Innovation experts have welcomed the new coalition government's goal of boosting spending on research and development to two per cent of GDP over 10 years.

But it won't be easy - and could require a huge increase in researchers.

Labour and New Zealand First included the aspiration in their coalition agreement, released yesterday, with little other detail.

New Zealand's level of gross spending on R&D is now 1.3 per cent, according to the OECD (Organisation for Economic Co-operation and Development), lagging the OECD average of 2.4 per cent.


Labour's R&D policy involves introducing a 12.5 per cent tax credit on companies' spending on research and development.

University of Auckland Business School deputy dean Professor Rod McNaughton told the NZ Science Media Centre the goal shined a welcome spotlight on what he said was a "fundamental weakness" in the economy.

"But, the devil is in the details of how this might be achieved."

The target was for total R&D, but innovation and economic growth was strongly linked to business enterprise expenditure on research and development, or Berd, McNaughton said.

New Zealand's record of Berd was "dismal" compared to many OECD countries, with low overall spend, and a high proportion of that expenditure occurring in small firms.

"How the government goes about increasing R&D is vital," he said.

"During the election Labour mooted a 12.5 per cent R&D tax credit. The experience of countries such as Canada whose innovation policies rely heavily on R&D tax credits, suggests this may be an ineffective approach.

New Zealand had too few firms with large research budgets, and rebating a small proportion of an already small expenditure would do little to achieve the large-scale focused investment required to make a difference, he said.


"R&D tax breaks might be popular, but it is unlikely that many breakthrough innovations will be achieved because of them."

Professor Shaun Hendy, an innovation commentator and director of Te Punaha Matatini, a University of Auckland-based Centre of Research Excellence, said it was pleasing to see widespread political support for lifting R&D investment.

"And it would not have surprised me to see this in a National-NZ First agreement had the chips fallen the other way.

"Other countries have managed to grow their R&D spend at the rate envisioned by Labour-NZ First so it should be achievable if the new government can get its policy mix right."

Hendy said the previous government did increase R&D spending, but he argued National lacked a coherent strategy for doing so.

Motu Economic and Public Policy Research director Dr Adam Jaffe called the new target a good aspirational goal - but one that would be difficult to achieve, and possibly in conflict with other Labour policies.

"In particular, since R&D is mostly about people, we need to recognise that achieving this goal would require an increase in the number of active researchers of something like 50 per cent."

This would almost certainly require a large influx of foreign scientists and engineers, Jaffe said.

"The international evidence is that R&D tax credits are modestly effective at increasing business R&D.

"This could be part of a portfolio of policies to increase R&D, but the most important factor in firms' R&D decisions is the perceived opportunity, not tax credits."