A Future Made in Australia

A Future Made in Australia

A Future Made in Australia (FMIA) is the consolidation of numerous already announced measures, as well as some new and enhanced initiatives, under one banner. The goal of the $22.7 billion program is to compete with the US Inflation Reduction Act and similar international initiatives in a bid to incentivise advanced manufacturing and clean energy projects within Australia. 

The focus of FMIA will be:

  • Renewable hydrogen
  • Critical minerals
  • Green metals
  • Low carbon liquid fuels
  • Clean energy manufacturing.

New measures announced in the Budget:

  • Introduction of a Production Tax Credit (PTC) for renewable hydrogen and critical minerals
  • Introduction of the FMIA Innovation Fund
  • Increased funding for Hydrogen Headstart.

Previously announced measures include:

  • National Reconstruction Fund (NRF)
  • Industry Growth Program
  • Hydrogen Headstart
  • Solar Sunshot
  • Investment in Quantum Computing
  • Buy Australian Plan
  • Resourcing Australia’s Prosperity.

New measures

Production Tax Credit

The Government has announced the introduction of a PTC from 2027-28 for hydrogen and critical minerals production in Australia. Whilst currently lacking in detail, we understand the proposed credit will be modelled on the US advance manufacturing tax credit. Companies will be able to access the PTC for costs that relate directly to the value-add processing of hydrogen and 31 critical minerals.

FMIA Innovation Fund

The Government has announced the introduction of $1.7 billion over ten years from 2024-25 for the FMIA Innovation Fund to support priority sectors, including renewable hydrogen, green metals, low carbon liquid fuels and clean energy technology manufacturing such as batteries. This funding will provide support for innovation, commercialisation, pilot and demonstration projects and early-stage development. From this language, it appears this funding will be focused on small and medium enterprises (SMEs) unlike the remainder of the FMIA.

Previously announced measures

National Reconstruction Fund

The Government has committed $5 billion to the National Reconstruction Fund. The fund, originally announced in October 2022 and established during 2023, has broad power to provide financial accommodations including debt, equity and guarantees for projects aligned to the Government’s seven priority areas - resources, transport, medical science, Defence capability, renewables and low emission technologies, agriculture, forestry and fisheries and enabling capabilities. A further $10 billion is to be committed by 2029.

Industry Growth Program

This program provides an advisory service for startups and SMEs undertaking innovative commercialisation and/or growth projects within the priority areas of the Australian Government’s NRF and provides grants of up to $5 million for commercialisation and growth projects. $382 million was committed to the program in the 2023-24 Federal Budget.

Hydrogen Headstart

Announced in the 2023-24 Federal Budget, the $2 billion Hydrogen Headstart program was designed to fund large-scale hydrogen production projects to accelerate the development of Australia’s hydrogen industry. Six applicants have been shortlisted for funding, with the Government intending to announce funding recipients in late calendar year 2024. The Government announced an additional round of the Hydrogen Headstart program, which has extended the funding by $1.3 billion.

Solar Sunshot

In March 2024, the Government committed up to $1 billion in funding for the Solar Sunshot program to build Australia’s solar photovoltaic (PV) manufacturing capabilities. Consultation for the program design is currently underway (closing 31 May 2024), with Round 1 expected to launch in August 2024.

Quantum computing

The Federal and Queensland Governments announced in April that they would each be investing $470 million through share purchases, grants and loans to PsiQuantum to relocate its regional headquarters to Brisbane in an attempt to build the world’s first commercially useful quantum computer.

Buy Australian Plan

Originally announced in the 2022-23 budget, the Buy Australian Plan aims to improve the way government contracts work and build domestic industry capability through the Australian Government’s purchasing power. The Australian Government will provide $18.1 million over four years from 2023-24 (and $1.5 million per year ongoing) to the Department of Finance to improve government procurement processes for businesses.

Resourcing Australia’s Prosperity

Announced last week, the Government will invest $566.1 million over ten years from 2024-25 to deliver data, maps and other tools for use by the resources industry to assist with new discoveries and commit to the full mapping of Australia. The funding means Resourcing Australia’s Prosperity (RAP) will be fully funded for 35 years. For the first time, RAP will map offshore areas of Australia and identify sites for carbon capture and storage, as well as possible sites for clean hydrogen projects.

BDO comment

Whilst FMIA has some welcome initiatives, in particular the PTC, its principles are a stark contrast to the open market-based economy espoused by the Hawke/Keating Labor Government. There is a clear risk of the Government creating businesses or even industries reliant on subsidies and an even bigger risk of the Government simply backing the wrong horse.

In addition, the PTC comes with little detail and is not due to kick off until 2027-28, after the next federal election. Ideally, the Government would be bolder and bring through these incentives given the existence of numerous critical mineral projects in the pipeline.

Whilst direct investment by Government can have its place, funding decisions need to be transparent and demonstrate value for money to the taxpayer, whilst being timely and efficient for business. Therefore, BDO strongly favours self-assessed tax incentives (with appropriate compliance monitoring) rather than direct grants and welcomes the new PTC for hydrogen and critical mineral projects.

BDO's Federal Budget analysis

Our team provides detailed commentary on the economic measures announced by the Federal Government. Read our expert insights to understand how the Federal Budget impacts you.