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Skills and Capability5.3 Intangible Capital

5.3.1 Intangible capital investment

The uneven pattern of productivity gains associated with the rise of the so-called knowledge economy — more prevalent in some firms, industries and countries than others — has brought attention to the role of investments in certain intangible assets such as computerised information (e.g. databases), innovative property (e.g. patents and designs) and economic competencies (e.g. human capital). Few attempts have been made to date to comprehensively measure all the relevant intangibles identified in literature.[128] For the few intangibles that are currently measured and published in the national accounts, the largest share of Australia’s market sector investment was traditionally directed to Research and development. However, this pattern has been changing. Since 2016-17, Computer software has been attracting the largest share of investment. Over three decades, this asset has seen dramatic and sustained investment growth, rising from just under $1 billion in 1989-90 to $24.6 billion in 2018-19. The other significant trend has been in Mineral and petroleum exploration, which led intangible investment prior to the mid-1980s. It peaked in 2012-13 before falling back dramatically to $3.0 billion in 2017-18. The latest estimate is at $3.5 billion in 2018-19.[129]

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5.3.2 Intangible capital stock

Experimental estimates to date suggest that the aggregate value of Australia’s intangible capital stock is substantial and growing.[130] Until around 2004-05, the largest share was Mineral and petroleum exploration but this was subsequently overtaken by Research and development. These two assets continue to dominate Australia’s intangible capital stock, accounting for around 77.4 per cent of total measured intangibles, or $192.9 billion as at June 2019.[131] For comparison, Australia’s aggregate stock of physical capital in the form of Machinery and equipment stood at around $621.9 billion at June 2019, roughly 2.5 times the size of total measured intangibles. This comparison underestimates the true size of intangibles since several important assets are currently not being measured, most notably Organisational capital and Firm-specific human capital. Recent experimental estimates of Australia’s organisational capital were published by the Office of the Chief Economist in 2016.[132]

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5.3.3 Patent family filings involving Australian applicants

Patent filings are a key indicator of innovative activity. Data provided by IP Australia show that the rate of Australian filings declined between 2006 and 2015, with 2,253 patent families filed in 2006 and 1,913 in 2015. (Note: Applications filed in different jurisdictions but claiming the same priority are known as patent families. Numbers reported for Australia underestimate the true level because of incomplete data integration into the EPO Worldwide Patent Statistical Database, PATSTAT) Despite this aggregate decline, there has been significant positive growth in patent families relating to: Electrical machinery, apparatus, energy (54 per cent); and Digital communication (44 per cent). Australian patent families have declined most in: Organic fine chemistry (55 per cent); Machine tools (55 per cent); and Textile and paper machines (70 per cent).[133]

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