News & Views item - May 2009

 

 

527 Days. (May 13, 2009)

The Labor Party, led by Kevin Rudd, assumed government on December 3, 2007. Now on the 12th of May 2009, 527 days later, the budget papers have effectively announced what looks to be the end of the inanition of the nation's universities perpetrated during the 11⅔ years of government by John Howard's Coalition.

 

Over the next weeks much argument will ensue about the overall effect of the budget on the nation's economy now and in the years to come, but as regards the tertiary education sector any whinging was at very low decibels.

 

Principal aspects of the government's down payment (and it's a large one) on its "Education revolution":

 

Funding for the indirect cost of research from about 20 cents in the dollar to 50 cents in the dollar over the next four years.

$3 billion to be available from the Education Endowment Fund for tertiary infrastructure and innovation.

[Thirty-one projects worth $934 million have already been approved for round two of the funding and $500 million will be made available for round three later this year.]

$490 million to remove funding limits and shift to a system by 2012 whereby funding follows a student, not the institution). Government claims 50,000 more students to start university by 2013.

$437 million to encourage universities to enrol more poorer students.

[Funding for low socio-economic status participation will increase to about 3 per cent in 2011, universities will get an increased loading for poorer students, and a further $108 million will be spent to develop partnerships with schools and vocational education providers.]

$57 million for a new national quality and standards agency to oversee the tertiary sector.

$3.8 billion over four years to support apprenticeships and traineeships.

 

The Group of Eight was fulsome in its praise in announcing its evaluation: "Visionary road taken to university reform", and went on to say that in responding to tonight's Federal Budget, Group of Eight Chair, Professor Alan Robson, commended the Government for commencing a far-reaching program of micro-economic reform that will improve Australia's economic capacity and performance through higher education and research.

 

Professor Robson in speaking for the Go8 said: "This budget includes a serious commitment to move progressively to cover each university's indirect research costs, long advocated by the Go8 as vital to the quality and competitiveness of Australian universities."

 

And he was also careful not to show any signs of straining at the leash: "This move, together with the Excellence in Research for Australia initiative, the new program of Collaborative Research Networks, structural adjustment facilitation measures, targeted infrastructure investments, and greater attention to student retention and learning outcomes, will provide incentives for diversification within Australian higher education."

 

Of course the Go8 tend to see themselves as hubs around which the rims might be expected to revolve.

 

The immediate reaction by Professor Ken Baldwin, President of the Federation of Australian Scientific and Technological Societies (FASTS) was:

 

This is an historic budget for science, education and innovation, with a record spend in this area representing a 25% increase on last year, the highest annual increase since records began. The new funding measures are worth $5.7 billion over four years, including $3.1 billion for science, innovation and research and the balance in education.

 

The key measures are to fund the full cost of research and a new tax credit scheme for firms, which effectively increases tax support back to pre 1996 levels. A key innovation of the tax credit is that it is a refund of cash to firms undertaking research and development independently of whether they are making a profit or not. This will have particular benefits for the biotechnology sector.

 

Furthermore the commitment to fundamental reform in the sector will provide ongoing dividends that will assist Australia in its recovery from the world economic recession."

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The Executive Director of FASTS, Bradley Smith, has made available the following detailed summation of the budget as it impacts on higher education and research:

General Comments
Against expectations, the budget provided significant new investment in science, higher education, research and innovation.
 
In 2009/10 commonwealth expenditure on innovation, science and research will be $8.6b, a 25% increase on 2008/9 budget – the single largest annual increase since science and innovation records began in the late 1970s.
 
The budget provides $5.7b for new programs over four years across the higher education and innovation sectors in response to the Bradley Review of Australian Higher Education and the Cutler Review of the National Innovation System. $3.1b of this is in Kim Carr’s DIISR portfolio.
 
The Government has also released a formal paper in response to the Cutler and Bradley reviews called Powering Ideas (http://www.innovation.gov.au/innovationreview/Pages/home.aspx). This paper indicates commitments for various reforms such as activity based costing for evaluating full costs of research, which have been implemented in this budget, but also sketches commitments to future reforms such as the introduction of compacts between Universities and Government that are not implemented in this budget cycle.
 
