AUSTRALIA and Great Britain have become locked in a race that will increase funding for sports without improving the chances of winning more gold medals, academics have warned.

In a paper to be published later this year, the RMIT economists Dr Mark Stewart and Dr Heath Spong describe funding of the two Olympic teams as a "competitive spiral", with each Government increasing investment for only a small competitive advantage.

The Sports Minister, Kate Ellis, yesterday promised "significant reform" of sports funding to be more competitive with the British at the 2012 Games, but stopped short of pledging extra money for the Olympic team.

Britain's Government admitted it is struggling to raise a planned $214 million in private investment to match the $1.07 billion of public funds pledged to maximise its medal haul in 2012.

Dr Stewart said Australia's success has been built on a strategy devised in the early 1980s with the establishment of the Australian Institute of Sport to invest heavily in specific sports, such as swimming, rowing and track cycling.

British investment in similar sports, which Dr Stewart said attracted low levels of historical competition, has blunted Australia's advantage. That has been most visible at the velodrome, where Britain had won eight medals but Australia had won only silver as of last night.

"What's going on is classic game theory," Dr Stewart said. "Australia got ahead of the pack by using a strategy, but then everybody else has adopted the same strategy and it has become less effective."

For the 2000 Olympics, Kevin Norton, of the University of South Australia, produced economic modelling comparing Australia's investment in sport with medals won. He found it cost $37 million for each gold and $8 million for every medal in general.

But Professor Norton told the Herald that since then the level of funding required to win a medal had been hugely inflated because of increased global competition. "The competition was weaker [in Athens]," he said. "As competition has evolved, it's going to cost more in real terms to get the same results as we did last time.

"That's not to say spending money doesn't equal success. But in the current situation, we're going to have to spend a lot more money just to maintain the level of success we have enjoyed."