The major research policy issues being addressed in Australian higher education arise from problems common to all developed countries and cannot be understood purely in terms of local circumstances. In the immediate future there is likely to be more rather than less emphasis on the competitive allocation of resources, selectivity and concentration in funding, and the setting of research priorities. These trends, together with growth in postgraduate research training, will encourage movement towards a method of funding higher education in which the research and research training functions of institutions are more explicitly identified and there is greater reliance on targeted research funding.