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R&D spending already starting rise ahead of new regime

Paul Brislen, Editor. 24 July 2018, 7:24 am

Business confidence is one of those odd-ball measures that is reported as hard fact but tends more towards the impressionist end of the political polling spectrum.

In its latest research, professional services consultancy Grant Thornton shows business confidence has fallen from 76% to 60% in the last quarter.

But the report also suggests businesses are investing more in research and development and will continue to increase that percentage.

The number of businesses looking to increase R&D investments in the next 12 months has jumped from 26% in the first quarter, to 50% in the second, and that's before the government's R&D tax regime kicks off, in April next year. The government has itself said it will invest $1 billion in R&D and that, coupled with near record levels of employment, is driving businesses to look to alternatives for growth.

Unemployment rates across the country are around 4.6% and expected to fall to 4% this year - the lowest they've been for some time. This puts pressure on businesses to find a new way to increase business outputs and R&D and "working smarter" is surely one way forward.

New Zealand's productivity is reportedly extremely low when compared with other countries' outputs, and our lower-wage economy does tend to reinforce that model, so turning to R&D for development makes sense.

However, Grant Thornton does warn that the new tax regime will exclude small businesses that can't invest a minimum of $100,000 a year (the threshold for the new tax breaks) and that will shut out a large part of the start-up community.

For that sector, alternatives are still required.


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