John Howard, the Australian prime minister, has announced a A$5.3 billion (£2.1 billion), five-year research and innovation package that will expand on a similar A$2.9 billion programme that began three years ago.
Mr Howard said that between 2001 and 2011, the government would have spent A$8.3 billion while total Australian government funding of science and innovation would amount to about A$52 billion.
Higher education groups welcomed the additional money but pointed out that the government had made no allowance for inflation and that spending under the new programme would slump by a third as a proportion of gross domestic product.
The National Tertiary Education Union said that to maintain spending as a proportion of GDP, the government should have provided A$5.9 billion - leaving a shortfall of some A$600 million.
The allocation will also peak in 2005-06 - the final year of the current round - at almost A$1.08 billion, then decline over the next five years to about A$1.03 billion. When inflation is taken into account (it is projected wages will grow 19 per cent over the period), another A$250 million will be added to the funding shortfall.
Similarly, although grants to the Australian Research Council will rise sharply in the next two years, with an extra A$1.19 billion allocated, as a share of GDP the proportion will drop back to current levels by the end of the decade.
The Australian Vice-Chancellors' Committee welcomed the news but said the government had to strengthen universities' research base by increasing their operating grants and funding more research students. "That's a task to be addressed at the forthcoming election and paid for through next year's budget," Di Yerbury, the AVCC president, said.
Kim Carr, the opposition science spokesman, said the package fell A$1.5 billion short of its original funding target. Senator Carr said Education and Science Department figures indicated that A$6.8 billion over seven years was needed just to maintain the Backing Australia's Ability programme from its peak year.
A report from the Committee for the Economic Development of Australia last month warns that the country's economic future is under threat because of its poor record in innovation. It adds that a failure to keep up with the technological revolution that has transformed the global economy, especially in industries such as software and electronics, could also affect emerging sectors such as biotechnology.
Despite a decade of strong economic growth, the report says that many standard indicators of innovation have been falling. In 2000, the Group of Eight research-intensive universities released a detailed analysis of Australia's research and development performance that found the federal government needed to invest an additional A$6.75 billion over five years from 2001 to 2006 just to reach the average investment of other Organisation for Economic Cooperation and Development countries.
Ian Chubb, chair of the group, said the big universities agreed with the AVCC that Australia should allocate 2 per cent of its GDP to research and development by 2010 and 3 per cent by 2020. This would require an annual investment in university research of nearly A$5 billion in 2010 and almost A$10 billion in 2020.
A report released by Brendan Nelson, the education minister, in March estimates that in 2003-04, universities had to find an additional A$450 million from their own resources to supplement competitive grants.