National has questioned how the Government will meet its ambitious 10-year target for research and development, after officials told the minister this year's Budget fell short of what was needed.

The Government has pledged to lift R&D expenditure from 1.3 per cent to 2 per cent of GDP by 2027.

While it injected $1b into R&D in the previous Budget, recently released documents show Treasury officials told the Government in March that what was allocated this year did "not reflect" what funding was needed to achieve its long-term target.

MBIE had estimated that business expenditure on R&D needed to increase by 10 per cent each year, while Government spending would need to rise by at least $150m each year.

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National's research, science and innovation spokesperson, Dr Parmjeet Parmar, said in not investing the cash now, the Government would be putting pressure on future budgets.

She pointed to recent official projections that showed, to meet the target, economy-wide R&D expenditure would need to climb by about $3.8b to $7.7b by 2028.

The majority of that growth would need to come from the private sector, and the balance from public investment – or $150m year-on-year.

"It is no point setting up a 10-year goal if they cannot deliver in their very second Budget. It is not realistic to leave it to future Budgets or governments," Parmar said.

"What is more, business confidence has sharply declined under this Government, which in turn has adverse effects on business investment in R&D, traditionally considered to be a high-risk investment, and if the Government does not keep up with its own commitment as they have not in this very second budget, businesses will feel even less confident investing in R&D."

But Research, Science and Innovation Minister Megan Woods said the funding increase would not come in a linear progression.

"Obviously we are going to need to track this, but there is never going to be a straight line on a graph for a decade."

Woods said the Government's billion-dollar spend in the first Budget, allocated over four years, had exceeded MBIE's recommended funding lift.

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Importantly, she said, that investment supported a tax incentive designed to lower the cost of doing R&D, thereby supporting businesses to do more of it.

The incentive included a 15 per cent tax credit on eligible expenditure over $50,000 and up to $120m, with limited refunds available to loss-making businesses.

Small Business Minister Stuart Nash, Green Party small business spokesperson Chloe Swarbrick and Prime Minister Jacinda Ardern at ther R&D tax credit policy launch in Oct 2018. Photo / Chris Keall
Small Business Minister Stuart Nash, Green Party small business spokesperson Chloe Swarbrick and Prime Minister Jacinda Ardern at ther R&D tax credit policy launch in Oct 2018. Photo / Chris Keall

Woods said while the full impact was yet to be seen, 2018 survey results indicated a 34 per cent increase in business expenditure on R&D.

But she acknowledged the tax incentive alone wouldn't help New Zealand reach the 2027 target.

"We will be looking across a range of areas over the next eight years. We don't have all of those charted out, but what we have is a commitment from the Government to shift New Zealand's expenditure on R&D from languishing at the bottom of the OECD."

An MBIE spokesperson noted some other allocations in the Budget that would help promote R&D, among them, $25m for the redevelopment of the Callaghan Innovation Gracefield Innovation Quarter, and another $25.5m for a package of initiatives intended to promote the commercialisation of innovation.