Research, Science and Technology minister Pete Hodgson has hit back at business criticism of Labour's first budget and promised better support for R&D.
Business leaders had wanted Labour to stick to its pre-election policy of having tax breaks for research and development, but Treasurer Michael Cullen announced a system of grants instead.
Hodgson told the Future Sectors conference in Auckland on Tuesday that taxation rules would create delays in the arrival of support, whereas the grant offers more immediate relief. He said tax breaks may also encourage "low quality" spending, adding you cannot be sure how much "development" expense is genuine.
The government policy is to give up to $100,000 per business in a one-for-two dollar scheme, funding a third of investment, starting from September 1.
"If the money gets spent, we'll increase it. But if the money gets spent, then private sector expenditure on R&D will have increased by 10%. And we will have reached young companies who couldn't get an immediate tax break because they are not in profit.
"If a business receives a grant, the effect is the same as a tax break for a capital development of 100%. For all other R&D expenditure, it rises to 150%," he said.
Elsewhere, the minister pledged industry would receive better support for R&D, some of which was announced in the budget, and R&D would take a greater share of national income.
This year, total government investment in research, science and technology increases by $43.6 million or more than 10%.
Technology New Zealand saw its budget doubled, with $8.5 million for business assistance schemes, on top of $11.8 million for the grants.
Basic research received an extra $8.5 million and the New Economy Research Fund now totals $50.8 million.
The Marsden Fund, which explores "the frontiers of knowledge" received an extra $3 million to $25.8 million.
"I hope you have gathered that you are dealing with a government, a cabinet, a prime minister who are focussed on innovation, focussed on transformation.
"We have a role as leaders. We have a role as facilitators, partners, brokers and funders. We are keen to play those roles well," Hodgson said.