Productivity Commission recommends renovation of rural R&D

With the nation’s 43rd Parliament commencing last week, rural and regional affairs and infrastructure are expected to enjoy new prominence. One of the critical elements of such infrastructure is rural research and development - not just how much we invest in it, but how we do so.

Over coming decades, this will be a critical determinant of Australia’s food, energy and water security, of the extent to which we can meet any emissions targets, and of the social and economic viability of many rural industries and regional communities.

Last week, the Productivity Commission released its draft report from its inquiry into Rural Research and Development Corporations. The report recommends the most significant renovation of the rural R&D corporations (RDCs) since they were established by the Hawke Government 20 years ago.

Rural research and development (R&D) in Australia is a $1.5 billion industry. About one-third of this ($490 million in 2008-09) is directly managed by RDCs, and a significantly greater proportion is influenced by RDCs through co-ordination activities, partnerships and co-investments.

The draft report presents a frank analysis that is comprehensive to the extent that available data allows.

The Productivity Commission endorses public investment in rural R&D and the inherent strength of the RDC model, which it found is highly regarded here and internationally. Importantly, it concludes that in the main, RDCs are very good at their core business of funding and managing R&D, especially in comparison with alternative funding vehicles (e.g. managing research programs from within policy departments). The draft report makes sensible recommendations for improvements through data collection, reporting, evaluation, external review and reinstating government-nominated directors on RDC boards.

More fundamentally, the Productivity Commission proposes two key changes: a new, government-funded ($50 million a year) RDC with a broad mandate on cross-cutting issues such as land, water and energy; and a reduction in the government’s funding contribution to the industry-specific RDCs to half its current level over ten years, with a consequent narrowing of their focus to R&D “of direct benefit to their levy-payers”.

In my view the PC has got it more than half right.

The great strength of Australia’s rural R&D model is the government-industry partnership at its core. The ownership felt by levy-payers towards the outputs of “their RDC” contributes to high levels of industry relevance and consequently research adoption rates. However, the commodity-specific structure of the model is also a weakness when it comes to big, non commodity-specific issues like climate change, carbon, energy, water, land and soil, biodiversity and food systems.

These big cross-cutting issues cannot be addressed effectively by simply urging each commodity to fund more of such work, and to collaborate with other industries in doing so. They demand specialist research purchasing expertise and knowledge systems, critical mass, and a strategic national approach. This inquiry has found that the Primary Industries and Energy R&D Act (1989) remains a world-leading framework for funding rural R&D. So it is appropriate to address these issues by creating a new body under that Act, and to give it the breadth, depth and resources it needs to tackle these issues. It is then reasonable that each industry RDC focuses on its own industry priorities.

I disagree with the Productivity Commission on one fundamental point however - the contention that public investment through the RDC model should be progressively reduced after five years to a level about $65 million a year less than the current $220 million.

First, this would risk losing industry support for existing levy streams coming into RDCs. Second, and more importantly in my view, we need to be increasing the overall size of the rural R&D investment cake (including matching public dollars for commodity-based RDCs), not reducing it.

A compelling case can be made for increasing public investment in rural R&D to better position Australian agriculture and natural resource management for the huge challenges of producing substantially more food and fibre in a more difficult climate; while using less land, water and energy; emitting less carbon; and while looking after animal welfare, soil health, biodiversity and landscape amenity.

Climate change, carbon, energy, water and food are intersecting, interdependent issues. We currently deal with them in policy silos in Canberra, but farmers and regional communities understand these connections as a daily reality.

The Productivity Commission’s comprehensive draft report makes a useful contribution to what seems likely to be a dynamic policy milieu in this Parliamentary term. It proposes valuable strategic reforms to our rural research infrastructure that would enable much better scientific integration (potentially informing much more “joined up” policy) across the big issues facing rural Australia and the nation. But its proposition that this can be achieved with less public investment than we make now seems more than a tad optimistic.