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SCIENCE INFORMER

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Australia’s science sector continues to punch above its weight, with output remaining strong. Scientists make an enormous contribution to the overall economy, working across a wide range of roles such as researchers, advisors, teachers, and managers, in the public sector, in private enterprise, in policy and in the business world. Science-trained employees are highly valued by the private sector for their technical expertise and analytical skills and can apply their knowledge to a range of disciplines. According to UBS Australia, “High quality expertise is always in demand” . This view is supported by the Australian Academy of Technological Sciences and Engineering (ATSE), which has found that that “demand for STEM skills in Australia is clear – 75 per cent of the fastest growing occupations require significant STEM skills and knowledge.” However, the diverse range of industries and roles that require skilled scientists leads to a lack of strong science-specific workforce data outside of research and development.

According to the latest data from the ABS, business spending on research and development (R&D) reached $18.8 billion in 2013-14. When Government and higher-education spending is added, the gross expenditure on R&D totals $33.5 billion in 2013-14. However, the contribution made by science-trained staff to the overall economy is much larger, as a significant portion of Australia’s science skill is employed within private companies in operational roles and is not counted in this figure.

Science Informer

Figure 2: Major areas of scientific researchSource: IBISWorld

Figure 1: Gross expenditure on R&D by sectorSource: ABS Catalogue 8104.0

Current performanceThe science sector has performed with relative consistency over the past five years. Government budget constraints have restricted growth, as Governments at all levels sought to reduce deficits and cut spending where possible. The decline in public funding has had the largest effect on the scientific research industry, as organisations in this area rely on Governments to provide a large portion of their revenue. While many major research organisations have maintained their funding level, growth in funding has been difficult to achieve. As a result, revenue from scientific research has contracted slightly in real terms, declining by 0.3% . Private industry has performed slightly better, with many firms turning to science in an effort to develop new products, better services, and comply with regulatory requirements. However, uncertainty in global markets also drove many private firms to seek ways to cut costs, which limited growth in the industry to a degree.

Government fundingA large portion of the industry is reliant on Government support to derive revenue. This support comes in the form of direct funding for projects and organisations, and the provision of tax benefits for those engaged in R&D. Much of this scientific research is carried out through specialist institutes, or at specialist research facilities, although private research is also becoming increasingly important. While commercialisation may be a major goal for publically-funded research, financial purposes are often secondary. Different institutes and facilities operate under different missions, although overall the primary aim is the advancement of the scientific field, for the benefit of the wider community. Government funding is a key aspect of this type of research, as the early stages may be costly, with low commercial potential. The Australia Government Department of Industry and Science has forecast $9.7 billion in financial support for science, research and innovation in 2015-16 . While this figure is significant, it represents a decline of 3 per cent on the previous year. Philanthropy and commercialisation provide some additional funding, although the level of funding from these sources is much smaller than from Government sources. As a result, a strong scientific research industry is going to require equally strong support from Government over the coming years.

Private sector Private sector employment of science-trained staff covers a broad range of areas. A major motivation for the employment of scientific staff is their expertise and analysis in developing information, providing services and ensuring that businesses meet regulatory requirements such as environmental management. Additionally, science staff are also vital in the development of new technologies and products, from which companies may be able to derive a profit. In an effort to develop better, more profitable products and services, the private sector has significantly increased its spending on R&D labour over the past five years, rising from $5.8 billion in 2009-10, to $8.7 billion in 2013-15 . This increase in spending has provided the opportunity for strong workforce growth, with professional, scientific and technical services employing the most R&D labour, followed by the manufacturing sector. While this growth is significant, this does not encompass science staff employed across non R&D roles. However, demand from the private sector for these roles has also increased, with businesses seeking to differentiate themselves through the employment of skilled, knowledgeable staff across all areas of business. Strong scientific understanding through all areas of businesses can enable the production and development of better, higher quality products and services, which are typically more attractive to end users. As a result, science-trained staff are increasingly in demand for roles in advisory, media, communications, economics and finance, utilities, mining and environmental management. This trend is expected to continue as businesses aim to gain a competitive edge through a stronger technical capacity.

