Australia's elite research-intensive universities have praised UK Chancellor Gordon Brown's commitment to increase science spending in Britain.
But the Group of Eight angered Brendan Nelson, Federal Education Minister, by contrasting the British plan with what it said was the parlous state of spending on research and development in Australia.
Ian Chubb, chair of the group, said Australian R&D expenditure was languishing at 1.55 per cent of gross domestic product and that there would be no real growth from 2006.
Professor Chubb said Australia was treading water while the Blair Government aimed to raise R&D spending to 2.5 per cent by 2014.
The rest of the world was using R&D as the prime driver of economic growth, he said.
"Many nations have set up targets on science spending that look certain to relegate Australia to a second-tier research nation over the next few decades," Professor Chubb said. "The EU, for instance, outlined in its Lisbon Strategy that government expenditure on R&D should be raised to 3 per cent by 2010 by member nations."
But Dr Nelson rejected the claims. He said British expenditure on R&D by universities and government research agencies was only 0.6 per cent of GDP whereas in Australia the figure was 0.8 per cent - the Blair Government's target for 2014.
"Over the past three years, the Australian Government, through its Backing Australia's Ability scheme, has increased funding for science and research in Australia by more than A$1 billion (£385 million)," he said.
"In the next seven years, it will further increase funding by more than A$7 billion," he added.
Dr Nelson said that with a record A$3.43 billion for the year, expenditure on R&D in universities reached 0.45 per cent of GDP, very favourable when compared with the Organisation for Economic Cooperation and Development average of 0.41 per cent.
But Virginia Walsh, Group of Eight executive director, accused Dr Nelson of using expenditure figures in a "highly creative way". She said that after 2005-06, the Government's contribution to R&D would decline in real terms.
Australian Bureau of Statistics figures for 2002 indicate that, in terms of R&D expenditure as a proportion of GDP, Australian business allocated 0.73 per cent, higher education 0.43 per cent, Government 0.35 per cent and private non-profit organisations 0.04 per cent.
The figures tally with the Group of Eight total of 1.55 per cent. The average for government expenditure on R&D among OECD countries is 1.81 per cent while in the US the figure is 2.67 per cent.