A major new review sets out a coherent plan to reform Australia’s innovation system. But the real challenge is not design – it’s whether the government can afford and deliver it.

The Strategic Examination of Research and Development, released on 17 March 2026, is the latest in a long line of reviews diagnosing Australia’s innovation system and proposing reform. Led by Robyn Denholm, with Ian Chubb, Fiona Wood and Kate Cornick, the panel sets out 20 headline recommendations spanning governance, foundational research, business incentives, capital markets, workforce, and the role of government.

The panel’s warning against “cherry-picking” its recommendations is explicit and emphatic. It argues that they are “mutually reinforcing” and that “adopting only parts will be another example of incremental changes and Band-Aid solutions”. This framing is analytically sound. From a political economy perspective, it may also describe what is likely to occur.

The SERD package is, at its core, a complementarity problem. Each recommendation depends on others being in place before it can function effectively. The proposed National Innovation Council is the keystone. On a close reading, a substantial share of the 35 sub-recommendations appear to depend on the NIC, the pillar structure, National Strategy Advisory Councils, or National Strategic Initiatives being operational.

This is not a design flaw. It reflects the reality that innovation system reform is inherently systemic. The difficulty arises when systemic reform encounters the sequential logic of budgets, legislative programs, and political cycles. Governments do not implement systems. They implement measures, one budget at a time.

For those who have observed Australian innovation policy over several decades, this pattern is familiar. The Cutler Review (2008), the Watt Review (2015), and earlier exercises identified systemic weaknesses and proposed integrated responses. In practice, governments have tended to select measures that were fiscally manageable and politically acceptable, while deferring more structural reforms.

A reasonable assessment suggests three tiers of likely implementation. The first contains measures that could appear in the 2026–27 Budget or shortly after: establishment of the National Innovation Council, a national RD&I narrative, First Nations pre-accelerators, grant simplification, PhD stipend increases, and modest reforms to the Early Stage Innovation Company and Early Stage Venture Capital Limited Partnership schemes. These share relatively low fiscal cost, limited political risk, and alignment with the Government’s ‘Future Made in Australia’ framing.

The second tier includes reforms likely to require two to three years of legislative development and stakeholder negotiation: R&D Tax Incentive reform, procurement reform requiring National Cabinet consensus, and partial funding expansion of NCRIS infrastructure.

The third tier comprises more structurally ambitious measures facing entrenched institutional resistance: funding consolidation through National Strategic Initiatives, superannuation settings for venture capital, corporate tax settings for RD&I firms, reform of university registration requirements, and consolidation of publicly funded research agencies, (including CSIRO and ANSTO operating as independent statutory authorities with substantial asset holdings), and Rural Research and Development Corporations (operating as statutory authorities or producer owned companies). Most may not be substantially progressed within the current parliamentary term, if ever.

The 2025–26 Budget projects an underlying cash deficit of $42.1 billion, with deficits continuing across the forward estimates and gross debt approaching $1.22 trillion by 2028–29. Any new spending on research and innovation must compete with cost-of-living measures, defence modernisation including AUKUS, health system pressures, and further personal income tax cuts.

The fiscal envelope for full SERD implementation could be substantial, potentially running to several billion dollars annually depending on design and sequencing. This would represent a significant call on a constrained budget.

The political context is, however, comparatively favourable. Labor’s 2025 victory, securing 94 of 150 House of Representatives seats, provides a strong governing mandate. If structural innovation reform were to proceed, the institutional conditions are supportive. The question is whether that mandate will be directed toward innovation system reform or toward more immediate and visible priorities.

There is a deeper issue, which connects to what has been described as the “management chasm” in Australian innovation policy. The gap between a well-conceived review and effective implementation is primarily a management problem. Australia has no shortage of sound innovation related recommendations. What it lacks is institutional capacity to execute complex, cross-portfolio reform programs over multiple budget cycles with sustained political commitment.

The SERD acknowledges this indirectly. Its proposed National Innovation Council, supported by a Statutory Officer and reporting directly to the Prime Minister, is an attempt to create the institutional capacity that has been missing. The paradox is that establishing this capacity is itself the reform that requires the greatest political will, cross-portfolio coordination, and sustained Cabinet attention.

Three indicators may signal whether the SERD leads to substantive reform or becomes another well-intentioned report. First, whether the 2026–27 Budget establishes a National Innovation Council with real authority over cross-portfolio RD&I investment, rather than an advisory body without influence over expenditure. Second, whether R&D Tax Incentive reform achieves genuine simplification or becomes a contest between incumbent claimants. Third, whether funding consolidation into pillar-aligned National Strategic Initiatives proceeds or is deferred in favour of relabelling existing programs.

The SERD panel has done its work well. The analysis is coherent, the recommendations are aligned, and the case for integrated reform is persuasive.

The question, as in previous episodes of Australian innovation policy, is whether the system can reform itself. The complements required for implementation are institutional will, fiscal commitment, and sustained political attention. Experience suggests these are often the rate-limiting factors.

In this instance, the mandate and the diagnosis may be strong enough to shift the outcome. Whether they will remains the central test of the government’s second term.