Norman Swan: Now to this rumour that's running strong in the Australian medical research community. The Health Report's Joel Werner has the story.

Julie Campbell: The word is out that the federal government plans to cut $400 million over the next three years which is about a 19% cut in the budget. I can't tell you who our source is but it is from government and the government is certainly not denying these rumours at all.

Joel Werner: That's Professor Julie Campbell, president of the Association of Australian Medical Research Institutes. The rumours she's talking about concern the National Health and Medical Research Council (NH&MRC), the peak funding body for health and medical research in Australia.

A spokesperson from the Department of Health and Ageing informed the Health Report that while they don't speculate on the budget, NH&MRC funding will 'be considered this year'. The federal government which funds the NH&MRC is under pressure to return the budget to surplus in difficult economic times. Like a lot of Australians the health and medical research community is worried about the impact that budget cuts might have. Julie Campbell.

Julie Campbell: It'd be absolutely disastrous to the health and medical research community. Already with the NH&MRC there is only a 23% success rate, so 77% of grant applications do not get funded even though about 70% are deemed that they should be funded. So a 19% cut in the health and medical research budget is going to drop the success rate, certainly under the 20% mark, probably about 18% which is a dreadful result for medical research. It's going to mean that a lot of medical researchers are going to be unemployed.

Joel Werner: The fear isn't so much that these unemployed medical researchers will add to the burden at the end of the dole queue, a bigger concern is that they'll take their skills and training overseas in search of more stable research environments. Professor Doug Hilton is the director of the Walter and Eliza Hall Institute in Melbourne, one of Australia's most internationally respected research institutes.

Doug Hilton: If the message is funding will go up and down and success rates will go through the floor and people have to spend 50%, 60%, 70% of their time applying for grants rather than actually doing experiments then people will vote with their feet. Our most talented researchers will either leave the industry or go overseas and that's exactly the experience that's been seen in the US. Funding has gone up and down over a decade there like a yo-yo, success rates at the moment at the National Institutes of Health which is their equivalent to NH&MRC are down in single digits, so you need to be applying for ten grants before one is funded and people just leave the industry. It's absolutely devastating.

Joel Werner: So you might be wondering where this research talent is headed if the US is losing its lustre. Well for many Asia might be the answer, China is luring research talent with huge monetary incentives as is Singapore. These countries seem to recognise the benefits that research can bring and these aren't stodgy old professors who might be packing their bags for foreign lands, they are the talent we can least afford to lose. Doug Hilton.

Doug Hilton: Senior investigators quite often have longer term funding which would come from program grants or fellowships for just five years. The investigators that suffer the most with short term changes in funding are the investigators that are starting their careers, they are the most vulnerable. And in a lot of ways they are the people that are our brightest lights and the ones that will really set the tone for medical research in the next 10 or 15 years. So what I would be arguing is those guys need more support, greater long term funding and greater certainty, so rather than worrying about where the next dollar is going to come from they can concentrate on what we've trained them to do; which is be highly innovative, creative talented people. You know these are some of the smartest people in the country; it's exactly the opposite message to the one we want to send to the kids coming through university and the kids in high school.

Joel Werner: And if we lose this future talent, it's institutes like Doug Hilton's that will be hit the hardest. The Walter and Eliza Hall Institute like many of its kind receives most of its research funding from the NH&MRC. Julie Campbell.

Julie Campbell: The Walter and Eliza Hall Institute is a wonderful institute in Melbourne and it was there that scientists discovered the colony-stimulating factors, one of the major treatments for leukaemia which has helped more than ten million cancer patients. They got about $12.7 million I believe last year from the NH&MRC in project grants, and by cutting the health and medical research budget we're virtually saying that we're not interested in having these sorts of health advances come out of Australia in the future.

Ten years ago medical researchers were really running on the smell of an oily rag, it was in a terrible position and we had a huge advantage in the last ten years and by cutting it now it's just going to go right back to the bad old days.

Joel Werner: To what extent is the writing on the wall for medical research funding? In the 2008 budget when the government was dealing with the fallout from the global financial crisis proposed health and medical cuts of a similar magnitude were only dropped at the 11th hour when the then prime minister, Kevin Rudd, intervened. But recent history suggests that the current prime minister might not be inspired to follow suit. Earlier this year Professor Penny Sackett resigned as the nation's chief scientist, claiming to have never been called upon by Julia Gillard and more recently the Gillard government scrapped two successful education programs run by the Australian Academy of Science. Indeed the Health Report has been told that Prime Minister Gillard rarely turns up to the Prime Minister's own Science and Engineering Council meetings, meetings she is supposed to chair and meetings we understand John Howard when he was PM rarely missed. Is our prime minister anti-science or just indifferent to research? And either way is this the problem?

Julie Campbell: I must say that I am very disappointed in Julia Gillard's commitment to education and medical research. I thought she was very pro-science and I am extremely disappointed that she hasn't shown the commitment to science education and to medical research that I hoped she would. I would have hoped that she would see that for Australia to really go ahead we have to maintain our skills and our intellect and we should be encouraging that across society.

Doug Hilton: Would I like a prime minister that gave an equivalent to Barack Obama's state of the union address where he talked about research and innovation being one of the core platforms by which America will succeed in the next 30 years? Yes. You know I think a lot of Australians are crying out for visionary politicians on both sides, politicians that are not nit picking each other trying to score points but actually have a real plan for the nation. Do I think research is going to be the engine house of Australia's future prosperity? Of course, I think we have to be cultivating our smart people not just in medical research but in all areas, and I have to say I have not got a real sense that either the Labor party or the opposition at the moment have really grasped that.

Norman Swan: That was Doug Hilton who runs the [Walter and Eliza} Hall Institute in Melbourne and that report was from Joel Werner you can follow him @joelwerner on Twitter and you can follow me on Twitter @normanswan.