In recent years there has been an overall lack of a clear and cohesive research funding policy for higher education which poses real risks in Australia's ability to sustain research excellence and is likely to lead to a decline in Australia's research performance at the international level. This could well lead to a decline in the reputation of Australian universities and a consequential decline in Australia's ability to attract the best researchers and research students and be detrimental to Australia's economic competitiveness. This lack of policy direction has led to the implementation of policies and programs which have the effect of spreading the limited resources available to higher education research funding thinly across the higher education system rather than on following the principles of selectivity and concentration that are the key to building an internationally competitive research system. The Go8 considers that it is time for a major overhaul of Australia's higher education research arrangements. Suggested solutions include: (1) Binary model of research funding; (2) Establishment of a research block grant program; (3) Continued development of Excellence Research Australia (ERA) so that outcomes can be used to drive future research funding to drive selectivity and concentration of Australia's higher education research system; (4) Full funding of the indirect costs of research funded by the research councils using a unique indirect rate for each university; (5) Development of a "hub and spokes" model as a way of managing the needs of universities that are unable to develop research excellence in a particular field; and (6) Strengthening of the government's engagement in international research collaboration through the establishment and funding of a successor program to the International Science Linkages program and related measures. Attached are: (1) "The Chronicle of Higher Education" article on "Germany Pursues Excellence over Egalitarianism"; and (2) Go8 response to the Report of House of Representative's Standing Committee on Industry, Science and Innovation Inquiry into Australia's International Research Collaboration.