This chapter reviews developments in Australia's national system of innovation from 1995 to 2005. It focuses in particular on the objectives and effectiveness of the policies adopted by the 2006 federal government since its election in 1996, and the prospects and challenges that Australia now faces in science and innovation.
Australia is different - in its economy, society and needs for technology – and yet its innovation policy apes the strongly market-driven rhetoric of the large G8 economies. I argue that after 20 years of neoliberal policies under successive labour and conservative governments the innovation system in Australia is at a crossroads. While market driven neoliberal policies have improved the level of industrial innovation (though not without large government subsidies and with mixed success in the case of smaller firms) business investment in research and development (R&D) and innovation is still low by OECD (Organisation for Economic Co-operation and Development) standards and, in contrast to many other countries, has barely grown in the last ten years. Perhaps contentiously, I further argue that the critical weakness in Australia's innovation system is now the erosion of investment in public sector research. This is placing huge pressure on the universities, which are being required to take on the tasks of collaborating more closely with business and carrying out the industrially oriented, regionally Important and public-good strategic research. These demands may prove impossible to achieve at current levels of public funding to higher education and the government research organizations.