With less than two weeks until election day, there's been no shortage of talk about how to get our economy growing again.
And while political parties have plenty of different ideas about how to make that happen, there's one ambition they largely agree on: building a more productive, innovative and high-value economy. One where New Zealand competes on the strength of its ideas, technology and expertise, rather than scale alone.
And we're already seeing glimpses of what that could look like.
Rocket Lab is launching rockets into orbit from the Māhia Peninsula. Halter is taking Kiwi-developed farming technology to global markets. Xero and Seequent have shown what's possible in software, while businesses across medtech, cleantech and the bioeconomy are developing technologies with the potential to create entirely new sources of economic value.
These aren't just impressive Kiwi success stories. They're examples of the kinds of businesses that could play a much bigger role in New Zealand's economic future.
But there's a difference between having a handful of standout innovators and building an economy where businesses like these can consistently emerge and thrive.
And that brings us to something they all have in common: research and development (R&D).
R&D underpins the technologies, products and specialist capabilities that allow these businesses to compete internationally. It's also one of the clearest indicators of how much a country is investing in innovation.
If we're serious about building a high-value economy, we need to ask whether New Zealand is doing enough to support the R&D that will help get us there.
Why R&D Matters for Economic Growth
New Zealand's economic challenges are well understood. We're a small market, geographically isolated from much of the world, and have long struggled to close the productivity gap with other advanced economies.
But while we can't change our geography, we can influence how we compete.
As NZIER economist Nam Bui recently observed:
“New Zealand cannot move itself closer to the rest of the world, but it can make better choices about where investment, skills and innovation are directed.”
R&D is central to building that competitive edge. It's how businesses develop new technologies, solve complex problems and build the expertise and intellectual property that allow them to compete in global markets.
But the opportunity goes beyond individual businesses. As Bui goes on to explain:
“The issue is not just whether New Zealand innovates. It is whether ideas, technology and better business practices spread widely enough through the economy to lift performance beyond the leading firms.”
Success stories like Rocket Lab and Halter show what's possible. But we can't rely on a handful of exceptional businesses to drive the shift towards a high-value economy. Innovation needs to become more deeply embedded across New Zealand's wider business landscape, from established sectors to emerging technologies.
And that means more businesses investing in R&D, developing new capabilities and finding better ways to create value.
If R&D is one of the foundations of the economy we're trying to build, the next question is whether we're investing enough in it.
Are We Investing Enough in R&D?
If we want innovation to become more deeply embedded across New Zealand's business landscape, our investment in R&D needs to reflect that ambition.
But the latest figures suggest we're not keeping pace.
According to Stats NZ, business R&D expenditure increased in dollar terms between 2024 and 2025, yet fell as a share of GDP from 0.98% to 0.95%.
That puts New Zealand well behind the OECD average of 1.53%, and further still from innovation-intensive economies like South Korea (3.93%) and Japan (2.72%).
For a country aspiring to compete through technology, expertise and high-value products, that's a significant gap.
Closing it will take more than a handful of standout innovators. We need more businesses investing in R&D, supported by conditions that make it easier to do so.
Fortunately, New Zealand already has an important tool designed for exactly that: the R&D Tax Incentive (RDTI).
The RDTI Is Working. How Do We Build on It?
The good news is that New Zealand already has a proven mechanism for encouraging businesses to invest more in R&D.
Introduced in 2019, the R&D Tax Incentive (RDTI) provides eligible businesses with a 15% tax credit on qualifying R&D expenditure. And the evidence shows it's making a difference.
An independent five-year evaluation found that the scheme generated an estimated $1.83 billion in additional business R&D. For every $1 of government support, businesses invested an additional $1.40 in R&D.
That's an encouraging result, and a strong reason to build on what's working.
Another positive is the scheme's bipartisan support. Introduced under Labour and maintained by the National-led Government, the RDTI has demonstrated the political stability businesses need to invest with confidence. R&D projects often take years to deliver results, so knowing that support is likely to continue makes long-term planning easier.
Budget 2026 also signalled progress, with proposed in-year payments allowing eligible businesses to access their tax credits sooner. For businesses managing significant upfront R&D costs, that could make a meaningful difference to cash flow.
But there's room to go further.
One obvious opportunity is increasing the 15% credit rate. Across the Tasman, eligible smaller businesses can receive a refundable R&D tax offset of up to 43.5% under Australia's scheme. While the incentives are structured differently, it raises an important question about whether New Zealand's support is internationally competitive.
When businesses can choose where to undertake their R&D, the generosity of incentives can influence those decisions. We should be encouraging innovative businesses to develop their technologies here, rather than risk losing that activity offshore.
Increasing the RDTI rate would come at a cost, but with evidence that the scheme stimulates additional investment, it's an option worth seriously considering.
The RDTI is working. The opportunity now is to strengthen it, helping more New Zealand businesses invest in the technologies and capabilities our future economy depends on.
Beyond the Success Stories
New Zealand has no shortage of innovative businesses showing what's possible. But building a high-value economy will take more than a handful of standout success stories.
We need innovation to become a bigger part of how businesses operate across the economy, from established sectors to emerging technologies.
And a practical place to start is getting more businesses investing in R&D and making use of the RDTI.
The scheme is already encouraging additional investment. The opportunity now is to build on that success, helping more eligible businesses access the incentive, reducing barriers to participation and ensuring the support remains internationally competitive.
Of course, R&D is only part of the picture. Access to capital, talent and commercialisation opportunities matters too.
But if we're serious about building an economy that competes on innovation rather than scale, getting more businesses investing in R&D is an important step towards making that ambition a reality.