Machines alone don’t create an ability to fight a war. Recognising this, the Australian Defence Organisation classifies equipment as just one ‘fundamental input to capability’—alongside such things as people, training and supplies, all of which must be integrated to create military power.
It’s time to recognise research and development as another of these. Without sustained, forward-looking R&D, our defence capabilities will become obsolete before they’re fully realised, and even more quickly in a time of conflict.
Russia’s invasion of Ukraine and growing tensions over Taiwan have shattered assumptions about global stability. The Indo-Pacific’s rules-based order is under strain, and rapid technological change is reshaping how wars are fought. Ukraine’s ability to innovate while at war proves that research and agility are as critical as hardware.
Yet while our allies and potential adversaries are rapidly increasing defence R&D spending, Australia has experienced a decade of decline. Much of the R&D underpinning our key capabilities now occurs offshore, which means that in a broader regional or global conflict, our needs will be weighed against the priorities of others. There is no guarantee that critical changes or upgrades will be approved, or delivered, when we need them most.
Australia’s R&D investment, both nationally and within Defence, lags behind global partners and competitors. This is not just a budgetary issue; it’s a strategic risk. While GDP percentage isn’t a perfect measure of defence capability, it’s a useful benchmark for R&D spending. As the government’s recent Strategic Examination into Research and Development discussion paper highlights, Australia currently spends just 1.66 per cent of its GDP on R&D, well below the average of 2.73 per cent among members of the Organisation for Economic Co-operation and Development.
This decline is driven by falling business and government expenditure, with business R&D intensity dropping from 1.37 per cent to 0.88 per cent, and government spending falling in real terms from 0.41 perc ent to just 0.16 per cent of GDP.
Despite producing 3.5 per cent of global research publications and 5.8 percent of citations, and with 15 percent of our research ranking in the world’s top 10 per cent, Australian inventions are too often commercialised overseas. Our higher education institutions carry much of the R&D burden, increasingly relying on international student fees that expose them to global market shifts rather than aligning with national priorities.
Defence’s own R&D investment reflects this broader national trend. In 2023–24, Defence allocated 2.73 percent of its total budget to innovation, science, and technology, a modest increase from the previous year’s 2.6 per cent. While this is a step in the right direction, it falls short of international benchmarks. For example, Britain spent 3.9 percent of its Defence budget on R&D in 2023–24, a 22 percent real increase from the previous year, and is aiming to lift this to as much as 7 percent. Japan increased its defence R&D spending by over 200 percent between 2022 and 2023, with projections suggesting it will reach 5.8 percent of its defence budget by 2025. Meanwhile, the US Department of Defense will commit around 15 percent its total 2025 budget to R&D and testing and evaluation. This is forecasted to increase in 2026. These figures reflect a growing recognition that technological superiority is not a given, it must be earned and maintained through consistent investment.
The case for elevating R&D to Fundamental Input to Capability status isn’t just about innovation or productivity, and the benefits it brings to defence industry and the broader economy, it’s about strategic resilience. It’s also about recognising that R&D will need to be surged in times of crisis. Ukraine’s defence against Russia has shown how rapid mobilisation of R&D is critical. Similarly, Australia’s Covid-19 response was underpinned by the strength of its medical research.
Australia has genuine strengths in such areas as quantum, but without a more coordinated and well-resourced approach, we risk falling behind. Defence should align its R&D spending with international partners—not just in funding levels, but in strategic focus. A national audit of research capabilities, infrastructure and workforce should be conducted to identify priority areas for investment. To guide this, some form of advisory board should support Defence determine which technologies it must invest in, and when. To embed R&D as a true Fundamental Input to Capability, Defence should also introduce scalable requirements for local R&D in Australian Industry Capability plans, drawing on international best practices to strike a balance between innovation and commercial feasibility.
Australia has the talent, institutions and potential to be a global leader in defence innovation. But to realise this potential, we must treat R&D as a core capability.
This article was originally published in The Strategist by the Australian Strategic Policy Institute (ASPI). You can view the original article here.
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