Chapter 1
Te whakatipu rangahau me te whakawhanake

Growing research and development

Kupu whakataki
Introduction

This chapter explores New Zealand’s investment in R&D. It presents total research expenditure and trends, research funding and detail on funding by different sources. Note that throughout this report 'R&D expenditure' refers to the amount of money attributed to R&D activity for a given sector.

This chapter does not reflect the impacts of COVID-19. The Stats NZ research and development survey data reflects financial years, and for most organisations the 2020 financial year ended on 31 March 2020. The figures presented in this chapter are for financial years and not calendar years. For most organisations the 2020 financial year ended on 31 March 2020, so data relates largely to the period before any impact of COVID-19.

Ngā miramira wāhanga
Chapter highlights

Between 2010 and 2020, total R&D expenditure increased by 90 per cent. Although R&D expenditure increased across business, government and higher education sectors, it was mainly driven by substantial increases in business R&D.

In 2020, R&D was primarily undertaken by government, business and higher education sectors to benefit the primary industries, manufacturing, health, information and communication services, and the environment industries.

New Zealand generates more publications per dollar invested in research than other small advanced economies.

1.1 Ngā whakapaunga R&D
Expenditure on R&D

Figure 1

Total R&D expenditure by sector

Total expenditure on R&D is used as a measure of R&D activity in New Zealand. It increased by 90 per cent between 2010 and 2020. Although expenditure on R&D has increased across all sectors (ie government, higher education and business), the greatest increase was in the business sector. Business contributed 60 per cent of the total expenditure in 2020 – up from 41 per cent in 2010.

Figure 2

Total expenditure on R&D as a percentage of GDP

As a proportion of GDP, total R&D expenditure in New Zealand is low compared with Australia, the OECD and other small advanced economies (see Small Advanced Economy Initiative).

In 2019, New Zealand's total R&D expenditure as a proportion of GDP was 1.41 per cent, up from 1.25 per cent in 2009.

Figure 3

R&D expenditure by sector and purpose of research

Expenditure on R&D is undertaken in the business, government and higher education sectors. The amounts vary and a wide range of industries benefit.

Government R&D is directed towards health, environment, primary industries and manufacturing. These areas accounted for about 90 per cent of all government expenditure on R&D in 2020.

Business R&D expenditure in 2020 was targeted towards manufacturing, primary industries, health, and information and communication services. This accounted for 70 per cent of overall business R&D expenditure.

Higher education R&D expenditure in 2020 was focussed on health, education and training, general knowledge, cultural understanding and the environment. These areas comprised half (54%) of all higher education expenditure on R&D in 2020.

In 2020, almost three quarters (73%) of all R&D expenditure of benefit to the environment was government-funded. In the same year, the business sector undertook all of the R&D for construction and transport and information and communication services. The business sector also undertook most of the R&D for commercial services and tourism (86%). In contrast, the higher education sector mostly undertook R&D to benefit cultural understanding (84%) and education and training (68%).

Time
20142016201820192020

COVID-19 research activity and database

A July 2020 analysis of peer-reviewed publications related to COVID-19 showed that most New Zealand research was in public health and clinical science. Most non-medical research was focussed on the social effects of the pandemic including tourism, psychology and policy. About 10 per cent of researchers had published in completely new research fields.

A central database of COVID-19 research and funding was set up by the New Zealand Research Information System team at MBIE to support researchers to share ideas and work together.

Read more and access the database.

1.2 Tuku pūtea R&D
R&D funding

Figure 4

R&D funding by source and sector of recipient

Total funding for R&D grew by nearly 80 per cent between 2010 and 2020. Most of the increase was in business funding. Since 2016, business has been the largest source of funding for R&D in New Zealand.

Between 2010 and 2020, the government was the largest funder of R&D, with funds primarily targeted towards the higher education and government research sectors. Funding from non-government sources (business and overseas) increased from 43 to 58 per cent of the total during this period.

Time
2010201220142016201820192020

1.3 Tuku pūtea tūmatanui ki R&D
Public funding of R&D

Figure 5

Total public R&D funding

Public funding for R&D rose by 75 per cent between 2010 and 2020. Although R&D tax incentives and some grant funding (such as project grants) are targeted to businesses, these are not tied to specific socioeconomic outcomes and are not included in government budget allocations for R&D. Public funding as a percentage of GDP is also presented in this figure for the same time period.

Figure 6

Public R&D funding as a percentage of GDP compared with other small advanced economies

Public funding of R&D in New Zealand is low compared with other small advanced economies, but has increased by 0.15 per cent since 2017. This trend in R&D growth as a percentage of GDP is also seen in countries such as Australia and Denmark.

Figure 7

Public funding by mechanism

Public funding of R&D is provided through a number of mechanisms, like the Endeavour Fund and Centres of Research Excellence funding.

The largest increases in funding have been directed towards supporting industry research, including investment through the Strategic Science Investment Fund.

This graph does not include the Research and Development Tax Incentive that was introduced in April 2019.

Funds

Advanced Energy Technology Platform

Developing technologies to transform the way energy is produced, used, managed and stored

Advanced energy technology research is essential to improve energy security and access, and to reduce pressure on the environment and emissions of greenhouse gases. The Government is investing $50 million over 7 years to ensure New Zealand is at the forefront of energy technology research and innovation. The first three funded programmes are:

  • high power electric motors for large-scale transport – developing new component technologies for future electric aircraft
  • architecture of the future low-carbon, resilient, electrical power system – how high levels of direct current can be efficiently integrated into the alternating current electricity grid
  • Ahuora: delivering sustainable industry through smart process heat decarbonisation – developing critical technology for decarbonising the process heat sector.

