Budget Update 2021

Summary

The economic impact of COVID-19 continues to dominate the Australian Budget, with tonight’s Budget, the second handed down in just seven months. Like the last one, this is a big spending Budget, but the focus has shifted from providing immediate stimulus to longer term recovery and Australia’s future prosperity. In the health sector, policy reform is focused on aged care and mental health.

Apart from COVID, the biggest health issue the Australian Government has had to grapple with in the last 12 months is aged care. The Royal Commission into Aged Care Quality and Safety provided the Government with 148 recommendations earlier this year. Until tonight, the Government had not provided a substantial response to the report.

This Budget outlines an additional $17.7 billion over five years, seeking to address the needs of aged Australians living at home and those in residential care. This equates to around half of what is called for overall in the Royal Commission’s Final Report. The Prime Minister’s press release states the Government has accepted 126 of the 148 recommendations, we are awaiting the Government’s detailed response to the Royal Commission – particularly the recommendations for dedicated funding for aged care and ageing research. The proposals from the Royal Commissioners in relation to funding for innovation and research have not been funded in this Budget.

Mental Health has also been under the spotlight, including the impact of COVID-19 on mental health. The Productivity Commission provided the Government with a report last year on what could be done to improve mental health, and earlier this year the Department of Health and Ageing consulted on what measures from the report should be implemented, and when.

Tonight’s budget provides $2.3 billion over four years from 2021-22 for the National Mental Health and Suicide Prevention Plan, including initiatives to be progressed with states and territories for a new national agreement on mental health and suicide prevention. The Government has indicated that it has accepted all the recommendations of the Productivity Commission Report on Mental Health and that the funding announced tonight is only phase one of its response. The only research specific funding announced as part of this package is establishment of an Eating Disorders Research Centre as part of a $26 million package of funding for eating disorders. Further funding for research-related aspects of the Productivity Commission’s recommendations may follow in future budgets. There is $117.2 million for data collection, in part to establish the evidence base for reforms. We will be seeking the advice of key mental health research experts to understand how this data can inform continuous, evidence-based improvement in mental health care for Australians.

While Preventative Health has gained attention from the Government in the last couple of years, the National Preventive Health Strategy is still very much a work in progress and there is only very limited additional funding for preventive health in tonight’s Budget. There is $1.9 million in 2021-22 for preventive health research and scoping activities, including a national health literacy strategy, to inform the National Preventive Health Strategy. Research Australia has previously advocated the need to improve health literacy (and digital health literacy) as a key measure to address health inequity and enable all Australians to better use technology to manage their health.

One of the key lessons from the COVID-19 pandemic is that we have become overly reliant on global supply chains for vital materials. This drove a new focus in last year’s Budget on manufacturing, with the announcement of $1.3 billion over five years from 2020-21 for the Modern Manufacturing Initiative. While the Government seems satisfied this is enough, Research Australia believes more needs to be done, and has proposed raising annual Government spending on R&D to 0.75% of GDP, setting a target for Australia to become a net exporter of pharmaceuticals by 2035, and using the Government’s influence as a key buyer of products and services to boost Australian innovation.

A key measure in this regard is a patent box; a tax deduction provided to companies that manufacture in Australia using Australian developed IP (patents). The patent box will only apply to income derived from Australian medical and biotechnology patents, with consideration to be given to the clean energy sector. It provides a concessional effective corporate tax rate of 17 per cent, with the concession applying from income years starting on or after 1 July 2022. Such a scheme has operated in the UK for many years and is designed to support high value manufacturing in Australia, complementing the R&D Tax Incentive. Research Australia has been a long-term advocate of patent box tax treatment, along with CSL and others in our sector, and this is a significant win for health and medical research.

Much has been said recently about mRNA manufacture of vaccines and therapeutics, with the Victorian and NSW Governments both announcing support and Victoria proposing to invest $50 million. In the Budget tonight the Government has announced that it, too, is acting. It will provide an undisclosed amount of funding (commercially sensitive) to the Department of Industry, Science, Energy and Resources to work with the Department of Health to develop an onshore mRNA vaccine manufacturing capability in Australia. Research Australia called for  such a commitment from the Government in our Pre-Budget Submission and we have been calling for this facility privately and publicly, to encourage this sovereign capability .

While the MRFF funding proceeds as outlined in the Government’s MRFF 10 year Plan, the funding to the NHMRC’s Medical Research Endowment Account continues to decline in real terms.

Medical Research Future Fund

Funding from the MRFF

The MRFF reached the target of $20 billion of capital in August 2020. Tonight’s Budget sees this balance maintained over the forward estimates.

