The precipitous cancellation of Australia’s Economic Accelerator (AEA) this month, alongside the redirection of $800 million in uncommitted funding, has sent a shock wave through their research, science and technology sector. The situation in New Zealand is not much better. It looks like a winter of discontent for Antipodean science innovators.
Launched in 2023, the AEA was a core component of the Australian government’s university commercialisation strategy. Designed to address the pre-investment “valley of death” between laboratory discovery and customer validation. The program was in particular a lifeline for early stage research based ventures needing support to develop an investment ready prototype. Australian government Treasurer Katy Gallagher has indicated the capital would be “redirected to support Australian science and research measures…”. Although it is not clear exactly what these measures may be or if a replacement initiative is planned. Framed as re-prioritisation and being fiscally responsible in difficult economic times, the reversal is in stark contrast to the position outlined in the Ambitious Australia report, the government’s own landmark blueprint for a revitalised R&D and innovation sector, released only a few months earlier. The only silver lining seems to be that already committed funding will be honoured. However, many questions remain about how the innovation pipeline will be supported in future.
But the recent Budget announcement is not the only concern stirring up Aussie investors. Bringing the refundable R&D offset to an end is also making investors nervous about committing. “Time and ambiguity kills deals” says Sydney finance specialist Steve Torso, and with all of the current global economic uncertainty, now is not the time to be dumping on the very investors who help get Australian innovation across the line, he suggests. Dr Safiya Noorzai originally trained in New Zealand as a chemical engineer. She now runs Melbourne based science commercialisation consultancy Polymarise, helping science research based, biomaterials and deep tech companies navigate scaling-up, market strategy, partnerships, due diligence and pathways from innovation to industry adoption. She reckons that proposed changes to Australian capital gains tax rules will also impact investor appetite for higher-risk startups, particularly deep tech and research-driven ventures that already have longer commercialisation timelines and rely heavily on bridge funding and patient capital. Numerous other commentators have also spoken about the negative signalling to entrepreneurs and investors.
“The AEA was more than a grant program. It was a signal that commercialisation of publicly funded research was legitimate, valued, and necessary. Researchers take professional risks when they pursue commercial outcomes; industry partners commit to long-term investments based on the certainty of government support. Withdrawing that commitment abruptly and without transition, without explanation, and without a successor, does not clear the ground for a new system. It destroys the institutional memory, trust, and professional capability that any successor system will need to function.” – Knowledge Commercialisation Australasia
It is not the first time innovation support programs have been reversed across Australia. In 2024, facing a post-Covid budget shortfall, the state of Victoria pruned Breakthrough Victoria (BV), the landmark $2 billion sovereign venture capital fund designed to provide patient capital to promote deep-tech and life sciences. Ecosystem anchor LaunchVic was canned and fund investment fell to half the previous rate with universities and ecosystem support providers left dangling in the wind. In an ironic twist, quantum computing venture Infleqtion recently listed on the NYSE, delivering a $200 million balance sheet windfall to BV. Although not founded in Australia, Infleqtion received strategic investment from the fund on the basis it would set up its Asia-Pacific operation in Melbourne to anchor quantum research in Australia. The deal directly illustrates how innovation funding support creates real value.
Meanwhile across the Tasman Sea, in an equally paradoxical situation, New Zealand scientists are either being made redundant or told to deliver more economic returns from state funded research. However Kiwi founders are accustomed to little or no support from the state, in contrast to their Aussie cousins. The trade-off (for now) is that a capital gains tax on business sales remains off the agenda in New Zealand. It is something discussed frequently by left-leaning politicians however and there is a general election on the horizon. Having no CGT on business sales is a rarely discussed huge point of difference for a small island nation at the edge of the world. But it is a precarious competitive advantage at best. Innovation systems appear under siege down under. The Ambitious Australia report explicitly warned that Australia’s R&D system is severely under-scaled, fragmented, and prone to sudden structural shifts that destroy investor confidence. The report called for sustained, long-term funding certainty to build high tech industries that attract global capital. The recent budget measures seem aimed at precisely the opposite effect.
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Paul Spence is a commentator, researcher and a part-time university assistant lecturer in commerce and management. A previous co-founder of a successful New Zealand based global technology venture, co-founder and director of Creative Forest, principal at GeniusNet Research & GeniusReFi and a startup advisor. You can follow Paul on BlueSky @GeniusReFi or Twitter/X @GeniusNet
Image credit: Renea Mackie
