The Governor of the Reserve Bank of Australia (RBA) recently spoke on the changing nature of investment in Australia and how intellectual property is playing a growing and important role in the economy. It came as no surprise that the Governor noted that Australia’s economy is strongly based on mining. However, there is a growing non-mining sector as well. Since the end of the mining boom – which insulated the Australian economy from much of the 2008 financial crisis – the role of the non-mining sector has come into focus. Where does intellectual property fit into non-mining business investment?
The following graph on non-mining business investment shows significant growth in the intellectual property component of investment in the Australian economy over the last two decades.
While physical assets remain important, they are becoming much less so in business terms as the traditional factory based manufacturing sector, as opposed to a slowly growing advanced manufacturing sector, declines in importance. Intellectual property is becoming a more significant part of the economy.
The Governor noted that the intellectual property sector could be disaggregated into R&D, computer software and artistic originals. Looking at Graph 3, artistic originals remain an appreciable but small portion of the economy. The key drivers for non-mining intellectual property in Australia are software and R&D.
The growth in software, according to the Governor’s remarks, can likely be attributed to the growth economy and its embrace by business including large companies in banking and resources sectors. Fintech is an obviously growing sector globally, not just in Australia, and it will be important to capitalise on potential opportunities in this space. The mining sector will continue to expand its use of data analysis and autonomous operation for economic and safety reasons.
A concern is levelling off in intellectual property and R&D investment growth. As the two graphs above show, there is a correlation between the two. Causes of the levelling off are unclear and the Governor’s address did not explore this issue in depth. It does appear that Australia is becoming less innovative, when measured by accepted metrics such as the Global Innovation Index. It is therefore reassuring that policymakers are looking to address this issue through the Innovation and Science Agenda and the Australia 2030 thirty point plan. A sensible assessment is that R&D and intellectual property growth will resume with intellectual property, in all its forms, becoming a larger part of the economy.