Forecast spending from the MRFF remains largely as expected over the forward estimates. While only $455 million is available from the MRFF to fund research and innovation in 2021/22 due to lower-than-expected investment returns, the Government is maintaining spending this financial year by providing an additional $175 million for MRFF funding from consolidated revenue (announced in the December 2020 mid-year budget). At this stage the Government expects the investment returns to recover this financial year, with $650 million available to fund medical research and innovation in 2022/23.

MRFF expenditure

$m. 20-21 21-22 22-23 23-24 24-25
MRFF Funding 2021 Budget 579.9 455.0 650.0 650.0 650.0

NHMRC and ARC Funding

In Research Australia’s Pre- Budget Submission and our Pre-Election Statement we continue to call for increases in funding for the NHMRC and ARC’s research programs. This Budget sees both schemes continue to decline in real terms, which is of genuine concern to the health and medical research community.

NHMRC Programs

The 2021/22 Budget reveals funding for the NHMRC’s programs continuing to grow very slightly, and only slightly faster than was forecast in last year’s budget. The increase in this financial year is 1,1%, with annual increases of around 1% thereafter. This is lower than the forecast CPI of 3.5%% for 2020-21 and CPI of between 1.75% and 2.5% expected in subsequent years. In effect, NHMRC funding continues to decline in real terms, as it has done for many years now. Research Australia remains concerned about this deficit because research and its outcomes is a long-term commitment.

NHMRC MREA Funding

$m. 20-21 21-22 22-23 23-24 24-25
Funding to MREA

2021 Budget

853,864 863,266 875,362 887,588 899,124
Funding to MREA

2020 Budget

853,864 862,412 872,770 884,960 N/A

ARC Programs

The Australian Research Council’s Funding Programs are critical to Australian publicly funded research including to the life sciences and medical technologies.

Over the forward estimates, the funding to the ARC for the Discovery Program increases slightly each financial year and while higher than in last year’s Budget, the funding is at significantly lower levels than forecast in the 2019 Budget. In real terms funding to the Discovery Program declines over the forward estimates. Again, a cause for concern.

$m. 20-21 21-22 22-23 23-24 24-25
Discovery 2021 Budget 483,272 489,188 494,922 501,162 509,432
Discovery 2020 Budget 483.272 487.016 487.860 490.610
Discovery 2019 Budget 513.542 525.537 538.350 N/A

The ARC Linkage Program has been singled out by the Government as an important component of Australia’s innovation system, and it was announced that from 1 July 2016 the Program would be open to continuous applications and decision making would be fast tracked.

Funding over the forward estimates is higher than forecast in last year’s budget, but future years fail to keep pace with inflation.

$m. 20-21 21-22 22-23 23-24 24-25
Linkage 2021 Budget 323.166 325.454 329.948 334.109 339.622
Linkage 2020 Budget 322.181 323.871 325.240 327.074 N/A
Linkage 2019 Budget 288.788 295.246 301.741 N/A N/A

 While not funding ‘medical and dental research’, the ARC Linkage program remains important to the health and medical research and innovation sectors.

Research Support

In addition to providing funding for the ARC Linkage Program, the Department of Education and Training also provides funding to universities to help cover the indirect costs of research.

In last year’s Budget, the Government used the Research Support Program to provide a vital injection of $1 billion into higher education research in the current financial year.  No further injection is provided in this year’s Budget and funding in is actually lower than was forecast in the 2019 Budget.

Research Support Program

$m. 20-21 21-22 22-23 23-24 24-25
2021 Budget 1918.298 930.659 942.775 958.326 974.143
2020 Budget 1918.298 926.490 929.270 938.107 N/A
2019 Budget 920.573 941.748 962.455 N/A N/A
2018 Budget 1,018.879 1,042.302 N/A N/A N/A

Funding for the indirect costs of research funded by the MRFF is now provided from the Research Support Program. With the MRFF providing hundreds of millions of dollars in funding to universities over the next few years, beyond this financial year, a substantial increase in the Research Support Program is needed just to maintain the levels of research support funding for research projects at their current already inadequate level. The cuts to the Research Support Program beyond the one-off boost in 2020-21 represent a real and continued threat to the capacity of our universities to undertake vital health and medical research.

The issue of indirect research costs remains unresolved for the whole health and medical research sector and indeed publicly funded research more broadly. Research Australia continues to call for a whole of government approach to the issue of funding indirect research costs. Research Australia proposes that the Chief Scientist lead a review of the funding of indirect research costs to establish a sustainable and equitable funding program. In the short term, the pool of funding for the Research Support Program must be increased substantially.

