New government report highlights benefit of R&D Tax Incentive

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The Government's 2015 Australian Industry Report shows economic activity in the Medical Technologies and Pharmaceuticals sector rose (up 1.4 per cent) but employment fell slightly to around 71,000 (down just 0.1 per cent).

Employment in Advanced Manufacturing fell 1.1 per cent to 259,000 while it rose 2.2 per cent in Food and Agribusiness to 526,000.

The economic contribution of the Medical Technologies and Pharmaceuticals sector rose to $10.5 billion, while Advanced Manufacturing fell 3.4 per cent to $29.7 billion and Food and Agribusiness fell 0.1 per cent to $53.9 billion.

Medical Technologies and Pharmaceuticals, Advanced Manufacturing and Food and Agribusiness are three of the Government's five strategic industry sectors - the others are: Mining Equipment, Technology and Services; and, Oil, Gas and Energy Resources.

A key feature of the Report is an analysis of Australian and international studies researching the impact of government-funded R&D tax incentives.

The analysis comes in advance of the Turnbull Government releasing its Innovation Statement, which could include changes to the R&D Tax Incentive.

AusBiotech has cautioned the Government against changes that would reduce or dilute the benefit for the biotechnology sector.

According to the analysis contained in the new Report, "...R&D is not persistent enough to be sustained over the long term without strong turnover or external stimulants such as spillovers and tax incentives, and it would rapidly fall to zero if not supported by other means such as strong sales or government assistance."

It added that, based on a "rigorous analysis", the Department's data on the R&D Tax Concession "...provides evidence of the existence of significant knowledge spillover for Australian firms engaged in R&D activity."

The Minister for Industry, Innovation and Science, Christopher Pyne, welcomed the the Report.

“The report continues the story of Australia’s economic transition and sets out the planks for a more resilient and adaptive economic future, where innovation and entrepreneurship can thrive,” said Mr Pyne.

“With the investment phase of the resources boom winding down and commodity prices softening, our economy is in transition and needs new and broader drivers of growth.

“This stage presents an opportunity to actively encourage innovation to grow the jobs of the future and ensure Australia’s ongoing prosperity.

“The Government’s National Innovation and Science Agenda is an economy-wide strategy that will support entrepreneurs and innovative businesses, closely link research and industry, and ensure our great ideas reach the global market,” said Mr Pyne.