Australia can compete on a global stage by focussing its research attention to develop scale in strategic areas.
Global investment in digital innovation is rapidly growing. Whilst Australia is likely to remain outmatched on the quantity of available investment for emerging technology, we can compete by developing scale in strategic areas. This means identifying technical and domain research strengths in the areas that are necessary to the industries where Australia has a competitive advantage, and then directing funding to them. For example, aggregating and building world-class research strengths in biomedical research, machine learning and optimisation, and sensor technology will be essential to lead the world in precision healthcare.
Countries around the world are engaged in a global innovation race to cement their competitive advantage in the next wave of digital innovation. Many countries have announced major investments in artificial intelligence (AI) research that dwarf Australia’s capacity.48 China has committed to becoming a world-leader in AI by 2030, envisioning a $210 billion domestic industry. In 2016 alone, North America attracted $15-23 billion in private sector AI investments. The European Union has set a 2020 target for a $20 billion investment program in AI. In addition, countries like France and Germany have separately announced significant national investments in AI. The United Kingdom has launched a $1.8 billion program which adds to significant private sector investment. In Asia, economies such as Japan, Korea and Singapore are also making large investments into AI technology.
This explosion in funding has been accompanied by strategic focus. The USA, China, UK, France, the European Commission, Russia, Korea, Japan and Singapore have all announced multiyear strategies to strengthen their innovation in artificial intelligence and data analytics.
Australia can compete against the scale of this investment by identifying strategic research areas where we are globally competitive and developing competitive scale in them. Australia is well placed to do this because of excellent quality of our research. Our key research strengths include fields like geology, environmental science, clinical sciences and materials engineering. And we are among the global leaders in digital research. For example, a higher share of Australian research papers on computer science and AI receive citations than for any other country (Exhibit 8). The 2017 QS World Rankings for Universities by subject placed four Australian universities in the world’s Top 50 universities for Computer Science and Information Systems.
However, our system of public funding for research is not designed for prioritising this kind of strategic investment. Almost 90 per cent of Australian public expenditure on R&D is through indirect channels such as tax incentives, where government has very limited ability to prioritise and generate scale. Just 13 per cent comes from direct investments. By contrast, half the comparable R&D expenditure is through direct investments in the UK, and three-quarters in the United States.
There are some examples of strategically focussed public investment in digital innovation which can help guide further investment. For example, the Australian Research Council (ARC) has a funding stream called Supporting Responses to Commonwealth Science Council Priorities that is specifically focussed on IoT, AI and machine learning, and Next Generation Agriculture. Similarly, the Australian government committed $500 million over the next 10 years in an Australian Genomics Mission to drive forward genomics research in Australia.
