Private research and development expenditure

IBISWorld expects private R&D expenditure to increase by 3.9% in 2025-26, to reach $23.8 billion. Improving economic conditions and reduced borrowing costs in the back half of the year boosted business investment in R&D in 2024-25. Rising business confidence and a cash rate cut in August 2025 has helped lift private R&D expenditure in 2025-26. However, a jump in inflation above the RBA's target band of 2% to 3% is dampening expectations of rate cuts and raising the possibility of rate hikes, which could dampen business confidence and constrain R&D investment.

R&D is an important driver of economic growth in advanced economies. Developing economies are able to expand by increasing labour force participation, improving education and healthcare services and boosting labour efficiency by investing in capital equipment. Advanced economies tend to rely more on new technologies and R&D expenditure than developing economies, given that they are already much closer to full employment. In 1987-88, R&D spending in Australia accounted for 0.5% of GDP. This has increased over the past two decades, with R&D expenditure expected to account for 0.8% of GDP in 2024-25. Nevertheless, Australia's share of GDP spent on R&D remains below the OECD average.

R&D is an important driver of economic growth in advanced economies. Developing economies are able to expand by increasing labour force participation, improving education and healthcare services and boosting labour efficiency by investing in capital equipment. Advanced economies tend to rely more on new technologies and R&D expenditure than developing economies, given that they are already much closer to full employment. In 1987-88, R&D spending in Australia accounted for 0.5% of GDP. This has increased over the past two decades, with R&D expenditure expected to account for 0.9% of GDP in 2024-25. Nevertheless, Australia's share of GDP spent on R&D remains below the OECD average of around 2.0%.