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Glossary

Competitiveness is a broad concept and is often taken to include factors that shape and maintain a conducive environment for business creation, growth and prosperity.

Economic growth is defined as an increase in the market value of goods and services produced by an economy. Usually measured by changes in the gross domestic product.

Energy productivity is the ratio of gross domestic product to energy consumption.

Foreign direct investment (FDI) is where a foreign based entity invests in a domestic business venture with some degree of control over decision making. This does not include portfolio investments such as the purchase of bonds. A common form of FDI is when a company expands into another country by acquiring an existing company, or building a new subsidiary from the ground-up (greenfield investment).

Global Financial Crisis was the global recession which began in mid-2008 and was trigged by financial market upheaval in the United States.

Global Innovation Index ranks countries/economies in terms of their enabling environment to innovation and their innovation outputs. It is made up of the Innovation Input Sub-Index and the Innovation Output Sub-Index.

Gross domestic product is the total market value of goods and services produced in Australia within a given period after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital.

Gross operating profit refers to gross profit (all revenue) minus the cost of a businesses day to day operations not including capital. E.g. wages, bills & rent.

Gross value added (GVA) is the total value of goods and services produced by an industry, sector or area, less the cost of the goods and services used in the production process. The sum of the total GVA can be thought of as the total industry output. The terms GVA and output are often used interchangeably in this report, but it should be noted that at the industry or sector level, GVA is net output, not gross output. i.e. total output less the value of intermediate goods used in production.

Innovation measures the introduction of a new or significantly improved good or service, operational process, organisational/managerial process, or marketing method.

Innovation-active includes any firm that intended to, or did, introduce a new innovation.

Innovation Input Sub-Index is comprised of five input pillars that capture elements of the national economy that enable innovative activities: Institutions; Human Capital and Research; Infrastructure; Market Sophistication; and Business Sophistication.

Innovation Output Sub-Index provides information about outputs that are the results of innovative activities within the economy. There are two output pillars: Knowledge and Technology Outputs and Creative Outputs.

Intangible capital includes R&D, design, market research & branding, organisation improvement, business-specific training and skills development, software development, mineral exploration and artistic originals.

Intellectual property products occur as a result of R&D, investigation or innovations leading to knowledge that the developers can market or use for their own benefit.

Labour productivity is the ratio of output to labour inputs (hours worked) used in the production process. Labour productivity figures can be volatile, with results varying widely between years. Figures are best interpreted by examining long run averages.

Multifactor productivity measures the efficiency with which combined labour and capital inputs are transformed into outputs. In the long-term, it represents improvements in ways of doing things (technical progress), which is the primary source of real economic growth and higher living standards. Multifactor productivity figures can be volatile, with results varying widely between years. Figures are best interpreted by examining long run averages.

New-to-business is a new innovation adopted by the firm. This innovation is already in place in other firms.

New-to-market is new innovation introduced into the market for the first time.

Organisation for Economic Co-operation and Development (OECD) is an international economic organisation comprising 34 countries. Member countries are typically those with advanced economies, although some less advanced countries such as Mexico, Chile and Turkey are also members. As a result the OECD is often used as a point of comparison for advanced countries for a wide variety of statistics.

Private gross fixed capital formation is a measure of how much of the new private sector value added in the economy is invested rather than consumed. It measures private expenditure on new fixed assets plus net private expenditure on second-hand fixed assets, including both additions and/or replacements.

Purchasing Power Parity (PPP) is the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.

Real effective exchange rate measures the value of a country’s currency relative to a basket of other major currencies adjusted for the effects of inflation. It is a way to track the international competitiveness of a country with respect to other countries. An increase in the real effective exchange rate decreases a country’s international competitiveness, while a decrease in the real effective exchange rate increases a country’s international competitiveness.

Real gross domestic product is gross domestic product less the changes in inflation/deflation to improve accuracy when comparing growth to previous years and/or other countries.

Research and development (R&D) activity is the systematic investigation or experimentation involving innovation or technical risk, the outcome of which is new knowledge, with or without a specific practical application, or new or improved products, processes, materials, devices or services.

Vocational education and training (VET) is that part of tertiary education and training which provides accredited training in job related and technical skills. It covers a large number of careers and industries like trades and office work, retail, hospitality and technology.

Reference List

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Australian Bureau of Statistics (2014) Business use of Information Technology 2013-14, cat. no. 8129.0

Australian Bureau of Statistics (2015) Australian System of National Accounts, 2014–15, cat. no. 5204.0, table 1, 5, 15

Australian Bureau of Statistics (2015) Estimates of Industry Multifactor Productivity, 2014–15, cat. no. 5260.0.55.002, table 1

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Further information For more information on other department initiatives please see the department’s website at: www.industry.gov.au/oce

For information or to comment on the report, please email: chiefeconomist@industry.gov.au

Project Team Mark Cully
Tim Bradley
Heather Cotching
Rene Chaustowski
Matthew Horne
Kristel Robertson
Matthew Bowd
Sophie Couch
Mark Gibbons
Katya Golobokova
Laura Jones
Christopher Kelson
Ana Porta Cubas
Claire Reynolds
Madelane White

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Disclaimer The views expressed in this report are those of the author(s) and do not necessarily reflect those of the Australian Government or the Department of Industry and Science.

© Commonwealth of Australia 2016
ISBN: 978-1-925092-78-3

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