The problem in one number
The Budget is candid about the challenge: "productivity growth in the decade to 2020 was the slowest in 60 years and it will take ongoing reforms to change this trajectory." (Productivity Package factsheet, p. 1)
Productivity growth is what lifts real wages and living standards over time — so a sustained slowdown is the backdrop against which the Budget's R&D and innovation measures should be read.
The response: a 15-point productivity package
The Government's productivity package spans 15 reform areas, anchored by two headline numbers (Productivity Package factsheet, p. 1):
- $10.2 billion a year reduction in regulatory burden.
- ~$13 billion a year boost to long-run GDP via National Competition Policy reforms.
R&D and innovation sit inside this package as a core productivity lever — the factsheet describes R&D, "from basic research to commercial deployment," as supporting productivity "through the creation and adoption of new products, services and processes" (p. 7).
The AI dimension
The package leans heavily on AI as a productivity multiplier. The Budget cites the Productivity Commission's estimate that AI could add at least 4.3 per cent to productivity levels, or $116 billion in GDP, over the next decade (Productivity Package factsheet, p. 6).
| Lever | Estimated long-run effect |
|---|---|
| AI adoption | **+4.3% productivity / +$116 billion GDP** over the next decade |
| National Competition Policy reforms | **+~$13 billion GDP** a year |
| Regulatory burden reduction | **$10.2 billion** a year saved |
Source: Productivity Package factsheet, pp. 1, 6.
Why this matters for R&D-active companies
The through-line is that R&D is being treated as economic infrastructure — and the R&D Tax Incentive redesign concentrates support on the genuine, experimental work most likely to produce the productivity gains the Budget is chasing.
For companies, there's a practical corollary: as R&D support is steered toward demonstrable, outcome-oriented activity, the evidence that an activity was genuine R&D becomes the thing that carries it. That's true for AI and software R&D as much as anything — where the line between routine development and genuine experimentation is exactly the line a contemporaneous record is there to draw.
Sources
- Australian Government — Productivity Package factsheet (pp. 1, 6, 7)
- Australian Government — Budget 2026–27: Tax reform