Australia’s reliance on its university sector to drive national research and development (R&D) is unparalleled, with universities performing over a third of the nation’s R&D. This positions Australia eighth among OECD members in 2020 for the share of research conducted by universities, surpassing peers like the United Kingdom (24%), France (21%), and South Korea (8%). With access to cross-disciplinary expertise and world-leading research facilities, Australian universities are pivotal in anchoring the country’s sovereign research capabilities, delivering vital R&D and strategic talent pipelines.
In the context of the AUKUS Pillar II Advanced Capabilities enterprise, Australian universities have a crucial role to play. They produce internationally recognised research across all Advanced Capabilities workstreams, particularly excelling in quantum and hypersonics. However, four years after the announcement of AUKUS, the university sector’s contribution to R&D in support of Pillar II has been modest. This limited involvement can be attributed to specific AUKUS-related constraints and broader systemic challenges within Australia’s R&D landscape.
Two structural realities have significantly shaped Australia’s R&D environment, limiting university involvement and stunting the innovation ecosystem. First, the Australian Government has not fully recognised the scope and potential of university-based R&D outputs for defence and economic purposes. This has led to their omission from key AUKUS initiatives, constraining their role in shaping AUKUS-related R&D. Second, over the past fifteen years, Gross Expenditure on R&D (GERD) in Australia has declined to 1.68% of GDP, well below the OECD average of 2.7%. This decline, driven by reduced government and large business investment in R&D, has hampered Australia’s capacity to translate basic research into higher Technological Readiness Levels (TRLs).
The drop in GERD has been exacerbated by rising research costs and a fragmented government R&D funding landscape. This has resulted in historically low levels of funding for experimental research and industry-research collaboration, undermining the potential for universities to advance R&D into deployable solutions. Additionally, defence and security-based research often collides with traditional academic principles around transparency and institutional autonomy, presenting unique challenges for universities.
To address these issues, several recommendations have been proposed. First, the Australian Government should adopt a whole-of-government approach to R&D, leveraging existing coordination mechanisms like the Australian Defence Science and Universities Network (ADSUN) and Defence Research Centres (DRCs) to streamline coordination and prioritise impactful R&D. Second, improved engagement between Defence and universities is essential, involving strengthened outreach through classified briefings, innovation working groups, and joint committees to align academic expertise with Defence priorities. Third, increased and optimised funding for R&D is necessary to meet OECD standards and bolster efficiency in support of AUKUS Pillar II R&D. Finally, embedded incentive structures and mechanisms should be reviewed to encourage Defence-related R&D, including streamlining security clearances and rewarding classified research.
In April 2024, Australian, UK, and US Defence Ministers reaffirmed AUKUS Advanced Capabilities as a critical engine for Defence-related innovation. However, four years after the establishment of AUKUS, the pact has yet to assume its place as a cornerstone of Australia’s approach to accelerating Defence innovation. With most attention focused on acquiring a conventionally armed, nuclear-powered submarine (SSN) capability, AUKUS Pillar II remains relegated to second-tier status. The scope and dimensions of Pillar II have been amorphous, with progress focused on creating the enabling legislative and regulatory environment for sharing sensitive technologies rather than capability development.
Despite these challenges, the rationale for Pillar II remains clear: the race for critical technologies is a key terrain for global and regional strategic competition. To fully realise the potential of AUKUS Pillar II, Australia must enact a whole-of-government approach to R&D, catalysing a sustained, self-reinforcing cycle of Defence-related innovation that supports its AUKUS obligations and ambitions. This will require leveraging the full scope of university capabilities and addressing the systemic challenges that have hindered their contribution to date.