The Academy welcomed the overall strategic thrust of the Report which seeks to double economic growth and recognises the need for an industry policy. The Review acknowledges that industry will under-invest in research and development (R&D) unless government's intervene. However, we have major reservations concerning the treatment of research and development as demonstrated by a number of the recommendations relating to the Cooperative Research Centres, CSIRO, AIMS, ANSTO, the Universities and the rural research and development corporations.

The report has failed to distinguish basic and strategic research from application. These are very different processes and cannot be treated in the same way.

While my comments are concentrated on the recommendations affecting basic and strategic research, I am also greatly concerned about the continuing need to remove financial barriers to technological innovation. The reduction of the tax deduction for R&D expenditure from 150% to 125%, coupled with the inappropriate application of accounting rules such as the requirement for a 25 year write-off of some expenditure on R&D (such as pilot plants), is an inducement to under-investment.

Cooperative Research Centres (recommendation 6.13)

During the past decade we have all recognised that innovation, advanced technologies and science-rich goods and services will dominate global trade.

We strongly oppose the recommendation that funding for the Cooperative Research Centre (CRC) program should shrink from $146 million p.a. to $20 million p.a. The report argues that the program 'funds institutions rather than research activities and that this is inconsistent with the review's program design principles'. In fact, each CRC embraces several institutions and organisations, and is funded for a specified program of work.

The CRCs have built a momentum of cultural change in research and industry that must not be slowed or halted. In its brief history, the CRC program has achieved some notable successes. For example, the photonics CRC has developed a signal-dispersion compensator and a fibre-optic current sensor as contributions to the information-communications technology sector. The CRC for tissue repair and growth factors in Adelaide has developed cheap and cost-effective new animal husbandry technologies. The CRC for mine site rehabilitation is producing answers to a national problem. There are many other examples of CRC achievements although for many it is too early to assess their success. In all cases the CRCs must satisfy stringent reviews if they are to survive. Many OECD countries are imitating the CRC model.

Coopers and Lybrand Consultants undertook an assessment of CRCs in Queensland last year and concluded that there would be an employment multiplier effect of 7000 jobs in Queensland in addition to the 935 person years of employment directly created by the 18 CRCs in Queensland. The role CRCs play in opening up employment opportunities at the leading edge of technology should not be underestimated.

In addition, the Centres' postgraduate training programs are providing a new breed of scientist, comfortable in bridging basic research and industrial realities.

The ability to access world-class research and development is becoming an important driver of investment decisions for leading Asian companies. This has been acknowledged in the Metal Trades Industry Association's report 'Make or Break', released this month.

The assertion that 10% of the CRC program is addressed to the public good fails to recognise the fact that the distinction between public good and private good is often blurred. In the case of tourism and forestry, for example, the public interest and industry development should both be served.

I note an apparent conflict between Table 4 of Appendix 4 which suggests that in 1998-9 the current CRC funding of $137.35 million would drop to $20 million while the text (R. 6.13) states 'terminate in line with the schedule date and limit funding to $20 m per annum for new CRCs and those with predominantly public good collaborative scientific programs.'

The Academy recommends that the Government should maintain a commitment to the continuation of the CRC program, noting that the program provides the flexibility to terminate some Centres and to form new ones based on performance as well as changing priorities.

Rural Research and Development (R&D) Corporations

Under the current structure, rural R&D corporations are efficient and produce good results for their particular industries. One report points to the grains and meat R&D corporations having shown benefit-to-cost ratios of 19 and 20 to 1. Producers in each industry, who provide 50% of the funds, are best able to prioritise the direction of those funds, and this would not be possible by amalgamating all the corporations as proposed in the Mortimer Report. Although it may be possible to make changes in the size of the top Councils, there would still need to be specific panels and this would add another layer of administration. Savings are likely to be minimal when these considerations are taken into account.

One of the functions of the R&D corporations is to communicate with the community that they serve and receive direct feedback on industry requirements. The rural R&D corporations have justified their industry contributions and the public funding they receive.

External funding for CSIRO, AIMS, ANSTO and Universities

The recommendation that CSIRO achieve 50% external funding is, in our view, unrealistic and would impact adversely on its strategic research. It also does not take into account the diversity of CSIRO. An overall requirement for this level of external funding would require a number of Divisions to achieve 70% or even 100% external earnings. Applying the recommended targets will reduce greatly CSIRO's capacity to perform its strategic research.

The changes recommended by the Mortimer Report to the R&D corporations and the CRC program would add to the difficulty of locating external funds.

The Report acknowledges the low level of industry support in Australia for R&D compared to other OECD countries, yet at the same time recommends considerable pressure on research establishments to obtain industry support.

We are concerned that the external earnings requirements, while they aim to mesh research goals with industry needs, have the effect of cutting the research budgets.

Considerable effort has gone into seeking external funding. Too often the requirement of meeting targets becomes itself the goal rather than the integration of research within industry.

The universities are also targetted for further cuts in public funding through requirements for extra outside funding. Universities are under great financial stress at present, further cuts would be folly.

Policy and program delivery should not be separated

The recommendation by the Mortimer Report that policy and program delivery be separated would reduce essential feedback from the customer base. Business needs consistency of delivery and interpretation of the rules. Corporate knowledge, expertise and professionalism within research funding and performing organisations should not be sacrificed in bids to encourage outsourcing. We support the need to simplify access to information about research and development programs. There should be an efficient roadmap, and assistance from the continuity of knowledge and skills available in professional and stable public institutions.

Plurality of funding

The Academy of Science supports a plurality of funding sources. This was also recommended in the recent report by Professor Stocker.

We do not wish to have a command economy and, therefore, should not pursue a single research and development support scheme.

We also need to be aware of the key role played by State governments in support of research activities.

I have forwarded copies of this letter to the Prime Minister and the Minister for Science and Technology.