Health & Medicine
The Melbourne that big ideas could shape
For the first time, we’ve mapped where Australia's innovation really thrives
A new index charts Australian innovation across nearly two decades. It shows a country with real potential, and where we need to focus to realise it
Published 11 September 2026
Innovation is central to Australia’s prosperity. Whereas productivity growth can come from numerous sources, one of the most important foundations for long-term growth is to create and commercialise new and improved ways of doing business.
Although much of our focus is often on the creation of new technology – vaccines that can save lives and encryption technologies that power internet commerce – a very important part of the innovation story is customising existing technologies to our markets.
However, the breadth and depth of Australia's innovation ecosystem is only partly understood.
We know about activities like research and development (R&D) expenditure and patenting, but they only capture part of how firms innovate. We measure other kinds of innovation far less systematically.
Our new composite index brings these strands together for the first time, measuring innovation from early inputs to what actually reaches the market.
Across nearly 20 years of data, we found that the intensity of Australia's innovation activity climbed steadily for more than a decade, then stalled. It has stagnated since 2021-22, with none of the post-pandemic rebound many had expected.
But there’s more to these figures.
Measuring what matters
The importance of measuring innovation properly can't be overstated. A clear account of what's actually happening is what robust policy debate is built on.
With Australia's productivity and living standards in stasis, it’s time to re-examine how we invent and commercialise, and to ask what more we could do.
As a nation, we clearly have the potential.
The centrepiece of our approach is the Commbank-Melbourne Institute National Innovation Index for Australia. We calculated it annually for every financial year from 2006-07 to 2023-24, in granular detail.
It scores the innovation activity of small statistical areas, typically the size of a suburb or country town.
Within each of those areas it scores every broad industry separately.
From that base we can build the picture up to regions, cities, states and whole industries, right through to the nation.
The index answers a specific call from the Government's 2025 report on the Strategic Examination of R&D, Ambitious Australia: that innovation reporting shift from measuring inputs to measuring outcomes and impact, backed by better data.
You may recognise the basic concept of the index if you've ever had a credit score.
A credit score pulls many pieces of information about a borrower's finances and behaviour into one number, so borrowers can be compared on a common scale even though no single figure tells the whole story.
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The National Innovation Index works the same way, condensing eight measures of innovation activity into one number for each place and industry, comparable across the country and over time.
To make the number easy to read, we set the national average in 2016-17 at 100. An area-industry scoring above 100 is more innovation-intensive than that benchmark and below 100, less so.
Innovation is hard to measure, so indexes are common. Most are built from national-level totals, which lets you track a country over time and compare it with others that collect the same aggregate figures.
By contrast, we worked from firm-level records held inside the Australia Bureau of Statistics (ABS): tax office data, IP Australia records and customs data on what firms put into innovation and what they get out.
This makes the data comprehensive, covering the entire population of firms rather than just a sample.
It also makes them more reliable. Data is drawn from actual R&D spending reported to the tax office rather than what firms say about themselves in surveys. And it lets us measure the same things the same way, year after year.
What the numbers tell us
That flat national line hides a lot of movement underneath.
The clearest divides are between industries. Wholesale trade, manufacturing and professional, scientific and technical services lead the field.
Manufacturing’s strength reflects a pivot into high-value, tech-heavy niches like robotics and advanced materials.
The difference between Australia’s states is also significant.
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New South Wales and Victoria consistently beat the national average, and Victoria pulled ahead of New South Wales in 2017-18. Western Australia has surged since 2020-21, overtaking Queensland as it diversifies into clean energy, agtech and space tech.
Emerging technologies also give us valuable insight.
Measured against R&D and patent-heavy firms, biotechnology ranks as the most innovative emerging sector, ahead of space, clean energy and quantum.
Firms deep in complex global export chains also score well, more evidence that trading abroad and innovating feed each other.
The biotech result isn't accidental. Industry leaders have leaned heavily on public support for basic research, much of it through universities, along with help to commercialise what comes out of the lab and to build dedicated precincts.
The newer fields, like clean energy, space and quantum, draw on the same deep well of basic research but don't yet have that close collaboration between universities, government and industry.
What this means for policy
Boosting Australia's innovation isn't a job for government alone.
Government's part is to get the economic settings right, the conditions under which firms want to innovate in the first place. The private sector's part, working through markets, is to put capital where it will work hardest.
That can mean drawing in foreign capital too, topping up the pool of investment the country needs to build its innovative capacity.
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One example is pairing large and small firms on procurement contracts, where a big buyer's guaranteed order underwrites a smaller supplier's production and gives it the certainty to invest and innovate.
Workforce capability is another lever.
Our data shows how much connecting into global value chains lifts the quality and impact of innovation, which is reason enough to help more Australian firms find and win export markets.
There's a case, too, for targeted immigration that brings in leading talent, aligned with the industries where Australia already competes and the emerging fields it's moving into.
The index will need to climb faster than it has in recent years. Australia's future prosperity depends on it.