February 21, 2024

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Rise in business R&D spending to boost New Zealand’s economy

New figures from Stats NZ have revealed the highest increase in business spending on research and development (R&D) in a decade.

According to a recent press release, New Zealand’s Innovation Agency, Callaghan Innovation, welcomes the half a billion dollar rise in the country’s business R&D spending.

What does it translate to?

The CEO of Callaghan Innovation shared that at this rate, New Zealand’s R&D spending is on track to hit the Government’s 2% of GDP target within the next decade.

The bi-yearly numbers from Stats NZ show business expenditure on R&D has increased by NZ$ 548 million in the past two years, to more than NZ$ 2.1 billion in 2018.

She added that over half a billion dollars’ worth of extra R&D is a shot in the arm to the economy.

This is a positive sign that corresponds with that is being seen on the ground – a significant rise in the demand for the Agency’s R&D services.

Furthermore, it reflects a growing and accelerating start-up ecosystem in the country. It is also indicative of the increasing willingness of 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%, which is much higher than the return on investment in physical capital.

The CEO warns, however, that there is plenty of work ahead if the country wishes to match its international peers.

More work to be done

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 Organisation for Economic Co-operation and Development (OECD) spend on R&D by a significant margin.

The country’s R&D expenditure is now 1.37% of GDP, up from 1.23%. Meanwhile, the OECD’s average is 2.34%, albeit static, and countries like Israel are at 4.25%.

R&D spending on the rise across multiple sectors

R&D in the services industries had increased by 64%. Spending in the ICT, commercial and tourism services sectors, particularly, have increased significantly.

The Board Chair of one of only a few of New Zealand’s unicorn companies, an online service provider, shared that businesses invest in R&D when they have the right supporting frameworks.

High-growth tech companies 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.

Callaghan’s CEO explained why manufacturing and primary industries need a significant R&D injection.

Innovation in these industries is critical to competitiveness and productivity.

Some of New Zealand’s world’s leading technologies in precision farming and agriculture, for instance, to further diversity the export growth.

Not only does the country want uplift in R&D in the said industries, but it also wants to see it speed up in order to match the global competitors and aspirations.


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