Physical sciences contribute 22% of economy – Report

The annual contribution of the physical sciences to the Australian economy has been estimated to be worth A$292 billion (US$230 billion), according to a report released on 25 March.

Prepared by the Centre for International Economics and delivered to the Office of the Chief Scientist and the Australian Academy of Science, the 104-page report focuses specifically on the core disciplines of physics, chemistry, earth sciences and the mathematical sciences – and the contribution that advances in these disciplines over the past 20 years have made to the national economy.

Titled The Importance of Advanced Physical and Mathematical Sciences to the Australian Economy, the report says the direct contribution of the advanced physical and mathematical sciences is equal to 11% of the economy while additional and flow-on benefits add another 11%, bringing the total benefits to just over 22% or almost A$300 billion a year.

It notes, however, that this estimate is likely to be conservative, and sets out several other areas of benefit that are harder to measure.

Launching the report at the National Press Club, Chief Scientist Professor Ian Chubb said the report indicated that science was “close to the heart of our prosperity and critical to the sort of economy we need to build”.

Chubb contrasted Australia’s support for science with that of China and other nations. He said the Chinese government was investing more than A$50 billion every year in science – which was about the size of Australia’s defence and education budgets combined.

“But I could just as easily point to the United Kingdom, which largely ring-fenced science and research against austerity cuts in the belief that these investments were critical to the future and to the position the UK would have in the world of the future,” he said.

“Or I could talk about India which put a satellite into orbit around Mars last year, becoming only the fourth nation in the world and the first Asian nation to do so.

"Or for that matter I could mention the Vatican City, where the reigning Pope is a qualified chemical technician with work experience in the food science sector. And where the Pontifical Academy of Sciences will next month hold a meeting to discuss how to ‘Protect the Earth, Dignify Humanity: The moral dimensions of climate change and sustainable humanity’.”

Pathways to economic benefits

The report carefully considered the pathways by which the advanced physical and mathematical sciences yielded economic benefits, Chubb said. But the Australian community’s continuing commitment to the advanced physical and mathematical sciences would be needed to ensure that the benefits from what is essentially a global scientific enterprise will continue to accrue to the Australian economy.

The report says that advanced scientific knowledge is discovered by research scientists who are often motivated by their own curiosity. It is then translated into “useful” knowledge and then applied to economic inputs.

“This is done by research scientists and science-trained professionals, who are responding to signals from business while business managers then use the economic inputs to produce output, in response to signals from consumers,” it says.

“The advanced physical and mathematical sciences have a direct impact on the economy, as they are the source of useful knowledge that is embodied in economic inputs (labour, capital and systems) that businesses use to produce output. They allow output to be greater than it would have been in their absence.”

Industry consultations

The economists who prepared the report conducted industry consultations to determine the importance of the physical sciences to Australia’s 506 industry classes. They outline the economic contribution of the sciences to the top 10 industry groups in an appendix to the report.

There are three distinct sources of useful knowledge, the report says: the core disciplines of mathematics, physics and chemistry can provide useful knowledge individually and it takes banking as an example.

“Part of the banking industry relies on complex mathematically based models that support risk and investment decisions, but on no other science input. We estimate that 3.6% of Australia’s economic output is produced from inputs that embody useful knowledge from a single core discipline.”

But the economists note that principles from the core disciplines have been combined to make new, ‘non-core’ disciplines that have become separate research fields and separate sources of useful knowledge. For Australia, the earth sciences, based on the principles of all three core disciplines, are an important non-core discipline because they underpin future mineral discoveries.

“We estimate that 0.3% of Australia’s economic output is produced from inputs that embody useful knowledge from just the earth sciences. [But] principles from multiple disciplines can be combined to solve problems and create useful knowledge.

“For example, in the 1980s and 1990s, the Australian scientists who invented the technology that became Wi-Fi did so using mathematics to solve a physics problem. To transmit data wirelessly using radio waves (a physics problem), they had to manage interference from various sources, which they did by using a complicated mathematical algorithm.”

The economists estimate that 7.3% of Australia’s economic output is produced from inputs that embody useful knowledge from multiple disciplines. So the multidisciplinary nature of science means that the total impact of science is greater than the sum of the contributions of the individual sciences.

“If a mathematician were to invent a new algorithm that allows more powerful mathematical models to be computed, that invention could advance the work of mathematicians running models in banking; earth scientists trying to find new minerals; and physicists in telecommunications trying to advance Wi-Fi. It is possible that the benefit that would flow from the mathematician’s work would be significant indeed.”

Chubb said he expected that similar findings to those outlined in the report would apply to other sciences not yet considered in the report: “The message is clear, however: without strong local commitment to science, it will not be possible to translate scientific developments into economic gains for Australia. We expect that future work will also clarify and measure the contributions of biology and other life sciences.”