The Research and Development Survey released last week by Statistics New Zealand showed some good news but falling R&D expenditure as a proportion of GDP is of concern – a broader R&D strategy is needed from Government to improve this, say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “Total R&D as a percentage of GDP fell from 1.25% in 2012, to 1.13% in 2014. To put this in perspective, the OECD average increased from 2.33% in 2012, to 2.4% in 2014. On the positive side total business R&D increased $53m (4%) from 2012 to 2014, however Government R&D expenditure fell $40m (7%) in the same time period.”

“Investing less than comparable countries in R&D as a percentage of GDP is a negative leading indicator – R&D drives complexity, capability and innovation in our economy, all things we need to play a competitive game in the future.”

“In a modern economy products and services increasingly rely on R&D and intellectual property to continually improve and innovate, this is particularly true for the high tech and elaborate sectors.”

“Manufacturing plays a disproportionately important part in our overall R&D expenditure (contributing 20% of total R&D); although manufacturing R&D spending fell $14m (3%) between 2012 and 2014. In recent years many have deferred investment of out necessity; due to lower returns from an unfavourable policy environment driving an overvalued currency, and global market conditions – a necessary deferral but it does risk future competitiveness.”

“A broader, more inclusive R&D strategy from Government, such as R&D tax credits would better encourage more businesses to invest more in R&D – with positive flow on effects to growth, incomes and employment. Such policies to encourage R&D are common place around the world, and we need to ensure New Zealand has a level playing field for our producers on the world stage.”

“The current grant system works for those who are able to win funding, but not for those who can’t for a variety of reasons; it has long been recognised that the reach of grant systems is limited. Some recent changes around how early stage companies can claim tax back early for R&D expenditure is a good step forward for some, but more needs to be done to support R&D in later stage companies that are paying tax.”

“A broader approach that does not need to pick winners could be far more effective in improving R&D spending, and consequently complexity, innovation and living standards. Investment in R&D now greatly increases our future ability to add-value to products and services” says John Walley.