Science and Research3.2 Government R&D
3.2.1 Government expenditure on R&D (GovERD) by type of activity
In addition to providing support for business R&D, governments are major R&D performers through public research agencies, such as the CSIRO. Australian evidence points to significant contributions to productivity from public sector R&D spending.[81] Australia’s GovERD comprises a mix of research activities including Applied research, Strategic basic research, Experimental development and Pure basic research. During the 12 years to 2018–19, the majority of GovERD by the Commonwealth was directed towards Applied research ($1.17 billion or 55.4 per cent of total in 2018–19). Pure basic research has historically received a relatively modest fraction of total GovERD (around $135 million or 4.1 per cent of total in 2018–19).[82]
3.2.2 Government expenditure on R&D (GovERD) by location of expenditure
In 2018–19, the Australian Capital Territory (ACT) was the third largest jurisdiction of GovERD by the Commonwealth — both in absolute and relative terms ($331 million and 15.7 per cent of total) — behind Victoria ($544 million or 25.8 per cent of total) and South Australia ($340 million or 16.1 per cent). This pattern of expenditure reflects the significant contribution of the CSIRO, which has its headquarters in the ACT (CSIRO funding is recorded against the ACT, despite having operations nation-wide). Commonwealth GovERD in the ACT peaked in 2011–12 at $492 million (20.3 per cent of total), and has fallen steadily since then. In 2018–19 it fell by $37 million from $367 million in 2016–17, allowing South Australia to overtake it for the first time. The ACT was also the second smallest jurisdiction of GovERD by state or territory (under $8.4 million or 0.7 per cent of total), the smallest being Tasmania ($4.3 million or 0.4 per cent of total). This general pattern has been broadly consistent over the decade to 2018–19.[83]
3.2.3 Government expenditure on R&D (GovERD) by level of government
Australia’s total GovERD comprises expenditure by both the Commonwealth, and states and territories. The share of Commonwealth expenditure currently makes up around two-thirds of total spending, and this has remained fairly stable over the last 12 years for which data are available. GovERD by the Commonwealth peaked in 2011–12 at $2.43 billion before declining to $2.11 billion in 2016–17. GovERD by states and territories peaked at $1.38 billion in 2012–13, trailing the Commonwealth by approximately one year.[84]
3.2.4 Australian Government investment in R&D
Government investment in R&D aims to cover the difference between the economic value of R&D to society and the private returns received by inventors and businesses that incur the costs and risks of pursuing R&D. Governments also support business R&D by offering tax relief for R&D-related activities and by raising awareness of the technological opportunities available to reduce both the cost and uncertainty of research and innovation.[85] While trending relatively flat in recent years, the latest estimate of Australian Government investment in R&D has jumped to an all-time record of $11.9 billion for 2020–21 (up by 17.1 per cent from the previous year), driven by a sharp increase in research block grants. (Note: The 2020–21 data is a budget estimate and will be revised as actual data becomes available.)[86]
3.2.5 Australian Government investment in R&D by sector
By economic sector, around 39.4 per cent of Australian Government investment in R&D is directed to higher education research for 2020–21. Roughly one fifth (21.8 per cent) is funding for research in business, and some 18.6 per cent is allocated to research activities by the Australian Government and public agencies. Multisector funding makes up around 20.1 per cent, and the residual is funding to the rest of the world. The data show that the share of funding for research activities allocated to the Commonwealth agencies sector has declined from 51.0 per cent of total in 1981–82 to 18.6 per cent in 2020–21. Over the same period, the share of funding for research in the Business enterprise sector has multiplied nearly eight fold (from 2.7 per cent to 21.8 per cent of total) — although the latest estimate is well below the peak of 33.2 per cent in 2011–12. The share of Higher education funding peaked at 49.4 per cent in 1998–99 before falling back to between 30 and 40 per cent where it has remained broadly the same over the last decade. (Note: The 2019–20 data is a budget estimate and will be revised as actual data becomes available.)[87]
3.2.6 Australian Government investment in R&D by major programs
Seven programs make up roughly three-quarters of total Australian Government investment in R&D. The share of funding for the Commonwealth Scientific and Industrial Research Organisation (CSIRO) has declined from 28.8 per cent of total 1981–82 to 8.0 per cent in 2020–21. By contrast, following the introduction of industry R&D tax measures, the share of this group of programs expanded from 9.7 per cent in 1985–86 to a peak of 29.9 per cent in 2012–13. At present, these measures represent the second largest component of total Australian Government R&D funding and are estimated to account for 21.5 per cent in 2020–21. Research block grants make up the largest share at 24.9 per cent in the same year. (Note: The 2019–20 data is a budget estimate and will be revised as actual data becomes available. From 2000–01 the Former funding of higher ed. research was replaced by a new funding regime, introducing new key elements such as competitive Research block grants and Australian Research Council (ARC) funding.)[88]
3.2.7 Civil government budget allocations for R&D (GBARD) by selected socio-economic objectives
Governments fund a variety of research effort. Consistent with the OECD Frascati Manual definition of R&D, data on GBARD encompass all allocations from sources of government revenue within the budget and are typically timelier than R&D survey data.[89] Allocations for R&D with specific socio-economic objectives are measured as a share of total civil GBARD, which exclude the allocation of GBARD on defence R&D. In Australia, the share of civil GBARD allocated to General university funds showed a notable uptick in 2020 to 36.2 per cent, up from 30.2 per cent the year before. The share of Health and environment programs increased from 18.7 per cent in 2000 to 28.9 per cent in 2020. The share of Economic development programs has remained relatively steady during this period, starting at 28.9 per cent in 2000 and recently easing to 23.5 per cent in 2020. Compared to other OECD countries, Australia allocates a relatively high share of its civil GBARD to Health and environment programs, second only to the United States.[90]
Footnotes
[81] Elnasri A and Fox K J (2014) The Contribution of Research and Innovation to Productivity and Economic Growth, UNSW Australian School of Business research paper No. 2014–08
[82] ABS, Research and Experimental Development, Government and Private Non-Profit Organisations, Australia, Cat. No. 8109.0
[83] ABS, Research and Experimental Development, Government and Private Non-Profit Organisations, Australia, Cat. No. 8109.0
[84] ABS, Research and Experimental Development, Government and Private Non-Profit Organisations, Australia, Cat. No. 8109.0
[85] Elnasri A and Fox K J (2014) The Contribution of Research and Innovation to Productivity and Economic Growth, UNSW Australian School of Business research paper No. 2014–08
[86] Department of Industry, Innovation and Science, Science Research and Innovation (SRI) Budget Tables
[87] Department of Industry, Innovation and Science, Science Research and Innovation (SRI) Budget Tables
[88] Department of Industry, Innovation and Science, Science Research and Innovation (SRI) Budget Tables
[89] OECD (2015) Frascati Manual 2015: Guidelines for Collecting and Reporting Data on Research and Experimental Development, OECD Publishing
[90] OECD (2021) Main Science and Technology Indicators, September 2021, OECD Publishing