The purpose of this study is to develop indicators and analyses for better understanding public sector innovation in Australia. An important caveat is that this study does not cover all of the Australian public sector. The focus is on the public administration activities of the Commonwealth Government. This excludes public hospitals, schools and universities, state and local governments, government business enterprises and public private partnerships (PPPs). Almost all of the proposed indicators would be appropriate for state and local governments, but many would be unsuitable for measuring the innovative activities of the education and health sectors and of government business enterprises or public private partnerships.