This report assesses the economic impact of public funding of R&D in Australia, using the Backing Australia’s Ability (BAA) package as an illustration. The report provides a concise review of literature on the analysis of economic impact of publicly and privately funded R&D. The authors use a large computable general equilibrium model of the Australian economy (Murphy model MM600+) to provide separate analysis of the impact of the BAA package as well as public support for R&D as a whole. The actual analysis is based on simulated shocks to the economy and involves counterfactual analysis of the public investments in science and innovation. R&D investment (including BAA programs) is assumed to result in cost saving (labour efficiencies) which are then utilized as inputs (alongside the government support for science and innovation by portfolio) into the simulations. The results indicate that the overall impact of BAA on GDP is a permanent increase of 0.12 percent (or an extra $1,072 million per annum) and an improvement in living standards – an increase in private consumption – of 0.07% (or an extra $352 million per annum). The public funding of R&D is estimated to increase GDP permanently by 1.02% (or $9,116 million per annum) and raises the private consumption by 0.70% (or $3,648 million per annum).