Australian universities play a pivotal role in the nation's innovation ecosystem, driving breakthroughs in fields from medical research to renewable energy. Recent data from the Higher Education Research Data Collection (HERDC) for 2024, released by the Department of Education in late 2025, sheds light on the current state of university research and development (R&D) incomes. This information forms the basis for the 2026 Research Block Grant (RBG) allocations totaling $2.37 billion across 42 higher education providers (HEPs). While incomes have shown growth in certain categories, persistent financial pressures highlight the need for sustainable funding models to support Australia's research ambitions.

The HERDC categorizes R&D income into four main types: Category 1 (competitive public sector research funding like Australian Research Council [ARC] and National Health and Medical Research Council [NHMRC] grants), Category 2 (other public sector funding), Category 3 (not-for-profit and industry sources), and Category 4 (other domestic and international sources). These figures not only reflect universities' ability to attract external support but also influence block grant distributions, which cover indirect research costs and higher degree by research (HDR) student training.

Key Highlights from 2024 HERDC Data

The 2024 HERDC data reveals a sector grappling with rising demands amid modest income growth. Total HERDC-eligible research income reached approximately $10-12 billion, building on previous years' trends where competitive and industry funding expanded significantly. Category 1 income grew 24% in real terms from 2014 to 2024, though ARC funding dipped 18% while NHMRC and Medical Research Future Fund (MRFF) rose over 65%. Category 3 income more than doubled, signaling stronger industry partnerships.

Despite this, research represents nearly 20% of total university revenue—around $9 billion of the sector's $45.17 billion in 2024—but universities subsidize it heavily from general funds. The ratio of general funds spent per dollar of research income dropped from $1.28 in 2018 to $1.06 in 2022, reflecting squeezed margins.

Top Universities by Research Income and Block Grants

The Group of Eight (Go8) universities dominate, capturing about two-thirds of total research funding—a stable trend underscoring concentration in research excellence. For 2026 RBG, allocations reflect 2023-2024 performance:

Adelaide University leads newer entities with $130 million, while smaller providers like Notre Dame receive $2.9 million. These grants, split between Research Support ($1.11b) and training programs, are calculated using two-year lagged HERDC income and HDR loads.

• Go8 unis secure 66% share due to scale and track record.
• Regional unis grow via Category 3 industry ties.
• Equity concerns: smaller institutions lag in competitive grants.

Trends in R&D Income Sources (2014-2024)

Over the decade, real research income grew, but composition shifted. Competitive Category 1 stabilized post-pandemic, with NHMRC+MRFF compensating ARC declines. Industry Category 3 doubled, fueled by commercialization pushes like the National Reconstruction Fund.

Block grants rose 15% real terms 2014-2025, boosted by a 2021 $1b injection, but remain modest amid inflation. Overall, Australia's gross domestic expenditure on R&D (GERD) hit a 20-year low of 1.7% GDP, with higher ed bearing 35% of national effort.

Process: Universities report HERDC data annually (July-June), audited, to qualify for RBG. Lag ensures stability but delays response to growth.

Financial Strain: Spending Exceeds Income

A February 2026 Universities Australia report warns of 'sustained financial strain'. Sector surplus $2.1b in 2024 masked $972m deficit excluding windfalls; nearly half unis in deficit past five years. Expenses up 8% ($3.2b), salaries 8% ($1.8b).

Go8 estimates $1.19 indirect costs per $1 direct income unsupported. International students (27% revenue) subsidize, but caps strain this.

Case Studies: Successes and Challenges

University of Melbourne: Leads with diverse portfolio, strong NHMRC wins in health R&D.

UNSW Sydney: Industry Cat3 growth via quantum/tech hubs.

Regional example: Charles Darwin University focuses niche tropical research, growing Cat2.

Challenges: Smaller unis struggle ARC success rates (~20%), rely block grants.

Stakeholder Perspectives

Universities Australia: Urgent need stable funding, indirect cost recognition.

Go8: Chronic underfunding threatens global standing.

Govt: 2025-26 SRI $15.1b total R&D up, but higher ed share key.

Industry: Calls collaborative models, praising Cat3 rise.

Economic and Societal Impacts

Uni R&D generates $66b Go8 economic impact alone. Drives jobs (/higher-ed-jobs), patents, startups. Low GERD risks lag OECD peers.

Photo by Eriksson Luo on Unsplash

• Health: NHMRC funds vaccines, cancer cures.
• Climate: Renewables R&D critical net-zero.
• Innovation: Industry links commercialization.

Future Outlook and Actionable Insights

2026 RBG $2.37b modest amid needs. Recommendations:

• Increase block grants 50% cover indirect costs.
• Boost ARC/NHMRC baselines.
• Incentivize regional/equity research.
• Leverage int'l partnerships.

For researchers: Target Cat3 via Australian opportunities. Unis: Diversify, efficiency. Policymakers: Elevate GERD 2.5% GDP.

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