Within the private sector, the most profitable products from many companies are those that can be protected by patents. Patents provide a barrier from competition, with competing firms unable to release products using the same technology or process for a period of typically 20 years. This can allow a company to operate under an effective monopoly, free from direct competition, and with higher profit margins. Science-trained staff are particularly important in this area, as companies compete to develop the best products. Additionally, companies are increasingly seeking to differentiate their products from those produced in emerging Asian markets, which are often much cheaper. In order to do so, quality and technology have become more important, with companies investing in research to develop better products. This trend is expected to drive ongoing investment in science, as markets become increasingly globalised, and foreign companies seek a larger share of the Australian market.

The overviewScience in Australia can be broadly separated into research and operational roles. Research work is often Government-funded and focused is the development and progression of scientific knowledge for the betterment of the community. Operational work occurs in the private and public sectors, and focuses on the development of new products and the provision of information and services for commercial or regulatory purposes. While the success of private industry demonstrates that the market values scientific expertise, not all scientific work is immediately commercial. As a result, Government funding is in place to ensure that important research is able to progress, with possible future commercial applications.

Within the scientific research industry, the largest area of research is health and medical, which is responsible for 29.8% of industry revenue . Information technology and engineering research is the second largest source of revenue.

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Figure 3: Business R&D labour costsSource: ABS Catalogue 8104.0

Figure 4: Business human resources devoted to R&DSource: ABS Catalogue 8104.0

Sector outlookWhile the past 5 years have provided some strong challenges for the sector, the future looks brighter. Ongoing uncertainty in the economy and continuing budget deficits will place pressure on public-sector science funding. Within scientific research, efforts to support the translation of research into commercial outcomes will provide some avenues for growth, as research institutes seek to increase their own source revenue. In order to fully realise these opportunities, research institutes will need the support of Governments to deliver stronger, streamlined funding systems that provide researchers with the certainty in funding they need. Environmental concerns and growth in demand for renewable energy will provide further opportunities for science-trained individuals. However, the largest source of growth over the next decade will come from the Medical Research Future Fund, which is poised to provide an additional $1 billion per annum for science when it is fully funded .

CommercialisationThere is a mounting push within the industry to boost commercialisation capacity within scientific research. Governments have been a major driver of this initiative, as they seek to derive some financial return from their ongoing investment. Improved translation of research into commercial outcomes has the potential to lift the level of funding available to the industry, as many institutes and research centres may be able to derive additional own-source income. In practice, the commercialisation of research is an inherently difficult process, with major hurdles when seeking to build the base of proof required to encourage private investment. The sector has faced similar challenges all around the world, with Governments seeking to find new ways to commercialise public research and encourage private investment.

However, many researchers lack the experience and skill required to manage the commercialisation process, and may not be able to effectively translate their research. Bridging the gap between important research findings and commercial applications will be a priority for the industry over the coming years. In order to do so, Governments will need to provide additional funding incentives, or relax the current rigid grant structures under which many projects are funded. Most grants operate for a period of 3 years, and do not provide the time or money required to fund the development of the large body of evidence needed to demonstrate commercial potential and attract private capital. Some relaxation of this structure may allow researchers to further prove the commercial opportunities

inherent in their research, to attract private investment. Another proposed solution is the development of centres of excellence for commercialisation or Cooperative Research Centres (CRCs), where research institutes, private companies and Government bodies can work together to share commercialisation expertise, in an effort to provide researchers with the support that they need. Governments will need to work together with the industry if this system is to work, as this type of research infrastructure is not typically financed through the current system of project-specific grants.

EnvironmentEnvironmental concerns will provide many new opportunities for scientists over the coming years. Tighter regulation and strict compliance requirements are driving businesses to employ more science staff, as they seek to monitor the environmental impact of their operations. Scientists are now routinely employed across industries such as agriculture, mining, manufacturing, construction, energy generation, utilities, communications and roads, to ensure that projects and daily operations are effective, efficient and environmentally compliant. Many businesses in these industries require environmental impact statements prior to undertaking new operations, with scientists being highly important in these processes. Science staff are also heavily involved in the day-to-day monitoring of operations and the ongoing compliance with regulation. This trend is expected to continue as the environmental impact of businesses come under greater scrutiny. Science-trained staff are also becoming more important in the ongoing management of business processes. Businesses are capturing and tracking more information than ever in an effort to optimise their operations, with scientists often required to analyse this information and implement best-practice systems.

