Christopher Adams

The Business Herald’s markets and banking reporter.

Growth in research spending slows

Proportion of NZ gross domestic product spent on R&D lags well behind other OECD countries, says study.

R&D expenditure grew at an average rate of 7.6 per cent a year between 2007 and 2011, according to 2013 Innovation Index of New Zealand. Photo / Getty Images
R&D expenditure grew at an average rate of 7.6 per cent a year between 2007 and 2011, according to 2013 Innovation Index of New Zealand. Photo / Getty Images

Research and development spending grew rapidly in the five years leading up to 2011, despite the onset of the global financial crisis, while around 4600 new fulltime R&D roles were created between 2007 and 2010, according to new research.

But the study, conducted by IBM, also says the proportion of New Zealand's gross domestic product spent on R&D continues to lag well behind other Organisation for Economic Co-Operation and Development (OECD) countries.

R&D expenditure grew at an average rate of 7.6 per cent a year between 2007 and 2011, according to 2013 Innovation Index of New Zealand.

The report said the public sector R&D spend increased by $203 million between 2008 and 2010. However, growth in spending slowed to an average of 3.7 per cent a year as the economy recovered during 2011 and 2012, during which time government spending fell by $33 million, the research said.

Shaun Hendy, industry outreach fellow at Callaghan Innovation, the Government's new high-tech development body, said companies had looked closely at their productivity during the financial crisis, prompting them to invest more into R&D.

"Maybe that's just eased off as the imperatives became less important," Hendy said.

"It's a little bit harder to explain why that growth's slowed down."

He said the long-term trend was for growth in R&D spending.

"Sometimes it's hard to explain the short-term effects but overall the trend [of growth] continues."

Hendy said the proportion of GDP spent on R&D, around 1.2 per cent, was well behind comparable countries such as Finland, where close to 4 per cent of GDP was spent.

Statistics NZ says the OECD average is 2.24 per cent of GDP.

"We've got a long way to go," Hendy said. "Although our growth is pretty strong, we're coming off a pretty small base and that's one of the reasons why our productivity is so poor, we work harder and earn less than most people in other advanced countries and it does come down to our poor spending on research and development.

"We need to see fast growth [in R&D] spending and if we could keep up that growth we saw during the GFC, if we could really light a fire under ourselves and realise how important it was, we could do a lot better in the long run."

The report also said 50,000 people in New Zealand were employed in R&D-related roles by 2012, with 35,000 in research roles and the remainder in support roles.

"When you add up what we have across the public and private sector we do have very large R&D workforce - that's something people don't often realise," said Hendy.

"But if you work out how much R&D spending we have per worker, it's actually quite low."

IBM chief technology officer Dougal Watt said the increased research spending was a positive sign.

IBM said the Innovation Index was drawn from a weighted composite of Statistics NZ and Intellectual Property Office data.

To access the report got to: www.ibm.com/nz?

- NZ Herald

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