Australian Bureau of Statistics figures released this week show national investment in research and development (R&D) reached a record $15.7 billion in 2004/5. Expressed as a share of gross domestic product (GDP), the investment in R&D has increased to 1.76%; from the 2000/01 figure of 1.51%.

The current OECD mean at 2.26% of GDP is of course still substantially higher and that of the top OECD nations markedly above the mean.

The increase stems primarily from stronger investment by the business and higher education sectors while the contributions from both federal and state governments through public reseach and development agencies continues to decline.

The executive director of the Federation of Australian Scientific and Technological Societies (FASTS), Bradley Smith, points out, “The relative mix between basic and applied research and amongst the different socio-economic objectives has remained pretty constant, and while the increase in investment in formal R&D is welcome, the long term challenge is to really build Australia’s capabilities through serious investment in building our human capital.
    “Getting value from R&D is ultimately dependent on the quality of human capital, including management expertise, and the quality of linkages between sectors, and there is plenty of room for work there,” Mr Smith said.

And it's worth recalling the analysis of this year's Economics Nobel Laureate as summarised by the Royal Swedish Academy of Sciences:

Phelps also analysed the role of investment in education (human capital) and research and development (R&D) in the growth process and showed that the golden rule can be generalized. In order to achieve maximum long-run consumption, R&D investments (which raise the technology level) should also be adjusted to the level where their return is equal to the growth rate in the economy. In joint work with Richard Nelson from 1966, Phelps emphasized how a better educated work force facilitates the dissemination of new technology, thereby making it easier for poorer countries to “catch up” with richer countries. This may explain why recent empirical research has found that GDP growth appears to depend on the existing stock of human capital, not just its growth rate. The Nelson-Phelps analysis also offered a possible explanation of why the return to education is often high in periods of rapid technological change: during such periods a well educated workforce is particularly important for increased productivity.
 

Such arguments have been put forth in order to explain why the salaries of highly educated employees have increased significantly in the United States (and in many other countries) in recent decades, when the IT-revolution has initiated a rapid diffusion of new technology.

Of course one of the principal impediments to raising government investment in R&D in general, and particularly research for the public good including fundamental research, is the assessment that there are damn few votes in it.