International affairs

Competing from Australia Paper 3: Innovation and growth in resource-based economies

Australia's high dependence on the resources sector does not constrain its economic growth nor innovation potential.


Report Summary

It is often claimed that economies with a high dependence on resources get stuck in low "value-adding" activities which curtail opportunities for growth.

This new CEDA research paper, Innovation and growth in resource-based economies, challenges the veracity of the so-called "resource curse". Several of the richest and/or fastest-growing economies - including Canada, Norway, Sweden, Finland, New Zealand and Australia - haverested economic development on their resources sector.

A nation can have large mining or agricultural industries and still prosper through innovation. Although it is the "high technology" industries that are typically associated with the application of sophisticated knowledge and cutting-edge techniques, it is in fact the "low technology" industries that make up the bulk of innovation in many economies. This report suggests the resources sector can not only fuel economic growth, but help make Australia a more innovative economy.  Unlocking the potential of Australia's resource base is far more sophisticated than a "dig-it-up, ship-it-out" activity.

Other features of the Australian economy - a large services sector, a (comparatively) smaller manufacturing sector, low levels of formal research and development spending, and a technology trade deficit - are typical of rich resource-based economies.

"This work says abundant natural resources are in no way an obstacle to Australia's growth", says CEDA Chief Executive Officer David Byers.

About the report

The Innovation and growth in resource-based economies report was written for CEDA by Professor Keith Smith, Chair in Innovation at the University of Tasmania and co-founder of the Australian Innovation Research Centre in Hobart. This report is the third in the Competing from Australia series. The first, Global Chains, by Professor John Houghton, details the challenges Australia faces in linking into global supply chains. The second, Export Weakness, Investment Strength, by Dr John Edwards, examines Australia's deteriorating export growth performance, and in direct contrast, Australia's improving outward foreign direct investment which is on track to exceed inward foreign direct investment shortly.  The full Growth 58 report is to be released 9 July 2007. CEDA would like to thank the report sponsors Invest Victoria and the Export Finance and Insurance Corporation (EFIC).