Treasurer Josh Frydenberg:"This is not about providing tax breaks for companies to do what they will be doing anyway,but rather putting the right settings in place to enable them to go a step further and back themselves to grow."Credit:Alex Ellinghausen
Mr Frydenberg on Monday angered business leaders when he challenged them to rethink spending on special dividends and share buybacks and instead back themselves and invest in R&D for the good of the economy.
An analysis of Organisation for Economic Co-operation and Development (OECD) figures shows sharply falling government incentives are already well below those of Slovenia and Greece.
Australia fell from 114 to 107 in 2017-18,according to an OECD index of R&D investment by government. The index,measured through purchasing power parity,is expected to drop again once a 2019 budget cut of $1.3 billion comes into effect,taking Australia further below Mexico and the Netherlands,which scored 134 and 114 respectively.
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The cuts have helped drive Australia's overall R&D investment below that of Europe,China,the United States,South Korea and Japan andstifled risk-taking and investment in technology,according to business and economists.
Treasury research shows the lack of innovation has left scores of unproductive"laggard firms"mopping up workers,hurting productivity and overall wage growth,which has struggled to get above historic lows across the economy.
KPMG's chief economist,Brendan Rynne,found real spending on R&D declined a further 0.7 per cent over the past year.