Australia is betting on plumbers and coffee-shop owners over scientists and researchers to drive the nation's next wave of economic growth.

The country that brought you refrigerators, black-box flight recorders, bionic ears and Wi-Fi will cut its research budget by 7 per cent over the next 12 months, and another 10 per cent in the following three years. At the same time it's offering tax cuts and write-offs in its budget this month for small firms to buy equipment like espresso machines and lawnmowers as the centrepiece of a plan to build a "stronger and more prosperous Australia".

"Cutting back on research is insanity.": Andrew Hughes, a lecturer at ANU. Credit:Nic Walker

The government is reducing spending in the face of budget shortfalls after a 30 per cent fall in commodity prices in 12 months and as its mining investment boom ends. The boost for small businesses in the latest budget lifted consumer confidence to its highest in 16 months and boosted shares of retailers such as Harvey Norman Holdings and JB Hi-Fi.

"Having this reliance on the bottom end of the economy, like small businesses, is a short-term fix," said Andrew Hughes, a lecturer at the college of business and economics at Australian National University. "Cutting back on research is insanity."