What’s in the Future Made in Australia Act?

Following in the footsteps of the US Inflation Reduction Act, signed into law in August 2022, the European Union’s Net-Zero Industry Act and a broader global trend towards industrial policy, Australian Prime Minister Anthony Albanese announced a A$22.7 billion Future Made in Australia package in the 2024-25 budget, aimed at investing in Australia’s domestic industries over the next decade.

The budget announcement included:

  • An A$8 billion investment in hydrogen, including tax incentives of up to A$2/kg of hydrogen produced, and a boost to the Hydrogen Headstart program.
  • A$7.1 billion for the refining of critical minerals (e.g., lithium hydroxide), including a production tax incentive of 10 per cent of the costs of production; as well as A$566 million for minerals exploration and A$1.2 billion in loans to three critical minerals projects.
  • A$3.2 billion for research and commercialisation of renewable energy technologies, with a focus on green metals, hydrogen and batteries.
  • A$836 million for domestic solar manufacturing and A$549 million for battery manufacturing.
  • A$466 million for quantum computing company PsiQuantum to establish an office in Brisbane.

Why is the Australian Government doing this?

Speeches by Prime Minister Anthony Albanese and Treasurer Jim Chalmers indicate two main reasons for this new investment:

  1. To compete with incentives offered by other countries — or as Albanese termed it “the new competition” — which recognises the increasing overlap between economics and security, and global shifts in how countries think about trade and the role of the government in the economy.
  2. To become a ‘renewable energy superpower.’ As the world shifts away from fossil fuels and towards renewable energy, the government believes Australia is well-positioned to benefit. Its land and weather conditions can produce large amounts of solar panel and wind energy — opening up new opportunities in hydrogen production and energy-intensive manufacturing. Australia is also home to large deposits of many of the minerals used in renewable energy technologies — like lithium, copper and nickel.

How does this compare to US industrial policy?

The Inflation Reduction Act (IRA) is a US$370 billion (A$557 billion) investment in the US energy transition. Like the Future Made in Australia Act, it contains grants, loans and tax incentives to encourage the domestic production of renewable energy technologies.

  • The IRA provides a Clean Hydrogen Tax Credit (45V) for up to US$3/kg (A$4.50/kg) of hydrogen produced, more than double Australia’s tax credit (A$2/kg).
  • US critical minerals refiners can access the Advanced Manufacturing Tax Credit which subsidises 10 per cent of the costs of refining, comparable to Australia.
  • Solar and battery manufacturers in the United States are also eligible for the Advanced Manufacturing Tax Credit, or the Advanced Energy Project Credit. The IRA budgets US$10 billion (A$15 billion) for the Advanced Energy Project Credit and US$30.6 billion (A$46.3 billion) for the Advanced Manufacturing credit. By comparison, Future Made in Australia offers A$836 million for domestic solar manufacturing and A$549 million for battery manufacturing. 
  • Through the Bipartisan Infrastructure Law, the US Office of Clean Energy Demonstrations is investing US$25 billion in R&D and commercialisation of net-zero technologies. In the budget, Australia's ARENA got A$3.2 billion for research and commercialisation of renewable energy technologies. Both countries are focusing on R&D into hydrogen, green manufacturing and batteries but the United States also has R&D programs on carbon capture and nuclear technologies.
  • Australia’s Future Made in Australia Act has a narrower technological focus than the IRA, prioritising certain sectors: critical minerals, hydrogen, green metals, solar and batteries.