Research & Development Expenditure

IBISWorld forecasts research and development expenditure to increase by 2.4% in 2023-24, to $5.65 billion. This anticipated increase in R&D expenditure in the current year is largely due to wider economic recovery from inflationary pressures. The Central Government (Te Kawanatanga o Aotearoa) introduced new tax incentives designed to spur R&D investment in May 2019. As part of this tax incentive, the Central Government aims for R&D expenditure to reach 2% of GDP by 2028. Consequently, this tax incentive is expected to continue to drive R&D investment in 2023-24. Furthermore, additional funding outlays for the public sector are likely to support R&D expenditure. However, despite increasing business confidence is anticipated to remain negative in the current year due to lingering heightened interest rates. Dampened business confidence and higher borrowing costs are likely to constrain R&D expenditure, particularly from the business sector over the year.

R&D is intended to improve products and services, by increasing profitability, efficiency, or market access. R&D is typically an iterative process, requiring long-term investment to deliver overall improvement. R&D expenditure increased from 1.12% of GDP in 2007-08 to an expected 1.91% in 2021-22. The acceleration of R&D expenditure has been driven by the growth of start-up businesses, government support schemes, and the increasing willingness of businesses to make innovation an ordinary business activity.