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Science and Research3.5 International Comparison

3.5.1 Gross expenditure on R&D (GERD) as a share of GDP

Gross expenditure on R&D (GERD) is a key headline measure of a country’s aggregate R&D activity. It is the sum of expenditures on R&D across all sectors of the economy — business, government, higher education and private non-profit. Australia’s latest GERD estimate published by the ABS is $35.6 billion in 2019–20, which represents an increase of around 7.7 per cent from $33.1 billion in 2017–18.[101] Australia’s national R&D intensity (GERD as a share of GDP) has held steady at 1.79 per cent in across both periods, remaining below the OECD average of 2.48 per cent in 2019. In the same period, Israel and South Korea had the highest national R&D intensities, 4.93 per cent and 4.64 per cent, respectively. Australia’s overall R&D intensity peaked at 2.25 per cent of GDP in 2008–09 and has been declining ever since.[102]

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3.5.2 Gross expenditure on R&D (GERD) as a share of GDP by sector

GERD is the aggregate expenditure devoted to R&D by the business, government, higher education and private non-profit sectors. The largest component is business expenditure on R&D (BERD) and its stagnation in recent years has been a major factor driving the decline in Australia’s GERD as a proportion of GDP (or national R&D intensity). The latest BERD to GDP estimate is 0.92 per cent in 2017–18, having declined from 1.00 per cent in 2015–16 and 0.94 per cent in 2017–18. Government expenditure on R&D as a share of GDP (GovERD to GDP) has also been declining but not nearly to the same extent, with latest estimate at 0.17 per cent in 2018–19. Meanwhile, higher education expenditures on R&D as a share of GDP (HERD to GDP) has remained relatively steady over the last five years or so, with the latest estimate at 0.62 per cent for 2018.[103] With BERD being a key driver of Australia’s overall R&D intensity, the GERD to GDP estimate should be interpreted in the context of other relevant information, particularly the role of major R&D industries such as Manufacturing or Mining.[104]

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3.5.3 Business expenditure on R&D (BERD) performed in service industries

Across OECD countries, a sizeable and growing share of BERD is performed in service industries. Service industries supply services, as opposed to physical goods. For example, services include accommodation, recreation, health, education, retail, as well as information and communication technologies (ICTs). In Australia, the share of BERD performed by service industries in 2018–19 was around 65.5 per cent — well above the OECD average of 37.9 per cent. Australia ranks 1st of 8 OECD economies for which data is available on this metric.[105] Only five years earlier, Australian service industries accounted for less than half of total BERD, and a decade ago it was barely above 40 per cent. This broad economic shift towards service industries is occurring across nearly all OECD economies, in part due to the rapid growth in the uptake of new digital technologies. Across OECD economies, ICTs account for a substantial and growing part of BERD, and are disproportionately represented by innovative businesses.[106]

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Footnotes

[101] ABS, Research and Experimental Development, Businesses, Australia, Cat. No. 8104.0
[102] OECD (2021) Main Science and Technology Indicators, September 2021, OECD Publishing
[103] OECD (2021) Main Science and Technology Indicators, September 2021, OECD Publishing
[104] ABS, Research and Experimental Development, Businesses, Australia, Cat. No. 8104.0
[105] OECD (2021) Main Science and Technology Indicators, September 2021, OECD Publishing
[106] OECD (2017) OECD Science, Technology and Industry Scoreboard 2017: The digital transformation, OECD Publishing