The federal government wants to boost productivity. Science can help

In the wake of Labor’s resounding victory in Australia’s federal election earlier this month, there has been much talk about flailing productivity in Australia.

In fact, last week, Prime Minister Anthony Albanese and Treasurer Jim Chalmers made clear that the priority for the government’s second term will be to boost productivity. This crucial measure of how much we produce for every hour we work rises a little every year. But growth has slowed over the past decade.

As part of this, the federal government has tasked the Productivity Commission with a new strategy to enhance productivity. A draft report is expected in July or August, with implementable ideas across five key pillars.

So far, however, one part of the solution to the productivity slump has received little public attention: boosting support for scientific research.

Productivity relies on science

Science can help boost national economic productivity in many ways.

For one, scientific innovation and creativity can create high value goods and services for both Australian and international markets. And translating this research into real-world economic benefits builds a workforce that combines science, technology, engineering and mathematics (STEM) skills with business skills.

This is important because it fosters technological innovation and supports evidence-based decision making. It also empowers individuals to solve complex problems in the face of technological change. This ultimately drives productivity growth.

Australian scientific solutions will also need to be at the fore if the Future Made in Australia agenda is to realise its goal of stronger public-private sector relationships and a more resilient economy.

The so-called fourth industrial revolution, or Industry 4.0, refers to the rapid digitisation and automation of manufacturing industry technologies and processes. It not only relies on science to realise the enormous opportunities of digital technologies, but also to ensure they are harnessed sustainably.

For example, science can help address the serious concerns relating to the huge energy and resource cost of artificial intelligence.

Recognising the role of science

The government seems to recognise the role scientific research and innovation can play in boosting productivity.

For example, in 2024 it fully launched the Australian Economic Accelerator, which was announced by the former Coalition government two years earlier. This scheme is designed to foster and build productivity by supporting university research in Australia that has the potential for commercialisation.

Australia’s new national science and research priorities also highlight the crucial role of science in addressing Australia’s complex energy and environmental challenges.

But there are still some fundamental problems in the world of science that are limiting productivity growth in Australia.

A widening gap

One of these problems relates to research and development – or R&D – funding.

Australia’s investment in R&D as a percentage of gross domestic product has been declining for many years. It has dropped from 2.25% in 2008–9 to 1.68% in 2021–22. At the same time, other advanced economies have increased their R&D spending, leading to a widening gap. The OECD average is 2.7%.

Multiple leading bodies have called out this decline as a threat to Australia’s long-term productivity. That’s because R&D spending in science fosters innovation and creativity – two major factors in productivity growth.

Another problem is the declining support for fundamental science which isn’t done with any application in mind, but can be equally important in the long term to enhancing productivity.

Consider the discovery of penicillin. Or of the double helix structure of DNA. These are just some scientific breakthroughs that were not initially focused on practical applications, but ultimately proved transformative.

This kind of scientific research requires sustained support, allowing knowledge to grow. We have seen the results of this in action and its impact even more recently. Scientists had worked on mRNA vaccines for decades before the vaccine breakthrough achieved during the COVID pandemic.

A nation at a crossroads

Australia is at a crossroads. Simply increasing funding in the short term through measures such as Australia’s Economic Accelerator is, at best, a band-aid solution. What’s needed to properly tackle the problem is thoughtful reform and long-term, strategic planning to secure the nation’s prosperity for decades to come.

There is some hope for this, thanks to the government’s comprehensive review of the R&D sector. This review aims to align R&D with national priorities, maximise the value of existing investments, harness public-private partnerships, and strengthen collaboration between research and industry.

The review is engaging a wide range of stakeholders and is designed to deliver long-term transformation.

Addressing productivity in these areas could yield substantial benefits. It could build Australia’s industrial and economic self-sufficiency. And it could broaden our field of view around productivity and how it can be boosted through long-term investment in science and R&D reforms.

By implementing robust R&D reforms and driving productivity across all sectors, Australia can set itself up for sustained growth and international influence.