The announcement was made along with the release a report by the Ministry of Science and Innovation titled 'Powering Innovation' yesterday. The report is aimed at identifying potential in developing New Zealand's "high-value manufacturing and services sector" and recommends forming a new organisation, provisionally called Advanced Technology New Zealand (ATNZ). This would be based on Industrial Research Ltd, a Crown Research Institute in Wellington but with additional sites in Auckland and Christchurch.

"We will effectively double the size and capability of IRL, transforming it into an advanced technology institute with up to 700 staff and with a far greater reach than at present," Key says in a press statement.

"Estimates show the establishment of the advanced technology institute will cost in the region of $120 to $150 million over five years, in addition to IRL's current funding.This is an average of $24 to $30 million a year of additional funding, which the Government will pay for out of the new operating allowance in next year's Budget. We will earmark up to $80 million from the Future Investment Fund for capital spending in areas like new buildings and equipment."

The MSI report acknowledges difficulty in attracting and retaining staff with appropriate skills in advanced technology and its application to business "For example, it is estimated that New Zealand needs 2,000 -- 2,750 new engineering graduates each year, but in 2008 there were only 1,500," it says in the report.

This shortage stems from cultural and education system issues in New Zealand. There is a need to motivate more young people to retain science and mathematics at secondary school and to pursue science and technology education at tertiary level."