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Networks and Collaboration4.3 Government Engagement

4.3.1 Businesses receiving government financial assistance

In 2017-18, just over one in ten Australian business (12.6 per cent) received any form of financial assistance from either Commonwealth, state/territory or local governments for innovation. Business size largely determines the share of businesses receiving government financial assistance. Large businesses, those with 200 or more persons, receive the most financial assistance, but this assistance also fluctuates over time. Large businesses who received tax concessions almost halved from 21.9 per cent in 2011-12 to 12.7 per cent in 2017-18. Similarly, 28.5 per cent of large businesses received government grants in 2007-08, whilst only 16.9 per cent did so in 2016-17, which rose again to 23.6 per cent in 2017-18. By industry, the highest proportions of all businesses receiving financial assistance in 2017-18 were in Agriculture, forestry and fishing (24 per cent) and Arts and recreation services (23 per cent).[108]

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4.3.2 Innovation-active businesses receiving public support for innovation

Australia has the third lowest proportion of innovation-active businesses receiving public support for innovation in the OECD (only 10.1 per cent in 2016-17, compared to 25.0 per cent for the latest available OECD average). The data only capture businesses pursuing product and/or process innovation.[109] For context, it is important to note that Australia has a large services sector, and that ABS estimates cover a broader range of business innovation activity than product and/or process innovation. For 2017-18, the ABS data show that some 49.8 per cent of all Australian businesses were identified as innovation active.[110] That said, the OECD estimate for Australia seems low relative to other countries, so the potential benefits and costs of expanding the take-up of the relevant business innovation initiatives may be worth investigating further.

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4.3.3 Innovation-active businesses with public procurement contracts

Public procurement affects innovation by influencing the demand conditions in which businesses innovate and compete. The use of public procurement as a tool of innovation has been gaining in popularity in recent years, and there are some notable examples of long-standing successful adoption of such policies. However, the evidence base on the effectiveness and economic value of this type of support is surprisingly sparse. A recent survey of evidence suggests that the barriers encountered by businesses generally correspond to the deficiencies addressed by procurement policies but are not sufficiently addressed by them.[111] In 2014-15, Australia’s share of innovation-active businesses with public procurement contracts was estimated at 21.7 per cent, below the latest available OECD average estimate of 26.1 per cent. Countries with the highest proportions include Finland, Iceland, Austria and Norway.[112] The data only relate to businesses pursuing product and/or process innovation.

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