The business expenditure on research and experimental development (BERD) represented 1.34 per cent of gross domestic product (GDP) in 2008-09, compared to 0.94 per cent in the 2004-05 financial year.

Large businesses continued to dominate the BERD spending with $12 billion, or about 71 per cent of the total, the ABS said. Small and medium sized businesses' expenditure on R&D grew 9 per cent over the year ago period.

Manufacturing accounted for the largest share of the BERD spending at 26 per cent.

Industry Minister Kim Carr seized on the numbers to argue the case for proposed changes to the Tax Credit regime that will be considered by this parliament. He says the increased spending on R&D highlights the commitment of Australian companies on innovation.

"It shows they are keen to develop new products and services and to reap the immense benefits that come from being innovative," Senator Carr said.

"To have such a significant growth in BERD, especially over a period that covers the Global Financial Crisis, is a testament to the resilience and confidence of the business community," he said.

"It demonstrates that businesses understand that innovation and R&D are critical to their long term planning and prosperity."

While Australia lags some industrialised countries in the R&D as a percentage of GDP, the increase from 1.26 per cent in 2007-08 to 1.34 per cent in 2008-09 lifted the nation's rankings from 14th to 11th among the 30 OECD nations. Top-ranked BERD investor Sweden spends 2.78 per cent of GDP on R&D.

Human resources devoted to R&D in business increased by 5.3 per cent during 2008-09 with the total person years of effort reaching 53,556. High skilled jobs such as those of researchers and technicians accounted for more than 83 per cent of these jobs.

"This boost in BERD is a good sign for the Australian economy and it shows the business community is embracing innovation," Senator Carr said.

"To keep this momentum going - and to benefit industries such as the pharmaceutical sector - it is essential that the proposed changes in the R&D Tax Credit are passed by the Parliament."