


Australia is punting on old industries instead of new ones

Tech goes where the talent is. If Australia is to get a piece of the pie we need to make some simple policy changes.

Simon Wilkie

Since the global financial crisis almost half of all the new GDP generated in the United States has come from one place, California.

The driver has been research and highly skilled talent in computer science, data science, business analytics and economics. Tech firms are so hungry for PhD talent that they acquire companies purely for their employees. Stanford and UC Berkeley California feed their PhDs to Silicon Valley.

In Boston, tech companies have literally set up across the street from Massachusetts Institute of Technology hiring PhDs. Microsoft has research labs in the UK next to Cambridge University, and in China near Tsinghua University. Amazon alone is hiring 140 PhD economists.

The lesson is that tech goes where the talent is. If Australia is to get a piece of the pie we need to make some simple policy changes.

I returned to Australia after a 35-year career in the United States to become Dean of Monash Business School in January this year. I am awestruck at changes in Australian higher education. There is no doubt we have several of the world's best research universities, delivering top-notch research and skilled undergrads.

But I am also struck by the lack of the symbiotic relationships between tech and leading universities that are a feature of the US landscape. In many areas by world standards, Australia underperforms in turning out a critical mass of outstanding PhDs.


"Tech goes where the talent is. If Australia is to get a piece of the pie we need to make some simple policy changes." Professor Simon Wilkie, Monash University. 

We desperately need to produce more PhDs in the areas driving technological change. It is not only great jobs at stake, but having an ownership share in the future.

Compared with peer nations Australia underspends on research by about $5 billion a year. Moreover, the caps on funding for domestic students means that about 300,000 Australians reaching university age during the 2020s will be denied university places.

These are huge problems that affect the level of research, but I want to suggest a solution to a PhD problem that is relatively simple and inexpensive to fix.

The federal government funds higher degree by research (HDR) through the Research Training Program (RTP). The funding criteria used actively discriminates against pioneering research in key strategic areas for tech.

First, RTP funding requires awarding the degree within four years. The average time to complete a US PhD in economics exceeds five years. All of their top PhD programs provide funding for five years. Federal policy creates two economic problems, adverse selection and moral hazard.

Adverse selection occurs because high-value projects are by definition risky. If a student spends substantial time on a project that fails, they then have to change topics and are unlikely to complete in four years. This negatively affects funding and so the university is punished.


There is a bias to “play it safe” and avoid risky pathbreaking research. Additionally, there is a moral hazard. To meet the deadline, universities are incentivised to push students out the door when another year might greatly benefit them.

Second, the RTP program considers the total research funding the university obtains. This biases decisions in favour of high cost areas such as medicine, where the government funding is much more substantial, over areas with lower lab and material costs, including computer science, economics, and data analytics.

Aussies who have US PhDs have held senior economist or data scientist positions at Amazon AWS, Uber, Microsoft and Expedia.

Finally, the RTP weights industry funding – but if the tech sector is not here, then there is little funding from industry. By design Australia is doubling down on the industries of the past rather than the industries of the future.

Together these criteria limit Australia’s ability to develop talent in the key tech sector-relevant disciplines. Yet Aussies who have US PhDs have held senior economist or data scientist positions at Amazon AWS, Uber, Microsoft and Expedia. We have the talent, we export it. We need to nurture some home-grown talent in order to develop the domestic tech industry.

To move forward, I offer a modest proposal to augment the RTP with a new strategic fund.

The Australian Research Council should identify the key strategic disciplines in which Australia needs to bulk up in PhDs, then competitively award five-year PhD fellowships to our best students if they join an eligible program. The students awarded fellowships would then select the program that’s the best mutual match.

Even if we started with a modest number, say 200 a year, this would help feed critical mass into these key areas and pump prime the ecosystem.

The additional cost is minor but the investment offers a different future for Australia.

Simon Wilkie is head of Monash Business School and Dean of Business and Economics, Monash University.

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