Fri Sep 1

Australia needs a 'knowledge economy' fuelled by scientists and arts graduates: here's why

Written by: Matt McGuire, Dean, School of Humanities and Communication Arts, Western Sydney University

The federal government has been asking for “bold ideas” to “reimagine” the future of Australian higher education for decades to come.

An interim report ^[1] for the Universities Accord was released in July. Feedback on this draft is due today.

While there have been many ideas floated by commentators and the review panel (such as a new national university ^[2] for regional students and a levy ^[3] on international student fees), there has been less discussion about what our university education system is for.

We think there is an urgent need to talk about how higher education can fuel a “knowledge economy” – an economy based on technical and scientific advances. This is crucial if we are going to move past our economic reliance on carbon ^[4].

We are not the only ones calling for a shift. On Thursday, Australian Academy of Science president Chennupati Jagadish told ABC’s Radio National ^[5] “we need to move towards a knowledge-based economy […] do we really want to be so vulnerable as an economy and as a country?”

What is a knowledge economy?

A knowledge economy is focused on activities that accelerate the pace of technical and scientific advances. Research and development generate products and services which lead to the formation of new companies, new industries and new economic opportunities.

This requires both the discovery of new technologies and the application of these technologies to new and existing industries, in both domestic and international markets.

Australia has a strong history here. We have invented Wi-Fi ^[7], solar panels ^[8] and cochlear implants ^[9].

But we need to do more.

Economic complexity

The Atlas of Economic Complexity ^[11] is produced at Harvard University. It is better for countries to be ranked as more complex. The assumption is the more complex a country’s exports are, the less exposed they will be to cheap substitutes from rival nations.

According to 2021 data ^[12], we ranked 93rd out of 133 countries, down from 60th in 2000. This is way behind countries such as Japan (first), Germany (fourth), the United Kingdom (eigth) and the United States (14th).

As the Atlas notes, “⁨Australia⁩ is ⁨less complex than expected⁩ for its income level”.

Another huge ongoing area of weakness for Australia is our lack of investment in research. As the interim report notes with concern, Australia’s university research “has become too reliant on uncertain international student funding”.

Currently, Australia invests only ^[13] 1.8% of its GDP in research and development. The OECD average is 2.7% and other countries invest significantly more. For example, Germany (3.1%), Japan (3.3%), the United States (3.5%), South Korea (4.9%) and Israel (5.6%).

As Professor Jagadish told Radio National on Thursday, Australian investment in research as a share of GDP has declined each year since 2008. “We cannot tolerate [this] if we want to stay as a smart country”.

Translating our research

In a report on innovation ^[14] released earlier this year, the Productivity Commission noted Australia was a “small open economy with limited (business and public) research capacity [so] many ideas and technologies will come to Australia from overseas”.

This means our efforts should focus on how we apply and encourage the uptake of new knowledge or “knowledge diffusion”. This is about how we make the most of new technologies. An example could be the use of new accounting software to free up staff time, shorten the billing cycle or expand the analytical capacity of a business.

According to the 2022 Global Innovation Index ^[15], while Australia ranks 25th for its innovation capabilities, it is way back in 72nd for “knowledge diffusion”.

The best countries ^[16] in the world for knowledge diffusion are Ireland, Finland, Israel and the Netherlands. Australia should spend more time studying the nature and performance of these small, open economies.

What is the role for universities?

Universities have a crucial role to play in securing this future for Australia. Their mission is already to discover new knowledge through research and disseminate this through teaching and learning.

Australia could learn more by studying US regions like Boston and San Francisco (where there are top-class research universities) and their impact on entrepreneurialism in their local economies. Geography matters when cutting-edge technology firms are looking to attract talented graduates, collaborate with experts and commercialise research innovation.

But it is not just STEM disciplines who will need to be involved. While science and technology are key when it comes to the discovery and development phases ^[17], the humanities and social sciences are needed to adapt and translate the research.

The World Economic Forum’s 2023 Future of Jobs Report ^[18] notes how the most important skills for workers over the next five years will be analytical thinking and creative thinking and then technological literacy.

Analytical and creative thinking are key to disciplines that dominate the humanities, from history to political science and economics.

What should the Universities Accord do?

In its initial draft, the Universities Accord notes the need to promote “commercial use” of Australian research capability and to “encourage” universities to “move towards” research translation.

In its final report in December, we suggest there is far greater emphasis on the transformation needed to ensure Australia is sustainable and productive into the future.

This means adequate government funding of university research as well as a focus on the skills needed to come up with new ideas and products and then apply them in real-world contexts.

In doing so, the review panel and the government should not forget this will require a focus on humanities and social science skills, as well as the more obvious STEM skill sets.