Raising the innovation bar?

Since the last election, the Government has promised to raise the level of innovation in New Zealand. The move to include innovation as a key platform of the Business Growth Agenda was a step in the right direction, but is enough being done to ensure this promise will be  fulfilled?

In 2009, New Zealand’s gross expenditure on R&D was equivalent to 1.3% of GDP. The OECD average was 2.4%. Across the ditch, the Australians have had a much longer commitment to innovation. They started with the establishment of the Industry Research and Development Board, now Innovation Australia, in 1986 to support Australian businesses in their pursuit of research and development and its commercialisation. However, progress reports show while they spend more on R&D than New Zealand, about 2.2% of  GDP, they are not getting the results they want. 

The problem for both Australia and New Zealand is that their economies are resource based where the opportunities for innovation are more limited. In turn this means that even where there is considerable investment in R&D in the resource sectors and some parts of manufacturing, the returns are likely to be lower than in the high-tech, human capital sectors like bio-tech and software.

There are evident signs of momentum in New Zealand’s innovation platform. However, while the Government is spending money on innovation, it was not clear if this created an environment that supported firms to pursue R&D for their own ends. The Government seemed to prefer having all the answers rather than encouraging others to come up with their own  – which is the essence of innovation! 

The investment in research and innovation through the Business Growth Agenda announced last year saw $166 million over four years allocated to develop the Advanced Technology Institute and Callaghan Innovation. The aim of this is to help New Zealand's high-tech firms grow, increase exports and ramp up productivity.

It also saw $100 million over four years to increase the Performance-Based Research Fund, to support research in New Zealand's universities and $59 million over four years to boost funding for science and engineering tertiary courses.

Sixty million dollars, over four years, was also committed to the National Science Challenges, to find innovative solutions to some of the most fundamental issues New Zealand faces. These were announced at the beginning of May 2013 with a commitment of another $73.5 million in this year’s Budget. 

Yesterday’s Budget is a further commitment to innovation despite the recession. The budget allocates additional funding to the innovation platform and its aim to improve New Zealand’s growth prospects with $200 million of new funding over the next four years including:

• $75.2 million for business R&D grants
• $31.3 million for repayable grants for start-up businesses
• $73.5 million for the National Science Challenges
• $20 million for the Marsden Fund

This means Government’s total cross-portfolio funding for science and innovation rises from $1.24 billion in 2012/13 to $1.36 billion in 2013/14 and continues building the momentum of Government investment in innovation as the economy grows and strengthens.

Further enquiries, please contact:

Murray Brewer            
Grant Thornton New Zealand Partner, Tax
M +64 (0)9 308 2586 
E murray.brewer@nz.gt.com