Prime Minister Anthony Albanese has unfurled an ambitious new plan to boost the Australian private sector with public dollars targeting investment in clean energy and technology.
Global trend towards infrastructure spending
Globally, the shift towards more government intervention in the economy, especially related to climate change, is gaining momentum.
This trend of greater government involvement to support domestic industries is evident most prominently in the Biden administration’s expansive Infrastructure Investment and Jobs Act, but also currently on trend in the European Union, Japan, Korea, Canada and China.
This focus on a low-emissions future is creating a competitive landscape where nations strive to capitalise on emerging economic opportunities.
The US Inflation Reduction Act, another Biden omnibus containing substantial investments aimed at facilitating the net zero transition, is another prime example.
The strategy involves directing taxpayer-funded incentives towards advanced manufacturing and clean energy projects, aiming to compete with international spending.
Market mechanisms to play a part
While the concept of selecting industry 'winners' for investment has been contentious in Western economies, it is gaining traction, evidenced by substantial investments in the US private sector and China's dominance in the solar and electric vehicle industries.
And we already have the existing National Reconstruction Fund (NRF), established to support manufacturing projects, alongside investments in hydrogen, battery manufacturing and solar panels.
In his announcement of the initiative, the Prime Minister advocated for a departure from traditional economic practices, suggesting a combination of market mechanisms and government action to foster national progress.
Thus far, details on how Australia will specifically benefit from the 'green rush' remain vague. The Future Made in Australia Act so far seems to be a rebranding of existing initiatives rather than entirely new measures and points to potential announcements, possibly in the upcoming budget.
What's more, challenges such as funding allocation, regulatory barriers and the need for economic scale are yet to be nutted out, raising concerns among business groups and policymakers.
Conry Tech CEO Sam Ringwaldt had this to say of the announcement:
“Future is the operative word when it comes to Australian manufacturing. It’s always tomorrow’s problem, not today’s. It’s great that Albanese is talking about Australian manufacturing, but we need to start putting these words into action. The Australian Government needs to invest in our future manufacturing today, not someday.
Reads like a Utopia script
“The NRF is a prime example. It has some amazing people involved, and lots of real-world experience at the helm, but the timeline reads like a Utopia TV show script. The program gets announced to great fanfare, the $15 billion funding gets confirmed, the board gets chosen, the first meeting is held.
“A year on, before it has achieved anything of note, it gets consolidated into a bigger manufacturing program with an even more ambitious objective. As a point of comparison, the US has spent billions in the US Inflation Reduction Act that inspired the NRF. Australia is yet to spend a cent.”
“Our manufacturing report shows that Australian manufacturing has been in terminal decline for decades. It will take more than speeches to fix it.
“We want Australian manufacturing to thrive, but every year we delay substantial action and investment, we see more factories close, more companies leave, and more imported goods. Soon there will be nothing left to save.”
Despite the scepticism, the Albanese government remains optimistic, saying its inspiration is drawn from a raft of successful historical collaborations between the government and the private sector in mission-driven innovations.