Research Training

The Research Training Program (RTP) provides funding to universities to support higher degree by research students (mostly PhDs). Funding for the RTP also declined in absolute terms between the 2019 and 2020 Budgets, and have only partly recovered in this year’s Budget.

Research Training Program

$m. 20-21 21-22 22-23 23-24 24-25
2021 Budget 1054.981 1069.182 1083.160 1100.967 1119.137
2020 Budget 1054.981 1064.392 1067.585 1077.738 N/A
2019 Budget 1057.595 1081.921 1105.710 N/A N/A

Industry PhDs

The Department of Industry will provide $1.1 million over two years from 2020-21 to create new employment pathways for students and boost financial incentives for universities to enrol students in ‘Industry PhDs’. This measure will introduce an additional weighting in the Research Training Program funding formula for PhD students who undertake an industry placement.

Research Commercialisation

In last year’s Budget the Government committed funding for a scoping study for a University Research Commercialisation Scheme to better translate and commercialise university research outputs. The development of the Scheme is still in train and there is no funding for the Scheme in this year’s Budget. It looks like this might have to wait until next year. Research Australia remains actively engaged in consultation with the Department of Prime Minister and Cabinet on this Scheme.

CRC Program

Funding forecasts for the CRC Program reflect a shift in some funding between 2019-20 and 2020-21. Beyond that, they are slightly lower over the forward estimates.

CRC Program $million

$m. 20-21 21-22 22-23 23-24 24-25
2021 Budget 222,777 189,980 197,815 191,042 193,807
2020 Budget 234,168 189,040 186,378 188,599 N/A
2019 Budget 187,356 192,239 191,223 N/A N/A

The CRC Program is important to health and medical research and innovation with about one third of the CRCs funded over the life of the program being health related.

Conclusion

Research Australia will continue to provide analysis and comment in the coming days and weeks as well as seek further input from across the membership for your reactions and insight into the policy and funding announced for our sector; and how it affects or enhances your research and related activities as a result.

Ends …..

 

 

 

 

 

University Research Commercialisation

The Australian Government is undertaking a scoping study to understand how to best implement a University Research Commercialisation Scheme to better translate and commercialise university research outputs. It has appointed an Expert Panel and issued a Discussion Paper.

Research Australia’s response to the Discussion Paper addresses the role of ‘Missions’, the use of stage-gating and the role of co-funding by Governments, universities and industry. It highlights the critical need to better align existing funding programs and fill the gaps to provide a more seamless approach to research funding from basic research through to commercialisation.

Research Australia’s submission is available here.

Changes to R&D Tax Incentive opposed

Research Australia has used its submission to a Senate Inquiry to argue against the latest round of changes to the R&D Tax Incentive that have been proposed by the Government.

The changes contained in the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 are largely the same as the changes the Senate rejected early last year. Research Australia believes the changes are poorly designed and will significantly reduce R&D in the health sector. With expenditure on the R&D Tax Incentive Scheme having fallen dramatically in the last couple of years and with Government support for R&D at an historic low, Research Australia has urged the Senate Committee to reject the changes again.

Research Austrlaia’s submission is available here.

The submission of an alliance of seven groups from across the health and medical research and innovation sector, including Research Austrlaia, is available here.

The Committee’s final report has been delayed and is now to be tabled in the Senate on 24 August.

Research Matters July 2019

Welcome to Research Matters. With the Federal election quickly receding in the rearview mirror, we take a look at the implications for health and medical research and in particular, what might be coming up.

To contribute to or discuss any of the items in this edition, please email Greg Mullins, Head of Policy, at greg.mullins@researchaustralia.org, or on (03) 9662 9420.

This communication features important information on:

  1. Research Funding – MRFF & NHMRC
  2. Personal Health Information 
  3. Prevention
  4. R&D

Please click here to view Research Matters July 2019

Amendments to the R&D Tax Incentive

Research Australia has made a submission in response to the draft amendments to the R&D Tax Incentive legislation, the latest round of changes since the legislation commenced seven years ago. Research Australia’s submission addresses two key issues.

The  first is our concern that the definition of clinical trial is not broad enough to ensure the exemption from the $4 million cap on R&D expenditure will apply to all clinical trials activity, particularly for medical devices. We have worked with other peak bodies, including Ausbiotech and BioMelbourne Network, to propose an alternative and more inclusive definition.

The second main concern relates to the proposed reduction in the rate of the R&D Tax Incentive. For early stage companies seeking to commercialise new pharmaceuticals, biotechnologies and devices, this has the effect of directly reducing their cashflow at a critical stage in their development. Research Australia has opposed the rate reduction.

Research Australia’s submission