Renewable energy has also provided some additional opportunities for scientific staff over the past five years, and this is expected to continue into the future. In August 2015, the Federal Government announced plans to cut emissions by 26-28 per cent by 2030. Although these targets are not overly ambitious by world standards, they do provide the impetus for additional investment in clean energy initiatives, which will require the employment of scientific staff for research and operational roles. Companies will increasingly seek the input of science trained staff in an effort to develop greener operations and reduce their carbon footprint. Efforts to reduce emissions and decrease the national reliance on fossil fuels also require that renewable alternatives are both effective and economical.

Various clean-energy initiatives have provided support for renewables, although the Clean Energy Finance Corporation (CEFC) provides the most tangible support. The purpose of the CEFC is to provide finance for the commercialisation of renewable energy technologies in the later stages of development, investing in a wide range of technologies and industries. This provides some assurance to research institutes and private industry that finance will be available at affordable rates, while still deriving a profit for the CEFC. In providing this investment, the CEFC encourages private firms to increase their investment in clean energy, providing additional opportunities for scientists in this area. Ultimately, the CEFC serves the additional purpose of not only encouraging the development of new, green technologies, but also demonstrating to private financiers that investment in cutting-edge renewable technologies is profitable, encouraging them to increase their own investment. Many other nations across the world have committed to emissions reduction targets, and this will provide major opportunities for the development, commercialisation, implementation and export of this technology over the next decade and beyond.

Medical Research Informer

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Health and medical researchThe most significant area of growth over the coming years will be the health and medical research sector, with the establishment of the Medical Research Future Fund expected to deliver a much need shot in the arm for the sector. The fund is expected to reach its full $20 billion of funding on 2022-23, at which point it will provide an additional $1 billion per annum for medical research . While this funding is earmarked for health and medical research only, it may ease the strain on other forms of research, as many medical research institutes (MRIs) are campaigning to allow additional funding for related sciences. The implementation of the MRFF is also likely to increase the profile of the industry, with related research centres likely to campaign for a similar boost in funding.

Figure 5: Medical research fundingSource: Deloitte Access Economics

Figure 3: CEFC portfolio distribution by technology typeSource: CEFC

Opportunities:

» Medical Research Future Fund: the significant additional funding available for medical research will provide an opportunity for additional research and better funding arrangements, with improved career paths.

» Commercialisation: Governments have emphasised the importance of translating research into commercial outcomes. If current issues regarding commercialisation knowledge, experience and funding are resolved, then there will be a significant potential for industry revenue growth.

» Environment: The ongoing push to develop and commercialise better, more efficient and cost effective renewable energy technology will provide an opportunity for industry growth. Rising demand for renewable technology globally will also provide a strong opportunity for both the public and private sectors to commercialise their research. Increased monitoring of business environmental impact will also provide an opportunity for science-trained staff.

» Intellectual property: The world economy is becoming smaller, with commerce and competition rapidly moving across borders. The development of intellectual property and the protection of products through patents provide a strong opportunity for the industry, both in local and foreign markets. More advanced, specialised are also likely to be more competitive against cheaper, more basic products from developing Asian markets.

For further information on Professional Scientists Australia’s advocacy in science, see Still the Clever Country? here: http://www.professionalsaustralia.org.au/scientists

Medical Research Informer

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Science Informer

Level 1, 163 Eastern Road SOUTH MELBOURNE VIC 3205 marketing-team@professionalsaustralia.org.au 1300 273 762

http://sydney.edu.au/science/career/industries/finance_banking_insurance.shtml https://www.atse.org.au/atse/content/publications/policy/advancing-stem-education.aspx ABS Catalogue 8104.0 - Research and Experimental Development, 2013-14 IBISWorld Industry Report M6910 Scientific Research Services in Australia – April 2015 IBISWorld Industry Report M6910 Scientific Research Services in Australia – April 2015 http://www.industry.gov.au/innovation/reportsandstudies/Documents/2015-16ScienceResearchAndInnovationBudgetTables.pdf ABS Catalogue 8104.0 Research and Experimental Development, Businesses, Australia, 2013-14 http://www.asmr.org.au/ASMR%20Deloittee%20Report_MRFF.pdf http://www.abc.net.au/news/2015-08-14/emission-reduction-targets-not-enough-climate-change-authority/6699034 http://www.asmr.org.au/ASMR%20Deloittee%20Report_MRFF.pdf

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