New governance model and funding pathways set out in R&D reform blueprint
A major national review of Australia’s research and development system proposes structural reform across funding, governance, workforce and industry participation, while parallel negotiations to join Horizon Europe point to expanded access to international collaboration and large-scale research investment from 2027, signalling upcoming changes to Australia's R&D system.
The Australian Government’s Strategic Examination of Research and Development has delivered a 20-recommendation plan to reshape how research, development and innovation (RD&I) operates across the country.
The Ambitious Australia report concludes that while Australia has a strong research base, the broader system is fragmented, overly complex and not delivering enough economic or societal impact. It points to more than 150 Commonwealth programs, declining funding in key areas, and a system that spreads investment too thinly across multiple activities.
The panel states that reform is needed to better connect research with industry outcomes, improve coordination, and lift productivity and long-term economic performance.
“I am so grateful for the work, expertise and experience that went into preparing Ambitious Australia. I want to thank Robyn Denholm for her intellectual rigour, hard work and commitment to the national value of Australia’s research and development system," Minister for Industry and Science Tim Ayres said.
"Meeting Australia’s big collective challenges – food and agriculture, energy security, new industrial and tech processes, water security and dealing with the human, animal and plant diseases of the future, to name just a few – requires a modern and fit for purpose research and development system.”
From fragmented programs to national coordination
A central recommendation is the creation of a National Innovation Council to oversee RD&I funding and coordination at a national level, reporting directly to government.
The report proposes consolidating activity into six National Innovation Pillars: health and medical; agriculture and food; defence; environment and energy; resources; and technology. These would be supported by targeted initiatives designed to focus effort on defined national goals and high-impact challenges.
This approach is intended to replace what the panel describes as an “atomised” system, where funding and effort are dispersed and difficult for businesses and researchers to navigate.
Linking research to industry and economic outcomes
The report identifies a gap between knowledge creation and commercial application, noting that the system places too much focus on inputs rather than translating research into products, jobs and productivity.
It recommends reforms to the Research and Development Tax Incentive (RDTI), new support mechanisms for startups and scale-ups, and stronger pathways for collaboration between researchers and industry.
A key concept is the “innovation flywheel”, where research generates knowledge, which is then translated into products and services that create jobs and economic value, attracting further investment into the system.
Investment and capital constraints identified
Access to capital is identified as a limiting factor for Australian RD&I businesses, particularly at later growth stages.
The panel recommends expanding incentives for angel investment and venture capital, reforming superannuation settings to support investment in high-growth firms, and improving exit pathways such as initial public offerings and mergers and acquisitions.
It notes that many Australian companies seek overseas investment to scale, which can result in value shifting offshore rather than being retained domestically.
Workforce and skills gaps across the innovation cycle
The report highlights workforce capability as a constraint, with gaps in STEM and industry-relevant skills, declining domestic PhD enrolments, and limited movement between academia and industry.
Recommendations include stronger industry-linked research training, improved incentives for PhD participation, and a coordinated workforce strategy to align education, migration and industry needs.
The panel also calls for targeted support for entrepreneurs and First Nations participation in RD&I activities.
Government role in driving change
Government leadership is identified as critical to reform, including through procurement policies that prioritise Australian innovation, streamlined funding processes, and more competitive tax settings.
The report also recommends shifting performance measurement from inputs to outcomes, with clearer metrics tied to economic and societal impact.
It warns that without reform, Australia risks declining living standards, noting projections that growth in GDP per person has fallen from 90 per cent over 40 years in earlier forecasts to 57 per cent in more recent estimates.
International collaboration through Horizon Europe
Alongside the report, the Australian Government has announced it will begin negotiations to associate with Horizon Europe, the European Union’s $155 billion research and innovation program.
If successful, Australian organisations are expected to access funding and participate in collaborative projects from early 2027.
Prime Minister Anthony Albanese announced Australia's potential inclusion, saying, “I am pleased to join European Commission President von der Leyen in announcing that we will commence negotiations on association to Horizon Europe for 2027."
"By associating with Horizon Europe, we are supporting international research collaboration innovation in Australia, creating jobs and driving productivity to help deliver a Future Made in Australia.”
Next steps
The Government has confirmed it is considering the report’s recommendations and will assess how to respond.
The panel describes the reform package as interdependent, stating that partial implementation risks maintaining the current system without achieving the intended shift in outcomes.
At the same time, progress toward Horizon Europe participation signals a parallel pathway, where domestic reform and international collaboration may operate together to expand the scale and impact of Australia’s research and innovation system.
