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Future Made In Australia: what you need to know

The Albanese government has its answer to the US Inflation Reduction Act. Here’s the key facts.

australia Source: Getty

The ‘Future Made in Australia' plan — designed to promote and fund domestic clean energy technology and innovation — is arguably big news.

The Labor government has set aside $45 million to advertise the campaign between 2024 and 2025. Treasurer Jim Chalmers enthuses that this is ‘a big ambitious vision for the future…Some of these changes that we’re contemplating are big, meaty changes. We’re talking about, over time, transforming our energy base, transforming our industrial base, our human capital base.’

Of course, with the next federal election coming within the next 12 months, there may be a political element to the campaign.

Future Made in Australia: key points

The government intends to spend $22.7 billion over the next decade — with $6.7 billion earmarked allocated to subsidies for green hydrogen (produced with renewable energy), and $7 billion for refining and processing 31 different critical minerals.

The policy echoes the much larger Inflation Reduction Act in the US and will take years to be delivered. In addition to the headline amounts, there’s also a $1.7 billion allocation for an innovation fund, $134.2 million to help improve worker skills, and a $519.1m Future Drought Fund to be spent over the next eight years.

The government also plans to invest $1 billion in solar power manufacturing through the ‘Solar Sunshot’ programme, is loaning $400 million to Alpha HPA to help create ‘Australia’s first high-purity alumina processing facility in Queensland’ and has set aside $185 million to help Renascor Resources develop its graphite mine in South Australia.

But there’s also investments the general public might not consider to be green; including $840 million to PsiQuantum to ‘build the world’s first fault-tolerant quantum computer.’ And there’s also the $1 billion deal with German company Rheinmetall to build 100 Boxer weapon carriers.

There is a lack of clarity in what exactly constitutes a ‘Future Made in Australia’ policy, as some of these have been announced before, but the bottom line is that the government plans to invest heavily.

Of course, the opposition opposes the plan — calling the headline $13.7 billion for green hydrogen and critical minerals processing a ‘handout to billionaires.’

But Chalmers counters that the global economy is approaching the largest change since the Industrial Revolution, and contends that ‘Australian energy can power it, Australian resources can build it, Australia’s regions can drive it, Australian researchers can shape it and Australian workers can thrive in it.’

Where next for Australian subsidies?

Outside of direct support, the government is also going to allow Export Finance Australia to finance domestic projects ‘in the national interest’ where they are consistent with the Future Made in Australia Framework — and has unveiled a gas strategy that effectively places gas firmly (and contentiously) as a transition energy that will be used for decades to come.

Of course, companies already in green hydrogen, such as Frontier or Pure Hydrogen stand to benefit. Fortescue may also be a beneficiary, given its subsidiary Fortescue Future Industries which was set up to produce green hydrogen to drive the decarbonisation of FMG's operations by 2030.

Australia is also home to hundreds of companies dealing in critical minerals including lithium and rare earths, such as Pilbara Minerals or Lynas Rare Earths. And the proposed 10% production tax credit should help some operations with their margins through periods of commodity weakness.

In terms of solar manufacturing, only one company in Australia currently makes the solar panels — Tindo Solar — though many of its components are still imported.

Just as in the US, there may be a scramble to reorient corporate strategy towards benefitting from government support, and for those already positioned there may be some upside.

The risk is that the next election sees a new government unpick some policies contained within the strategy, leaving long term investing decisions uncertain.

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