishing R&D can rarely get bank loans and may not be ready for other forms of significant capital investment. The result is promising IP often being sold off or developed overseas when local funding runs dry.
Australia’s venture capital ecosystem, while growing, remains small relative to our economy. In recent years Australia hit record VC totals (around A$3–4 billion annually) – or $150 per person – but this is still modest. By comparison, in 2024 there was US$209 billion invested in US early-stage companies, or about US$614 per person. Australia’s smaller VC pool means comparatively fewer local startups reach scale, and many must seek overseas capital to reach global scale. Just look at the two major Aussie tech darlings from this era: Atlassian is listed on the NASDAQ and Canva has signalled its IPO will likely not be in Australia with co-founder Cliff Obrecht saying local investors “don’t understand tech” as well as those in the US.
Still, there are positive signs that Australian innovation is heading in the right direction. Phil Morle is a partner with Main Sequence Ventures, a deep tech investment fund started by the CSIRO. He says Australia’s startup ecosystem “used to be a desert”.
“When I first started trying to make startups, the entire venture capital pool of Australia was less than one of our funds now,” Morle told ACS.
“This job of getting IP out of the labs, connecting the dots, finding the language, finding the commercial mindset, having people that help all the way along – now we have all that from the moment someone has an idea all the way up to a series A investment.”
There comes a time when funding rounds are getting bigger and bigger, and to do the next thing you’ve got to raise more money to take more risk and work with a bigger global customer base,” Morle said.
“So you look around and you don't find that money in Australia, but you do find it overseas and you move the whole company. This happens time and time again.”
Declining R&D Intensity: A National Concern
Like many advanced economies, Australia has experienced a period of de-industrialisation over the last 50 years with value-added manufacturing now accounting for just under 6% of GDP, down from around 14% in 1990.
After peaking around 2008–2012, national R&D expenditure has declined as a share of GDP, even as other advanced economies increased their R&D intensity. Gross R&D spending (GERD) fell from roughly 2.1–2.2% of GDP at its height to about 1.7% of GDP in recent years, which is low compared to our peers.
In fact, Australia’s R&D intensity has been in decline for over 10 years, creating a growing gap between Australia and other OECD nations. By 2021–22, Australia’s total R&D spending was just 1.68% of GDP, notably around one percentage point below the OECD average.
Australian firms have been comparatively slow to adopt new technologies, which weighs on both productivity and R&D demand. Since 2017, Australia’s labor productivity growth has slid further, partly due to the slow uptake of new technologies. While ICT boosted productivity in the late 1990s, its benefits have somewhat faded to the point that, by the 2010s, the rate of ICT investment itself had declined to below that of Australia’s peers.
This trend is reflected in Australia’s tech and ICT-related R&D spend which is proportionally lower than many peers. Business R&D effort is heavily concentrated in a few industries: professional services, manufacturing, and finance which now account for around 74% of all business R&D.
For Emeritus Professor Roy Green, Special Innovation Advisor at the University of Technology Sydney, this all points to a broader problem that touches on Australia’s relatively poor economic complexity.
“There appears to be a correlation between the decline of manufacturing, the decline of business expenditure on R&D and the decline of productivity growth,” Professor Green told ACS.
“This tells us that just spending money on R&D is not going to solve a broader question of our narrow trade and industrial structure based on the export of unprocessed raw materials.”
But if we are to work on that problem, the government needs to take a deliberate, consolidated approach to how it manages federal R&D spending and related programs.
“The Commonwealth expenditure, as we found in a review about 10 years ago, is spread across 12 portfolios, 150 separate budget line items, none of which connect with each other.
“Since then, it's actually got worse once you add Future Made in Australia and the climate change programs. But imagine if we had a coordinating focus.”
Late last year, the Labor government appointed Tesla chair Robyn Denholm to lead a new strategic review of the R&D system which will hand down its findings by the end of the year. This review is long overdue and presents a critical opportunity to fix a system that’s become over-complicated, under-coordinated, and not fit for our economic ambitions.
Recommendation: Treat the national R&D review as a priority reform process by acting on its recommendations and explaining any decisions to diverge from its findings.
Innovation Needs Clear Objectives
Australia needs a clear, long-term innovation strategy which focuses on areas where we have competitive advantages, proven expertise, and global relevance.
One of the most promising areas is quantum technology, an area in which Australia has long been a global leader. Yet only recently has this work gained mainstream recognition, leading to encouraging steps from the government, including the release of the National Quantum Strategy and a major investment in US-based PsiQuantum. Maintaining that momentum will, however, require long-term commitment beyond this election cycle.
Australia's abundant natural resources and strong research capabilities also position us well for leadership in climate technology and circular economy innovation. Shifting toward more sustainable systems can add long-term value to sectors like mining, agriculture, and construction. Similarly, we have deep expertise in public infrastructure and digital government services – areas that can benefit from technological experimentation and data-driven efficiency.
Mic Black is an inventor and entrepreneur who co-founded Rainstick, a First Nations startup building on ancient practices of the Maiawali people of central west Queensland to mimic the bioelectric effects of lightning on plant growth. The company is applying what it calls Variable Electric Field Treatment (VEFtTM) to seeds for farmers to increase crop yields without chemicals.
Mic wants Australians to develop a higher risk appetite for new ideas and technology so scientists can capitalise quicker on their new discoveries and inventors can iterate in shorter cycles.
We can no longer afford to have our most transformative ideas spend up to 10 years sitting underfunded in a university, then up to a further four years’ worth of pre-commercialisation trials, before we are ready to embrace the risk as a market,” Mic told ACS.
“By then the world's moved on. Everything is accelerating, and global markets move way faster than that today.”
Mic has a track record of pushing the limits of scientific endeavour. In just three years, Rainstick has gone from scientific discovery in his home garage to trials with some of the largest names in food production in the world. That story involves testing lightning machine prototypes in a Serbian bunker, retrofitting a campervan into a mobile lab parked outside of CSIRO, and converting an old pie factory into a 400m2 advanced plant bioelectric laboratory.
Mic says it was the support of early high-risk investors and innovation programs that helped he and his co-founder, Darryl Lyons, accelerate at the speed required to stay ahead of the market. But he notes that there’s still a long road ahead. Mic said he doesn’t yet see a long-term innovation identity for Australia to lean into and extend its comparative advantage.
“As a country, what do we want to be competent in? What do we want to be known for? If we pick a few category-leading moonshots, then we can scale R&D incentives to activities that impact on these goals and favour more audacious, first mover advantages.”
There is, of course, evidence that this mode of thinking already exists, although implementation is a lot less bold. The National Reconstruction Fund (NRF) legislation allows the Industry and Finance Ministers to define priority areas of the economy that guide the fund’s investment decisions.
On the surface, the categories in the NRF reflect sectors where Australia has competitive strengths and future opportunity. However, taken together, they cover nearly every part of the economy. Without clearer focus, there is a risk that the NRF will struggle to direct investment with the strategic precision needed to build deep capability and long-term advantage.
For example, the inclusion of road vehicle manufacturing as a national priority raises questions about strategic coherence. While transport is a critical enabler – and the shift to electric and autonomous vehicles is globally significant – it’s less clear how this fits with the reality that domestic car manufacturing completely stopped just six years ago. Priority-setting should be forward-looking but also grounded in realistic assessments of capability, market fit, and strategic need.
Recommendation: Develop of a National Innovation Strategy that is not subject to election cycles, recognises that innovation policy is economic policy, and positions Australia to lead in areas of strategic and comparative advantage.