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Science and Research3.1 Business R&D

3.1.1 Total business expenditure on R&D (BERD)

As experimental development is dedicated to producing new materials, technologies, products or processes, it is closely related to business innovation. It has previously been estimated that R&D-active Australian businesses were three times more likely to introduce new-to-market goods and service innovations than non-R&D-active ones.[71] BERD currently makes up just over half (52.7 per cent) of total Gross expenditure on R&D (GERD). It is particularly relevant to businesses in technology-intensive industries such as Manufacturing but also increasingly in Professional, scientific and technical services, which now represents the largest contribution to BERD. Following a notable decline in 2015–16, total BERD lifted from $16.7 billion in 2015–16 to $17.4 billion in 2017–18. The largest increase in this period occurred in overseas expenditures (up $534 million), while in Western Australia expenditures continued to fall sharply (down $490 million). In 2017–18 by field of research, the largest contribution to BERD came from Information and computing sciences ($6.7 billion) and Engineering came in second ($4.7 billion).[72]

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3.1.2 Business expenditure on R&D (BERD) by industry

Australia's BERD is relatively concentrated, with just four industries accounting for more than three quarters of the $17.4 billion in total expenditure. The largest contribution in 2017–18 was in Professional, scientific and technical services (29.3 per cent), which has overtaken Manufacturing (26.4 per cent) for the first time. This is especially significant given that as recently as 2011–12, Professional, scientific and technical services accounted for 15.5 per cent of total BERD, compared to 24.4 per cent for Manufacturing and 22.4 per cent for Mining. Mining expenditure peaked in 2011–12 (at $4.1 billion) and has fallen to a quarter of that year's value — to $1.0 billion in 2017–18 — contributing a comparatively modest 6.0 per cent to total BERD.[73]

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3.1.3 Business expenditure on R&D (BERD) as a share of GDP

In many OECD countries, R&D activity in the business enterprise sector represents the largest contribution to overall R&D activity. The ratio of BERD to GDP provides a convenient measure for making cross-country comparisons. It also gives an indication of the trend of a country's business R&D intensity over time. Year-to-year changes in the value of BERD to GDP reflect changes in both BERD as well as GDP, so they should be interpreted with caution. Australia's BERD to GDP declined steadily from 1.37 per cent in 2008–09 to 0.94 per cent in 2017–18. This trend has resulted from a stagnating value of BERD (numerator), measured against a growing value of GDP (denominator). A closer look at the ABS data reveals that the bulk of the stagnation can be traced back to large declines in a handful of industry subdivisions in Mining, and to a lesser extent Manufacturing (data not shown). The pattern is characterised by a significant withdrawal of R&D spending from the field of Engineering, most evidently by large businesses based in Western Australia and Queensland.[74]

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