The measures announced align with the objectives of the long-awaited National Reconstruction Fund (NRF) – a key innovation incentive domestic manufacturers will rely on for funding.
The Budget focused on balancing cost of living pressures, economic growth and national stability but there was no mention of the R&D Tax Incentive, the flagship innovation support program. While the industry initiatives outlined are modest, with a long runway until benefits fully materialise, the Budget showcases a targeted, responsible approach to industry development outlined below.
No significant changes to the National Reconstruction Fund
With the passing of the long-awaited National Reconstruction Corporation Bill in March 2023, organisations within the priority areas –renewable and low emissions technologies, medical science, transport, value-add in agriculture, forestry and fisheries, value-add in resources, defence, and enabling capabilities – are now one step closer to accessing finance through the Fund.
The NRF was allocated a total of $15b, $8b of which was pre-allocated before the first Albanese Budget in October 2022:
- Up to $3b for renewables and low emission technologies,
- $1.5b for medical manufacturing,
- $1b for value-adding in resources,
- $1b for critical technologies, and
- $500m for value-adding in agriculture, forestry, fisheries, food and fibre.
While we are still awaiting the NRF’s investment mandate, it’s expected to offer finance options such as concessional loans, equity investments, and guarantees. Modelled on the Clean Energy Finance Corporation framework, which has a 10-year track record, it’s expected that the NRF will deliver a positive rate of return across its investment portfolio, noting details on complying investments and commercial terms are yet to be developed.
In the global decarbonisation race, the NRF plays a crucial role in developing Australia’s future industries by countering incentive packages offered by prominent international players, such as the United States’ landmark Inflation Reduction Act. To remain ahead of the global race, it will be important for Government to meet their estimated NFR launch date of mid-2023.
Developing priority supply chains
Innovation, commercalisation and scale up across priority industry sectors are supported through initiatives aiming to create investment-ready projects for the NRF. This includes the Industry Growth Program, which was allocated $392.4m over four years to enable small and medium-sized enterprises (SME) and start-ups to commercialise ideas and grow. It offers growth advisory services, mentorship and matched grant funding ranging between $50,000 and $5m to start ups and SMEs, to build the ecosystems required to develop the seven priority sectors.
Positioning Australia as a global clean energy leader
Leading up to the Federal Budget, both Chalmers and Albanese emphasised the NRF’s significant role in reducing greenhouse gas emissions and supporting Australia's decarbonisation initiatives. The Budget re-emphasised this ambition to position Australia as a global renewable energy superpower as being central to the Government’s economic growth strategy. The Budget also allocates funding for a national Net Zero Authority to facilitate Australia’s clean energy transition.
Enabling initiatives include:
- The new Hydrogen Headstart Program, which will receive $26m over three years to establish, and a total $2b to operationalise from FY27. The program bridges the commercial gap for early-stage projects and provides access to competitive hydrogen production contracts, helping attract foreign and domestic investment in Australia’s hydrogen industry.
- The Powering the Regions Fund, which was allocated $1.3b over five years to help regional industries realise opportunities towards net zero transformation. This includes the $400m Industrial Transformation Stream to support the growth of new clean energy industries in regional areas and $400m for the Critical Inputs to Clean Energy Industries Stream to support sovereign manufacturing of critical inputs essential to energy transformation.
Unlocking critical minerals supply chains
Similarly, expanding onshore resource and energy value chains is a clear priority, as Australia is well-positioned to benefit from its significant reserves of lithium, cobalt, rare earths and nickel resources. In support, initiatives under the Supporting Australian Critical Minerals, were allocated $80.5m over four years that include:
- The Critical Minerals International Partnerships program, with $57.1m over four years, to undertake international engagement to promote Australian critical minerals projects and build diverse and resilient supply chains with key international partners.
- Critical Minerals policy development and project facilitation, with $23.4m over four years, including showcasing Australia’s environmental, social and governance credentials to international markets.
Responsibly developing critical technology industries
The Government is also providing modest support to develop Australia’s future-focused industries through targeted investments including:
- Growing critical technologies with an $101.2m allocation over five years to support Australia’s quantum and artificial intelligence industries.
- Establishing a Powering Australia Industry Growth Centre with $14.8m over four years to develop advanced technology and skills as part of the Australian Made Battery Plan, and supporting Australian businesses looking to manufacture, commercialise and adopt renewable technologies.
Investing in Defence innovation
Following the Defence Strategic Review released in April, the Government is reprioritising defence funding into six priority areas for immediate action, which include investment into new sovereign defence capabilities. Over the next 12 months, we expect details to emerge as recommendations are implemented and the Defence Industry Development Strategy is released.
Initiatives include establishing the Advanced Strategic Capabilities Accelerator, with $3.4b over 10 years, to create more defence jobs and commercialise technologies and innovative solutions. Priorities for the program are hypersonics, directed energy, trusted autonomy, quantum technology, information warfare and long-range fires.
For more information on these initiatives or support in accessing these incentives, please reach out to our team below.