This article was published on 28 February 2019
New figures reveal the highest increase in business R&D spend in a decade – more work to do
Callaghan Innovation welcomes the half-a-billion-dollar rise in New Zealand business research and development (R&D) spending revealed today in figures from NZ Statistics.
Callaghan Innovation CEO, Vic Crone, says the increase is the highest in a decade. Growth at this rate, she adds, puts New Zealand’s R&D spending on track to hit the Government’s 2% of GDP target within the next decade.
The bi-yearly numbers from NZ Statistics show business expenditure on R&D has increased by $548 million in the past two years, to more than $2.1 billion in 2018.
“Over half a billion dollars’ worth of extra R&D is a shot in the arm to our economy. It’s a positive sign that corresponds with what we’re seeing on the ground: a significant rise in demand for our R&D services,” says Ms Crone.
“It also reflects a growing and accelerating start-up ecosystem in this country, and an increasing willingness by businesses to make innovation business as usual. It speaks of a market ready for the opportunities presented by the Government’s R&D Tax Incentive, too.
“Evidence suggests companies big or small that prioritise R&D investment stand to reap major rewards. Private returns for R&D are around 20-30 per cent, much higher than the return on investment in physical capital.”
Yet, Ms Crone warns there is plenty of work ahead if we’re to match our international peers. “Although there has been a large boost in R&D expenditure in dollar terms, New Zealand still has a lot of catching up to do relative to the size of its economy.”
Even with the increase over the past two years, New Zealand still trails the average OECD spend on R&D by a significant margin. Our R&D expenditure is now 1.37 per cent of GDP, up from 1.23 per cent. The OECD’s average is 2.34 per cent - albeit static - and countries like Israel are at 4.25 per cent.
R&D spending on the rise across multiple sectors
R&D in the services industries increased by 64 per cent. In particular, spend in the ICT, commercial and tourism services sectors increased significantly.
Online software service provider, Pushpay, is one of only a few New Zealand ‘unicorn’ companies. Its Board Chair and early stage investor, Bruce Gordon, says businesses invest in R&D when they have the right supporting frameworks.
“High-growth tech companies like Pushpay are underpinned by R&D with strong support, innovation and advisory services. This combination gives businesses the confidence to invest in R&D at this level, and to increase their investment over time,” says Mr Gordon.
Ms Crone says manufacturing and primary industries need a significant R&D injection. “Innovation in these industries is critical to our competitiveness and productivity. We need to commercialise some of the world-leading technologies we have in precision farming and agriculture, for example, to further diversify our export growth. So we not only want an uplift in R&D in these industries, we want to see it speed up to match our global competitors and aspirations.”