Chapter OverviewScience and Research
The content of this chapter draws on data collected and published prior to the COVID-19 outbreak. Until new data becomes available, the COVID-19 page provides some key estimates and information related to the impact of COVID-19 on business activity.
Science and research are major driving forces behind knowledge creation, and play a crucial role in the technological development and competitiveness of an economy. In addition to creating new knowledge, research activity is an important driver of skill development. Research is becoming increasingly data-intensive and multi-disciplinary. For example, the Square Kilometre Array radio telescope research facility will generate huge amounts of scientific data that was previously unavailable. This data can feed into future discoveries that may not yet be conceived, potentially finding new commercial applications either through the incremental improvement of existing services or even by creating entirely new technologies, products and industries.
There is robust and consistent evidence of significant positive spillovers from R&D activity, with some industries generating more spillovers than others. R&D activity has been estimated to explain up to 75 per cent of total factor productivity growth, once externalities are considered. R&D also has high rates of return, estimated at 10–30 per cent for private return and more than 40 per cent for social return. Recent Australian evidence also suggests that an increase in business expenditure on own R&D stock is associated with a significantly larger increase in sales for the average business, and that R&D performed in one business can increase the sales of other businesses nearby.
However, aggregate expenditure on R&D in Australia is falling. Total expenditure on R&D across all sectors (or GERD) has declined in both dollar terms and as a proportion of GDP in recent years. The decline has been driven largely by falls in business expenditure on R&D in the mining and manufacturing industries. Public investment in R&D has followed a long-term upward trend but remained relatively flat in recent years. Compared to the 1980s, there is now considerably more emphasis on indirect R&D tax measures than direct and targeted funding. In terms of research output, Australia's share of the world's scientific publications has been growing steadily, and its share of the top percentiles of highly cited publications reflects the quality of Australia's science and research output.
 Department of Industry, Innovation and Science (2018) Co-hosting the Square Kilometre Array, Project
 Balaguer A, Talgaswatta T, Palangkaraya A and Webster B (2018) Evidence of R&D spillovers in Australian business, Department of Industry, Innovation and Science and Swinburne University Centre for Transformative Innovation (forthcoming)
 Department of Industry, Innovation and Science (2016) Australian Innovation System Report 2016, Office of the Chief Economist
 Bakhtiari S and Breunig R (2017) The role of spillovers in research and development expenditure in Australian industries, Department of Industry, Innovation and Science, Office of the Chief Economist research paper 2/2017