Decline of Business Expenditure on R&D (BERD) as a Share of GDP Disturbing:  FASTS (September 6, 2004)

The President of the Federation of Australian Scientific and Technological Societies (FASTS), Professor Snow Barlow, said the decline in BERD as a percentage of GDP was a disturbing result particularly in view of the buoyant state of the national economy.

Quoting from the latest ABS tabulation on Business Expenditure on Research and Development (BERD) released today Professor Barlow pointed to a BERD decline as a percentage of GDP from 0.81% in 2001/2 to 0.79% in 2002/3.

"While BERD increased by 3.6% in 2002/3 - or 1.5% in real terms* - the decline as a percentage of GDP raises serious concerns about how much of today's economic activity Australia is prepared to invest in the future."

What is in fact the almost complete flattening of the chain volume measure from 2001-02 to 2002-03 demonstrates virtually  no increase in constant dollars let alone an increase as a percentage of GDP as compared to the previous marked overall revival in BERD.

Professor Barlow went on, "Australia's national investment in R&D is declining relative to OECD averages and today's ABS figures confirm the gap is widening. Australia's strong GDP growth is not sustainable while Australia's national investment in R&D continues to decline as a percentage of GDP. With the impending retirement of the 'Baby-boomer generation', future growth must come from new knowledge generated from R&D and innovation.
    "Governments cannot simply rely on record consumer spending to underpin GDP growth. For 14 years Australia's strong economic growth has been built on financial and labour market reforms but there are diminishing returns with this approach. Economic growth in the global economy is increasingly dependent on the quality and capacity of the science and technology knowledge base.
    "That is why Governments in Europe, US, Canada and the United Kingdom are all pressing for increased public and private sector investment in R&D."

The ABS data oughtn't to come as a particular surprise. The Age in an article by Gabrielle Costa on August 9 wrote:

Domestic companies spend less than a third of 1 per cent of their revenue on research and development - well behind world's best practice and significantly lower than the Australian public sector.

    The latest R&D and Intellectual Property Scoreboard, which measures spending on innovation by Australian companies and Government-backed authorities, has found that the top 15 Government firms spent $1.7 billion on R&D in 2002-03.

    But the top 50 corporate spenders - which account for about 25 per cent of all Australian R&D expenditure by business enterprises - had no improvement on their 2001-02 tally, raking together combined spending of $1.4 billion.

Those revelations didn't exactly send shock waves through voter consciousness at the time. How Labor's R&D policy will try to redress business apathy remains to be seen.

The FASTS president then returned to the decline in Government expenditure for R&D. "The ABS results follow this year's budget figures, which show Government investment in R&D is projected to fall to 0.62% of GDP in 2004/05 - down from 0.66% in 2002-03. The Coalition and Labor must offer the electorate credible policies that prioritise building our national investment in R&D."

(* The ABS have rounded up the change in BERD to 4% (2% in volume or real terms) in their media release, but the actual ABS report states the increases are 3.6% and 1.5% respectively).