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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.[146] 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 in terms of chain volume measures, 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.[147]

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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.[148] 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.[149] 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 business-specific human capital. Recent experimental estimates of Australia's organisational capital were published by the Office of the Chief Economist in 2016.[150]

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5.3.3 Business investment in intangible capital

Intellectual property rights denote investment in intangible assets, such as branding and design. Spending on intangible capital investments by Australian businesses has seen sustained growth over the past 40 years. In terms of chain volume measures, the data shows the effect from the mining boom, which wound down from 2013.[151] Business investment in intangible capital increased until 2012–13 to $36.5 billion and fell to $33.6 billion by 2015–16, before rising to $39.6 billion in 2018–19. Similarly, Business investment in intangible capital as a share of new capital investments decreased from 2010–11, when investments focused on more tangible assets, before increasing to 11.4 per cent in 2018–19.[152]

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5.3.4 Patent family filings involving Australian applicants

Patent filings are a key indicator of inventive activity. Applications filed in different jurisdictions but claiming the same priority make up a patent family. IP Australia reports that 2,637 resident patent applications were filed in 2019, a slight decrease of 4.3 per cent from 2018 (data not shown).[153] The European Patent Office data shows that, for Australia, the number of patent family filings has remained relatively stable since 2006, with data for 2018 reflecting a part-year effect.[154]

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5.3.5 Patent family filings involving Australian applicants by technology field

Applications filed in different jurisdictions but claiming the same priority make up a patent family. The European Patent Office data shows that patent family filings were most concentrated in the Civil engineering field with 429 patent families filed in 2017. Data for 2018 reflects a part-year effect. Significant positive growth has occurred in patent families over the last 10 years relating to Electrical machinery, apparatus, energy (51 per cent), Digital communication (35 per cent) and IT methods for management (34 per cent). A large number of technological fields have also seen significant declines, such as Textile and paper machines (60 per cent), Basic communication processes (36 per cent) and Organic fine chemistry (55 per cent).[155]