Not quite the Smart State

The business R&D estimates published by the ABS last Friday reminded me of the limited economic impact of successive Queensland Government initiatives such as the Smart State and Advance Queensland, although there have been some successes such as the Biosciences precinct at UQ and the Ecosciences precinct at Boggo Road. In 2019-20, Business R&D as a percentage of Gross State Product (GSP) was 0.62% in Queensland compared with over 1.0% in NSW and Victoria, and a national average of 0.9% of GDP (see the ABS estimates and the chart below). 

Business R&D is 0.62% of GSP in Queensland compared with over 1.0% in NSW and Victoria.

In Queensland’s defence, I should note:

  • mining exploration spending is not included in these figures, and arguably that could count as R&D broadly defined, and 
  • a major determinant of business R&D is an economy’s industry mix, as Graeme Davis and I demonstrated in some analysis we did of OECD data in the Treasury back in the mid-2000s (see International comparisons of research and development).

While business R&D has increased in Queensland over 2017-18 to 2019-20, that could just reflect the normal volatility and sampling error in the data. The ABS data set did not contain historical data, so I’ll need to track that down to analyse this more fully. I can say, however, that, since the early 2000s, the business R&D to GSP ratio does not appear to have budged. This Smart State Council working paper from 2006 reported business R&D was 0.60% of GSP in Queensland in 2003-04, which is roughly what it is today (see p. iii). 

This goes to show how challenging it is to transform an economy, to create a Smart State or to Advance Queensland. So much is determined by resource endowments, the local skills base, and tax and regulatory policy settings. Arguably we should focus our efforts on improving our education and training system and our tax policies and regulations, rather than on flashy initiatives to encourage business R&D and innovation.  

Please feel free to comment below. Alternatively, you can email comments, questions, suggestions, or hot tips to contact@queenslandeconomywatch.com. Also please check out my Economics Explored podcast, which has a new episode each week. 

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2 Responses to Not quite the Smart State

  1. grahamy01 says:

    One problem with this series is that it only catches a certain sort of research. When I was running a software development business we were effectively doing research all the time to improve the sites we were doing, but it would never show up in any data. There’s a strong software production industry in Queensland, particularly around gaming. And as you correctly note, we’re also strong in mining, but again, a lot of the research there would be happening on the job, and even if counted by the statisticians, probably wouldn’t be counted to the degree it should be.

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