Productivity Commission proposes changes to rural research and development

The Australian Government’s Productivity Commission (PC) has today released its draft report on Rural Research and Development Corporations (RDCs). The report recognizes the strengths of the existing co-financing model for funding rural research and development (R&D). But it also suggests that a significant proportion of public funding has been diverted to support R&D that industry would have financed anyway. This has been to the detriment of R&D with a bigger public good component. Amongst other things, the report has proposed the creation of a government funded RDC focusing on R&D that is socially beneficial but for which private incentives to invest are particularly weak. It also proposed reducing the cap on government funding for industry sponsored RDCs to half its current amount over 10 years.

Frontier’s 2006 report into rural R&D funding and governance arrangements raised concerns as to the alignment of public funding and public benefits under existing arrangements. It has been widely cited by the PC in both the terms of reference for its inquiry and in its draft report.

For more information, please contact Marita O’Keeffe at m.okeeffe@frontier-economics.com or call on +61 (0)3 9620 4488.

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