Australia needs more innovative entrepreneurs who have a key role to play in transforming the nation's economy, according to a new report from the government.

The Minister for Industry, Innovation and Science, Christopher Pyne, said that while Australia performed well in terms of entrepreneurial activity only a very small number of start-ups go on to grow dramatically.

Entrepreneur"We have one of the highest rates of entrepreneurship amongst developed economies. But we need to improve in terms of innovation driven entrepreneurship. Innovative entrepreneurs play an integral role in improving productivity and growing the economy because they are agents of change, creating opportunities for themselves and others," said Pyne.

The report is published at a time when the Australian government is also encouraging overseas investors to start businesses in the country.

The Business Innovation and Investment Subclass 188 visas are for investors and business owners who wish to establish business operations in Australia and are valid for four years.

Once the holder has maintained an investment in Australia for four years or established an ownership interest in an Australian business, they can apply for permanent residence through the Business Innovation and Investment (Residence) Subclass 888 visa.

There is also a two-year extension available for those who have held the subclass 188 visa for three years, giving them six years from the date of grant of the original visa.

The Australian Innovation System Report 2015 also shows that between 2006 and 2011, the activity of start-ups, firms two years old or younger, added 1.44 million full time equivalent jobs to the Australian economy, whereas all other firms shed more than 400,000.

It states that it is the new firms that are driving change. Start-ups aged one year or less are more likely to introduce innovations that are new to their industry rather than just to the firm.

"The report's findings reinforce what the Government has been saying for some time about the importance of innovation. The Government recognises that innovation, science and entrepreneurship are crucial to establishing the jobs of the future and securing the country's future economic prosperity," said Pyne. "We are looking forward to announcing the Innovation Agenda in December, which will outline measures that will encourage more of our smart, creative entrepreneurs to innovate and turn their ideas into reality."