Australian policy relating to knowledge exchange has never been well articulated, notwithstanding that the nexus between knowledge, engagement and higher education in Australia has been on the national agenda for several decades (Grattan Institute, 2013). In universities, this policy deficit is reflected in a lack of project management and collaboration skills, and limited motivation of researchers to engage in collaborative knowledge exchange processes. Taken together, poor policy and inadequate practice constrain the effective use of knowledge in socioeconomic development and national innovation. This paper primarily focuses on the knowledge exchange policy-practice nexus in Australia. We adopt the term "knowledge exchange" while acknowledging many other related concepts, such as knowledge transfer, university community engagement, integrative applied research and engaged scholarship. We draw attention to international contexts in which universities, governments, industry and funding agencies are now explicitly supporting and facilitating collaborative knowledge exchange activities. Our review suggests that Australia needs a clearly articulated national knowledge exchange policy, along with enhanced university capacity to implement knowledge exchange initiatives.