Our main focus here is on DIISR [Department of Innovation, Industry, Science and Research] and Education announcements but there were other announcements of interest to members in other portfolios including:

 The key budget items are:
 
Higher Education


Research


Science
A program called “super science initiative” with $1.1billion for science initiatives ($901m in infrastructure)in

Space science $160.5m – new National Centre for SKA science in Perth; additional funding for the Australian Anglo telescope; $40m for space research and skills and $8.4m for a new space policy unit in DIISR
 
Marine and Climate $387.7m - Including Replacement vessel for Southern Surveyor; new tropical marine infrastructure at AIMS; distributed infrastructure for terrestrial ecosystems, groundwater depletion etc
 
Future Industries $504m - includes $71m for Monash EMBL facility, nuclear science facilities at ANSTO, New Enabling Technologies Strategy
 
In addition, there will be 100 Super science fellowships ($27.2m) for 3-year postdocs in these three science areas (50 commencing in 2010 and 50 in 2011) worth up to $72,500pa.

The 2009 round of Science linkages has been cut and I expect that means the end of this troubled program.
 
Public Sector Agencies
CSIRO, ANSTO, AIMS and BoM all received infrastructure funding including over $150m for CSIRO comprising $120m for a replacement vessel and $30m for Atlas of Living Australia; $55m for AIMS; $62m for ANSTO to provide additional neutron beam instruments for OPAL. There were no cuts. The agencies will also be partners in, or have access to, a lot of the other infrastructure investments.
 
ARC
ARC received funding to develop ERA [Excellence in Research for Australia], which means it does not have to be funded out of existing ARC programs. It also received additional funds for specific programs such as extension of NICTA and the super science fellowships.
 
NHMRC
No cuts or new programs. There are major new health infrastructure grants some of which will have direct benefits for researchers and universities (eg Monash and ANU)
 
Innovation
The key innovation initiative is an R&D tax credit with two levels of assistance:

The new R&D tax credits take effect for income years commencing after 1 July 2010. Of particular note is the change to an R&D tax credit system which means that the rate of support will be decoupled from any future changes to the corporate tax rate.

The arrangements for turnover <$20m is a significant increase, as the current refundable offset has a group turnover limit of $5 million, and aggregate R&D expenditure capped at $1 million. For the R&D tax credit the turnover limit has been increased to $20 million, and the cap abolished. As a transitional measure, for the 2009/10 income year, the Aggregate R&D Expenditure cap will be lifted to $2 million to provide more support and flexibility for organisations that currently do not qualify.

Where group turnover is over $20 million, companies will be eligible for a 40% non-refundable credit, equivalent to a 133% tax concession, again one-third higher than the current basic rate of support. Further, companies conducting R&D in Australia where intellectual property rights are held offshore (as for the current international premium R&D concession) will also able to access this credit.

Both the current 175% premium and international premium will be abolished in line with the introduction of the new credit system, and the 2009/10 income year will be the last for claims under those programs.

It is important to note that there is no successor program to Commercial Ready, in particular R&D Start Grants. That suggests that the Government has withdrawn from the usual mix of grants and tax support to tax support only. Start up firms typically used R&D Start grants to leverage State Government and private venture capital so it remains to be seen what long term impacts the new policy environment will have on development/commercilisation pathways.
 
Infrastructure
Injection of almost $3 billion into tertiary education and innovation Infrastructure through the Education Investment Fund (EIF).
 
The Government has approved 31 projects received through Round 2 of the EIF worth $934 million 12 for VET; 11 are for higher education teaching and learning facilities and 8 for research infrastructure.
 
The Government has also announced an allocation of $500 million for Round 3, and a special $650 million Sustainability Round of the Education Investment Fund.
 
The funding will be open to VET and higher education and research institutions and will support projects that feature sustainable design, energy efficiency and build capability for climate change related research.
 
$1.1 billion will also be provided for the Super Science Initiative. Of this, $901 million will come from the EIF for the capital components.
 
Applications for Round 3 of the EIF will open later this year and successful projects will be announced in early 2010.
 
Successful Round 2 EIF grants are:
 
Higher Education Teaching and Learning

 
 
Research