Business investment in R&D has grown for the first time in almost a decade, registering a 14 per cent increase in nominal terms, while overall proportional spend has reached its lowest level in 20 years.
A new Australian Bureau of Statistics (ABS) dataset, released on Friday, reveals business expenditure on R&D (BERD) reached $20.64 billion in 2021-22, up from $18.17 billion in 2019-20.
It is the first time BERD has exceeded the $18.85 billion peak set in 2013-14 in nominal terms, although in adjusted terms it remains $30 million less.
But while businesses spent almost $2.5 billion more in 2021-22, ABS head of business statistics Robert Ewing said that BERD as a proportion of GDP remains unchanged at around 0.9 per cent since 2017-18.
BERD does not include expenditure on R&D funded by businesses but performed by other organisations.
Similarly, Swinburne University of Technology’s Centre for Transformative Innovation director Professor Beth Webster said that despite a recovery in BERD, when taken as a proportion of GDP it is still below the 2013-14 level, when it was 1.3 per cent.
Estimates of gross expenditure in R&D (GERD) have reached its lowest point since the 2002-03 reporting period. This is an estimate because R&D expenditure in government agencies and by higher education is reported by the ABS in alternate reporting years to BERD.
While peak research bodies were quick to re-sound the alarms around proportional GERD, the University of Technology Sydney’s director of research at the TD School (formerly the faculty of transdisciplinary innovation) Associate Professor Martin Bliemel said that the proportional GERD spend will also have been affected by relatively high GDP growth.
The Labor party recently recommitted to driving Australia’s GERD to GDP ratio to 3.0 per cent, a policy position they took to last federal election. Industry and Science minister Ed Husic has also reiterated his commitment to this ambition since coming to office.
But, as reported by InnovationAus.com, Commonwealth spending on R&D as a proportion of GDP was estimated by the Department of Industry, Science, and Resources to be the lowest on record last financial year.
The Albanese government is looking to increase support for manufacturing and research commercialisation programs like its flagship $15 billion National Reconstruction Fund and $1.6 billion ‘Australia’s Economic Accelerator’, expected to be spent over then next decade.
Following the release of the dataset, peak research bodies reiterated ongoing concerns, with Universities Australia chief executive Catriona Jackson highlighting the GERD trend as evidence that the levels of spending on R&D are in “free fall”.
“Australia’s spend has been in free fall relative to the economy for more than a decade, dropping from the OECD average of 2.24 per cent of GDP in 2008 to now sit at 1.68 per cent,” she said.
Australian Academy of Science president Professor Chennaputi Jagadish expressed similar concerns, saying “Australia has one of the world’s least differentiated economies”, as highlighted in the recent Harvard University ranking of Australia’s economic complexity.
Professor Bliemel is less concerned, however. He posited that the decline in proportional GERD “could be more suggestive that GDP is also up”. GDP grew by about 16.6 per cent between financial year 2019-20 and 2021-22, according to ABS figures.
Professor Bliemel also said that Australia’s proportional GERD spend does not significantly change the country’s standing compared to other advanced economies, although Professor Webster flagged this as a concern, as Australia still trails leading R&D countries.
According to the dataset, the professional, scientific and technical services industry committed the most BERD in 2021-22 at just under $7 billion, with the manufacturing industry sitting following at $5.2 billion.
However, Professor Bliemmel said BERD in manufacturing engineering, at $854 million, was relatively low compared to software engineering, at $3.86 billion, and information systems, at $1.05 billion.
“This reflects a general shift of OECD countries from manufacturing to service-based economies and it indicates a massive appetite for talent in that space. The other rising star is biomedical and clinical science… and health.,” Professor Bliemmel said.
“If you couple the latter with software, you start to see opportunities at the intersections of those sectors, whether that’s predictive analysis of health care data or robotic assisted rehabilitation and palliative care, or anything in between.”
Professor Webster reiterated that innovation in addition to “changing the way we work and live” is the only source of long-run improvements in productivity and well-being.
“Although R&D is not the only source of innovation – many improvements occur informally through learning by doing and the exchange of knowhow – it is a good litmus test for the ability of our industry to change,” Professor Webster said.
“The economic miracles of the Asian tigers and Israel were supported by multifaceted and nuanced industry policies that places the use and exploitation of new and clever ideas at the forefront of economic reform.
“If Australia is to make the transition to new industries and adapt to a new energy regime it should take seriously the hard quantitative evidence we have on the best way to create new export industries using frontier technologies.”
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