Read more.

COVID-19 rapid research response

In April 2020, the Health Research Council of New Zealand and the Ministry of Health provided funding for research related to COVID-19. The aim was to support New Zealand’s immediate readiness and response to the threat of an outbreak as well as long-term challenges to health and wellbeing.

Two funded projects related to the development of diagnostic tests for COVID-19. Additional COVID-19 funding was provided for research-based innovations. Further information is presented in Chapter 3.

See Rapid diagnosis and genome sequencing to follow CoV-2019 outbreak and DNA Diagnostics & Research Distinguishing COVID-19 from influenza with rapid 15-minute diagnostic or read more about the investment.

1.4 Ngā whakapaunga pakihi ki te R&D
Business expenditure on R&D

Figure 8

Funding sources for business R&D expenditure

Businesses are likely to invest in their own R&D, but they also access other opportunities from public funding provided by government, tertiary institutions, overseas and other sources.

Total business expenditure on R&D (BERD) had a 2.8-fold increase over 2010–2020 (from $971 to $2,709 million). In 2020, 73 per cent of this increase amount ($1,941 million) was contributed by businesses' own funds.

Funding for business R&D from other sources also increased. Government funding increased 3.6-fold from $82 to $295 million for 2010–2020. Funding from overseas sources grew 4.2-fold from $81 to $344 million for 2010–2020.

Figure 9

Business expenditure on R&D as a percentage of GDP compared with other small advanced economies

Despite recent increases, business expenditure on R&D in New Zealand is relatively low compared with other small advanced economies. This is partly due to the large number of small businesses that are less likely to undertake R&D, as well as the predominance of businesses in industries with historically low levels of R&D.

Temporary R&D loan scheme

Supporting businesses to continue R&D in the COVID environment

Disruptions caused by the COVID-19 pandemic put business R&D programmes at risk of being cut or put on hold, with urgent and short term needs taking priority. This temporary government scheme provided loans of up to $400,000 to eligible business to fund planned R&D programmes. It recognised that high-value R&D activity would contribute to a faster economic recovery by creating new export opportunities and increasing New Zealand’s productivity.

Read more.

1.5 Ngā whakapaunga kāwanatanga ki te R&D
Government expenditure on R&D

Figure 10

Funding sources for government R&D expenditure

Total government expenditure on R&D (GovERD) increased by 23.3 per cent between 2010 and 2020, primarily through greater public funding. Funding from business increased by 1.2-fold during this time.

Most government R&D is carried out by Crown research institutes, which also receive contracts or grants from private and overseas funders.

In 2020, R&D funding from government was more than half (52%) of the total amount of government expenditure on R&D. This was followed by private sector funding and overseas funders, which contributed 32 per cent towards government expenditure on R&D.

Figure 11

Government expenditure on R&D as a percentage of GDP compared with other small advanced economies

Government R&D expenditure as a percentage of GDP in New Zealand was relatively high compared with other small advanced economies. However, from 2009 to 2019 this expenditure decreased from 0.32 to 0.24 per cent of GDP.

Funding for CRIs makes up a large part of government expenditure on R&D. These organisations have a unique and important role to support innovation and growth in relevant sectors. They are also tasked with addressing New Zealand’s most pressing issues and achieving economic growth by improving productivity and the sustainable use of natural resources.

1.6 Ngā whakapaunga mātauranga matua ki te R&D
Higher education expenditure on R&D

Figure 12

Funding sources for higher education R&D expenditure

Total expenditure for higher education on R&D (HERD) rose by about 35 per cent for 2010–2020 from $802 to $1082 million. Approximately 44 per cent of funding over this period came from government, with a small amount from business and overseas sources (between 4.5 and 8.1%).

Since 2010, almost half of the total R&D funding for higher education came from universities and other tertiary institutions. These institutions have a special role as research enables teaching staff to stay at the forefront of their field. These institutions also develop the next generation of scientists and innovators through doctoral and other postgraduate degrees.

Figure 13

Higher education expenditure on R&D as a percentage of GDP

New Zealand's higher education expenditure on R&D fell from 0.41 per cent of GDP in 2009 to 0.34 per cent in 2019. A similar decrease was observed in some other small advanced economies (Israel, Singapore and Ireland), while others (Denmark, Switzerland and Finland) had increases during the same period.

1.7 Ngā whakaputaranga rangahau
Research productivity

Figure 14

Publications per researcher compared with other small advanced economies

The publications per researcher metric provides a partial view of research productivity. This is because research can take several years to publish and some fields produce more publications than others.

In 2015, there was a change in the way that researchers were counted, with Masters students being included in the researcher count from that year. This has resulted in a drop in the number of publications per researcher. Since 2015, the number of publications per New Zealand researcher has been between 0.54 and 0.73.

Figure 15

Publications per million dollars spent compared with other small advanced economies

New Zealand researchers consistently produce a high number of publications per dollar spent when compared to Australia and most small advanced economies (except for Ireland).

The number of New Zealand publications per dollar spent increased by 13 per cent from 2011 to 2019.