Australia's economy is facing a stubborn challenge: stagnant productivity growth that threatens living standards, innovation, and global competitiveness. For over a decade, labour productivity has hovered at its lowest levels in six decades, with recent data showing market sector productivity excluding mining slowing to unprecedented lows. This isn't just an abstract economic metric; it directly impacts wages, job quality, and the ability of businesses to thrive amid rising costs and technological shifts. Enter the University of New South Wales (UNSW), a leading Australian institution at the forefront of research and education, which has stepped up with a comprehensive set of recommendations to reignite this vital engine of growth.

Through its detailed submission to the Productivity Commission on consultations regarding five interim reports, UNSW has outlined targeted priorities aligned with the government's five-pillar productivity agenda: boosting business investment and innovation, building a skilled workforce, advancing digital capability, strengthening competition and market dynamics, and enhancing adaptation to net zero and resilience. These priorities emphasize the pivotal role of universities in driving research and development (R&D), fostering talent, and bridging the gap between academia and industry. By focusing on practical, evidence-based reforms, UNSW is not only contributing to national discourse but also positioning higher education as a cornerstone solution.

Understanding Australia's Productivity Predicament

To grasp the urgency, consider the numbers. Australia's R&D intensity stands at a mere 1.68 percent of gross domestic product (GDP), well below the Organisation for Economic Co-operation and Development (OECD) average of around 3 percent. This shortfall translates to missed opportunities: every dollar invested in R&D generates approximately $5 in economic value through innovation spillovers, process improvements, and new technologies. Meanwhile, small and medium-sized enterprises (SMEs), which comprise 98 percent of Australia's 2.6 million businesses, innovate at higher rates but face barriers to scaling, contributing to a 2.7 percent productivity boost per innovation that remains underleveraged.

The labour market tells a similar story. By 2050, 40 percent of adults will be aged 55 and over, with traditional working-age population growth slowing. Yet, critical shortages loom: 12,000 PhD-qualified researchers by 2031 and 200,000 engineers by 2040. Underutilization of skills—particularly among mid-career professionals and skilled migrants in mismatched roles—exacerbates the issue. UNSW's analysis highlights how universities can address these through sovereign research capability and workforce upskilling, ensuring equitable productivity gains across regions and communities.

UNSW's 10 Core Priorities for R&D Revival

At the heart of UNSW's response are 10 interconnected priorities aimed at uplifting Australia's R&D ecosystem, the primary driver of productivity. These build on lessons from high-performers like Israel and South Korea, where consistent policy has elevated R&D to 3 percent of GDP over two decades.

• Develop a National Collaboration Framework to align government and industry R&D investments with national priorities, integrating reviews like the Strategic Examination of R&D and the Australian Research Council (ARC) National Competitive Grants Program.
• Ensure government fully funds the cost of commissioned research it directs, estimated at $1.2 billion annually, with clear departmental accountability to maximize taxpayer value.
• Promote structured knowledge exchange via programs like Trailblazer Universities, industry PhDs, and skill badges, addressing the PhD researcher gap while embedding scientific advisors in policy through a Chief Technology Officers’ Circle.
• Provide long-term, sustainable funding for research programs to enable predictable planning and sustained excellence.
• Treat research infrastructure—such as the National Collaborative Research Infrastructure Strategy (NCRIS) and National Digital Research Infrastructure (NDRI)—as strategic national assets, fast-tracking investments for higher returns.
• Position government as a lead adopter of domestic research to catalyze industry uptake and build sovereign capabilities.
• Invest in mission-driven innovation centres modelled on the UK's Catapult Network, targeting Technology Readiness Levels (TRL) 4-7 in areas like clean energy, critical technologies, and advanced manufacturing to de-risk commercialization.
• Empower SMEs with R&D Tax Incentive (R&DTI) collaboration premiums, levies on large firms reinvested in SMEs, instant write-offs for PhD salaries, and a national broker network.
• Incentivize large businesses via R&DTI premiums and a 10 percent concessional tax rate for Australian R&D activities, countering a decade-long $2.9 billion decline in their spending.
• Craft a national philanthropy strategy leveraging 2,000 family offices and high-net-worth investors, with tax incentives to fund high-risk research.

