The Cashcow Helping to Fund Australia’s Vaccine Hunt Is Endangered

Leading a team of scientists at theUniversity of Queensland in what has been framed as Australia’s best shot at a Covid-19 vaccine, Paul Young has plenty to worry about: from competition with other vaccine hopefuls to unexpected clinical results that could derail everything.

But there’s another concern that has little to do with science and all to do with economics — a research funding crisis years in the making that’s been exacerbated by the very pandemic Young is trying to stop. With the government scaling back investment in research, universities have come to rely on a flow of international students that have now been frozen out of the country to stem the virus’s spread.

“Universities get accused of going down that path and looking for additional revenue,” said Young of the high numbers of international students across the nation’s university campuses. “Well, we’ve had to go down that path because our revenue from government funding sources has diminished.”

Foreign students make up over a quarter of enrollments Down Under —more than four times the OECD average. That has made education Australia’s fourth largest export, behind only iron ore, coal and natural gas. Yet only a handful of students managed to make it into the country to begin or resume their studies amid the pandemic. There were nearly 40 international visa arrivals in July, a decline of 143,810 compared with the same month in 2019.

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Australia’s education sector generated fee exports of A$13.7 billion ($10 billion) in 2018-19, trade data shows. Yet “student fees are less than half the story,” says James McIntyre, Bloomberg Economist in Sydney. “For every $1 of fees paid international students injected a further $1.35 of demand for good and services from across the economy. This equates to a further A$18.5 billion of spending, equivalent to 0.9% of GDP.”

And there’s an even bigger multiplier when it comes to the research all those foreign students’ fees helps fund.London Economics, a consultancy, estimates every A$1 spent on research at Australia’s Group of Eight Universities generates almost A$10 back in benefits to the private sector and the broader economy.

The fallout from the blow to universities is already reverberating across the industry and economy, with several hundred jobs lost. Around 30,000 positions may be at risk, fueling fears the nation could face a brain drain if universities can no longer rely on lucrative foreign students to keep their coffers full and research departments busy. The dire outlook is compounded by the government’s refusal to extend its signature wage subsidy, JobKeeper, to public university staff.

Dominoes Falling

Andrew Norton, a higher education policy expert at the Australian National University, estimates foreign student revenue supports between a quarter and one-third of research output in Australia. He sees another hit to student intakes at the start of the 2021 academic year as the biggest risk for the sector. “If you get that, then we’re looking at probably worst case scenarios,” he said. “There are some dominoes that are about to start falling.”

Not only do foreign students fees provide the cash cow to fund research, foreigners are often involved in the research too. Around one-third ofdoctoral enrollments at Australian universities are undertaken by international students, and in 2018almost a half of commencements at some of Australia’s top research universities were foreign students.

Paul Butler, investment manager atUniseed Management Pty Ltd, a venture capital firm that invests in university research projects, says the freezing out of foreign students and the loss of their fees could stymie momentum that was building in the sector to improve the conversion rate of great science into industry and business.

“You pay for it much later down the track,” he said. “You don’t feel it so much now, but it’s one of those things that you’ll look back on in 10 years and say -- oh, that was a real missed opportunity there.”

Australia’s economy has seen total research and development expenditures as a percentage of GDPdecrease every year since 2008 andranks 20th among Organisation for Economic Co-operation and Development nations. Australia also ranks below the OECD average for its share of government spending on tertiary education.

The lack of innovation shows. Banks, retailers, resources companies and low-tech industrials comprise around 80% of the benchmark stock index’s top 50 companies. Biotechnology giant CSL Ltd., which has signed an agreement to manufacture any vaccine from the University of Queensland, and hearing implant makerCochlear Ltd. are among the few exceptions.

Graeme Clark, now 85, pioneered what we now know as the bionic ear in the late 1970s. Against a barrage of skepticism, the Australian slowly drilled into the mastoid bone at the back of one of his patient’s skull and implanted his device. “I was seen as a clown,” Clark said. “I believed it needed someone to give it a scientific shot.”

When it worked, the invention rocketed to international fame, upending everything doctors thought they knew about the possibilities of biomedical engineering. In 1981, with funding from the Australian government, Cochlear was founded to commercialize the product. The company soon became the leading global manufacturer and distributor of hearing implants, and one of Australia’s biggest biotech success stories.

Future Workforce

It’s that kind of dynamism that will be essential for Australia’s future workforce, wherehighly skilled jobs have seen the strongest employment growth and are at less risk of automation.

With unemployment predicted to hit 10% this year, investing in human capital is vital now more than ever, according to Brian Schmidt, Vice-Chancellor of Australian National University. That’ll help boost services industries and further diversify the economy.

“Australia is resource-rich, but it’s not uniquely so,” said Schmidt. “The reason we’re really good is that we have automated our resource fleet, we have made it extraordinarily efficient, using technology and ultimately research that has emerged out of universities and CSIRO,” referring to the Commonwealth Scientific and Industrial Research Organisation.

While Australia still has its international borders firmly shut amid the pandemic, competitors elsewhere -- like the U.K., parts of Europe and Canada -- have lifted restrictions to welcome overseas students.

About a third of international students destined for Australia have said they wouldgo elsewhere if it meant starting in-person tuition sooner, according a survey conducted byIDP Education Limited. The revenue hit has led universities to cut course offerings, which is likely to dent their attractiveness in the global education market -- where overseas students are worth an estimated$300 billion.

If Australia’s universities fail to maintain or grow their slice of that pie, the loss will extend far beyond their campuses and set back innovation across the economy.

While the University of Queensland’s vaccine endeavors are well supported, Young is worried other research projects will struggle for money once things return to normal. The Queensland Government has provided A$10 million of funding for the project, the Federal Government A$5 million and millions more has been provided by philanthropic and other donors. It is also receiving international funds from theCEPI -- Coalition for Epidemic Preparedness Innovations -- founded by Bill and Melinda Gates, among others.

“We are a clever country, I genuinely believe that,” Young said. But, “there just isn’t enough funding to go around.”

— With assistance by Michael Heath

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