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Science and Research3.2 Government R&D

3.2.1 Government expenditure on R&D (GovERD) by type of activity

In addition to providing support for business R&D, governments are major R&D performers through public research agencies, such as the CSIRO. Australian evidence points to significant contributions to productivity from public sector R&D spending.[75] Australia's GovERD comprises a mix of research activities including Applied research, Strategic basic research, Experimental development and Pure basic research. During the 12 years to 2018–19, the majority of GovERD by the Commonwealth was directed towards Applied research ($1.17 billion or 55.4 per cent of total in 2018–19). Pure basic research has historically received a relatively modest fraction of total GovERD (around $135 million or 4.1 per cent of total in 2018–19).[76]

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3.2.2 Government expenditure on R&D (GovERD) by location of expenditure

In 2018–19, the Australian Capital Territory (ACT) was the third largest jurisdiction of GovERD by the Commonwealth — both in absolute and relative terms ($331 million and 15.7 per cent of total) — behind Victoria ($544 million or 25.8 per cent of total) and South Australia ($340 million or 16.1 per cent). This pattern of expenditure reflects the significant contribution of the CSIRO, which has its headquarters in the ACT (CSIRO funding is recorded against the ACT, despite having operations nation-wide). Commonwealth GovERD in the ACT peaked in 2011–12 at $492 million (20.3 per cent of total), and has fallen steadily since then. In 2018–19 it fell by $37 million from $367 million in 2016–17, allowing South Australia to overtake it for the first time. The ACT was also the second smallest jurisdiction of GovERD by state or territory (under $8.4 million or 0.7 per cent of total), the smallest being Tasmania ($4.3 million or 0.4 per cent of total). This general pattern has been broadly consistent over the decade to 2018–19.[77]

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3.2.3 Government expenditure on R&D (GovERD) by level of government

Australia's total GovERD comprises expenditure by both the Commonwealth, and states and territories. The share of Commonwealth expenditure currently makes up around two-thirds of total spending, and this has remained fairly stable over the last 12 years for which data are available. GovERD by the Commonwealth peaked in 2011–12 at $2.43 billion before declining to $2.11 billion in 2016–17. GovERD by states and territories peaked at $1.38 billion in 2012–13, trailing the Commonwealth by approximately one year.[78]

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3.2.4 Australian Government investment in R&D

Government investment in R&D aims to cover the difference between the economic value of R&D to the community at large and the private returns received by inventors and businesses that incur the costs and risks of undertaking R&D for profit. Governments also support business R&D by offering tax relief for R&D-related activities and by raising awareness of the technological opportunities available to reduce both the cost and uncertainty of research and innovation.[79] While remaining flat in recent years, the long-term trend in Australian Government investment in R&D is increasing. Over the two decades, it increased from $3.8 billion in 1998–99 before peaking at $10.3 billion in 2017–18 and is currently estimated to be $9.6 billion in 2019–20. (Note: The 2019–20 data is a budget estimate and will be revised as actual data becomes available.)[80]

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3.2.5 Australian Government investment in R&D by sector

By economic sector, around 37.5 per cent of Australian Government investment in R&D is directed to higher education research for 2019–20. Roughly one fifth (21.4 per cent) is funding for research in business, and one fifth again (21.8 per cent) is allocated to research activities by the Australian Government and public agencies. Multisector funding makes up around 19.1 per cent, and the residual is funding to the rest of the world. Long-term trends in the composition of Australian Government R&D funding reveal that the share of funding for research activities currently allocated to the Commonwealth agencies sector has fallen from 51.0 per cent of total in 1981–82 to 21.8 per cent in 2019–20. Over the same period, the share of funding for research activities in the Business enterprise sector has multiplied nearly eight fold over the same period (from 2.7 per cent to 21.4 per cent of total) — although this is well below its 2011–12 peak of 33.3 per cent. The share of Higher education funding peaked at 49.4 per cent in 1998–99 before falling back to between 30 and 40 per cent where it has remained broadly the same over the decade. It is currently at 37.5 per cent in 2019–20. (Note: The 2019–20 data is a budget estimate and will be revised as actual data becomes available.)[81]

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3.2.6 Australian Government investment in R&D by major programs

Seven programs make up roughly 75 per cent of total Australian Government investment in R&D. The share of funding for the Commonwealth Scientific and Industrial Research Organisation (CSIRO) has declined from 28.8 per cent of total 1981–82 to 8.7 per cent in 2019–20. By contrast, following the introduction of industry R&D tax measures, the share of this group of programs expanded from 9.7 per cent in 1985–86 to a peak of 28.0 per cent in 2017–18. At present, these measures represent the largest component of total Australian Government R&D funding and are estimated to account for 20.9 per cent in 2019–20, followed by Research block grants at 21.1 per cent in the same year. (Note: The 2019–20 data is a budget estimate and will be revised as actual data becomes available. From 2000–01 the Former funding of higher ed. research was replaced by a new funding regime, introducing new key elements such as competitive Research block grants and Australian Research Council (ARC) funding.)[82]

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3.2.7 Civil government budget allocations for R&D (GBARD) by selected socio-economic objectives

Governments fund a variety of research effort. Consistent with the OECD Frascati Manual definition of R&D, data on GBARD encompass all allocations from sources of government revenue within the budget and are typically timelier than R&D survey data.[83] Allocations for R&D with specific socio-economic objectives are measured as a share of total civil GBARD, which exclude the allocation of GBARD on defence R&D. In Australia, the share of civil GBARD allocated to Health and environment programs increased from 18.7 per cent in 2000 to 32.3 per cent in 2019, while the share of General university funds fell from 37.1 per cent to 30.1 per cent in the same period. The share of Economic development programs has remained relatively steady during this period, starting at 28.9 per cent in 2000 and recently easing to 24.4 per cent in 2019. Compared to other OECD countries, Australia allocates a relatively high share of its civil GBARD to these two socio-economic objectives, particularly to Health and environment programs.[84]