These steps form a cohesive blueprint, emphasizing collaboration over siloed efforts. For instance, UNSW's own initiatives in quantum technologies and AI exemplify how such frameworks can translate into real-world breakthroughs.

Bridging Workforce Gaps Through Higher Education Reforms

Beyond R&D, UNSW advocates for a unified post-secondary education system that supports lifelong learning. This includes equitable funding for micro-credentials in high-demand areas like digital skills, cybersecurity, renewable energy, and advanced manufacturing. Employer partnerships, HECS-style loans, and a potential lifetime learning levy would make upskilling accessible, while tax deductibility expansions and work-integrated learning incentives encourage participation.

Targeted measures for mid-life workers—such as income-contingent loans and reformed Austudy—could unlock labour force participation, vital as demographics shift. The National Skills Passport would streamline recognition of prior learning, and streamlined visa pathways for skilled migrants in priority sectors like defence and health would fill immediate gaps. UNSW's vision integrates these with migration planning, ensuring universities produce adaptable graduates ready for an AI-driven economy.

Real-world example: UNSW's Trailblazer program has already partnered with industry to deliver PhD-qualified talent, demonstrating scalable models for national rollout.

Regulatory Overhaul and Global Ambitions

Bureaucratic hurdles stifle innovation, so UNSW calls for a comprehensive regulatory stocktake aiming to halve burdens by 2030. This includes data-sharing reforms, agency mergers like TEQSA and ASQA, and updates to the Higher Education Support Act. Restricting R&DTI to domestic activities and simplifying administration would boost accessibility.

Globally, joining Horizon Europe—the €95.5 billion collaborative program—alongside bilateral agreements would deepen ties. Reforms to unlock superannuation for high-risk R&D, inspired by the UK's Mansion House Compact, could mobilize billions. These align with UNSW's international research networks, enhancing Australia's edge in critical technologies.

Stakeholder Perspectives and University Leadership

UNSW Vice-Chancellor Attila Brungs, as Group of Eight chair, underscores universities' dual role: educating future leaders and pioneering research that drives productivity. Economists like Scientia Professor Richard Holden emphasize tax reforms—such as GST overhauls and company tax cuts—as complements to R&D boosts. Industry voices echo the need for SME support, while policymakers reference these priorities in roundtables.

UNSW's full submission provides granular evidence, drawing on university data showing higher education R&D rising to 0.61 percent of GDP.

Case Studies: UNSW's Impact in Action

UNSW exemplifies its priorities. In clean energy, partnerships yield advanced manufacturing innovations boosting efficiency. Quantum research addresses national security needs, while AI initiatives upskill thousands via micro-credentials. These not only enhance productivity but create high-wage jobs, aligning with Future Made in Australia goals.

Challenges and Pathways Forward

Implementation faces hurdles: political will for tax shifts, funding commitments amid budgets, and cultural resistance to regulation cuts. Yet, phased rollouts—starting with collaboration frameworks—offer low-risk entry points. Monitoring via key performance indicators, like R&D intensity targets, ensures accountability.

Photo by Henrique Felix on Unsplash

Future Outlook: A Productive Australia Led by Universities

If adopted, UNSW's priorities could propel Australia toward 3 percent R&D intensity, fostering a dynamic economy. Higher education emerges as the linchpin, producing talent and ideas for net zero transitions and tech leadership. For academics, researchers, and students, this signals opportunities in mission-driven projects and global collaborations. As UNSW's Strategy: Progress for All charts a decade of impact, the path to productivity renewal is clear: invest in knowledge, collaborate boldly, and reform decisively.

The implications extend to career landscapes in higher ed, where demand for R&D experts surges. Institutions like UNSW are not just observers but architects of economic revival.