The Australian mining sector has emerged as a winner from this week’s Federal Budget, as the Federal Government takes substantial steps to support Australia's critical minerals and green hydrogen sectors.
Rivalling the subsidies offered under the US’ landmark Inflation Reduction Act, the Budget has revealed a plan for almost $32 billion worth of tax incentives to turbocharge critical minerals processing and green hydrogen production in Australia.
Under the plan, a total of $13.7 billion will be set aside over the next decade to fund tax credits for the processing and refining of critical minerals and the production of green hydrogen. The scheme will then extend out to 2041, taking the estimated cost to $31.9 billion.
Labor will also create a new 'front door' for investors with major, transformational investment proposals to make it simpler to invest in Australia and attract more global and domestic capital.
Critical minerals support
Under Anthony Albanese’s Future Made in Australia plan - a centrepiece of the Budget - $22.7 billion will be invested in innovation and clean energy technology with the aim to ensure Australia remains a globally competitive ‘renewable energy superpower’.
Miners will be offered a 10% tax credit on the cost of processing and refining any of the 31 resources on the Commonwealth’s critical minerals list.
The credits, which will be available for a maximum of 10 years per development, are due to start from 2027-2028 and companies must reach a final investment decision on a project by 2030 to access the credits.
According to the Association of Mining and Exploration Companies, a production tax credit scheme would inject $2.4 billion into the economy each year by 2035, supporting more than 4,200 jobs.
Critics of Future Made in Australia were concerned that the government risked creating a class of business that permanently relied on taxpayer subsidies. However, capping the length of time a project can be supported addressed this concern.
The decision comes after heavy lobbying from Western Australia’s critical mineral miners, calling for a production tax credit scheme that would rival subsidies under the US’ Inflation Reduction Act.
Support for green hydrogen
The Federal Government is also ramping up its support for Australia’s emerging green hydrogen industry, providing a tax credit of $2 per kilogram produced for up to 10 years per project. The program has an estimated cost to the Budget of $6.7 billion over the medium term.
Like its support for critical minerals, the hydrogen credits won’t be made available until 2027-2028, as the government needs time to pass legislation to amend the tax system and refine the scheme.
Both the hydrogen and critical minerals programs will be uncapped. This means that if there is a strong take-up, the cost to the Federal Budget could be even greater.
The Commonwealth’s Hydrogen Headstart scheme, to subsidise more flagship projects, will receive an extra $1.3 billion over 10 years. The implementation of a National Hydrogen Strategy will also support Australia into becoming a global hydrogen leader by 2030.
Supporting emerging industries
To ensure taxpayer dollars are not wasted, the Government will use a new National Interest Framework to guide investments in sectors that are critical to the net zero transformation or to Australia’s economic security and resilience.
Five industries were identified in the budget that are aligned with the framework — green hydrogen, critical minerals processing, green metals, low carbon liquid fuels and clean energy manufacturing, including solar panels.
To help kick-start these emerging industries, the government will tip a further $1.7 billion into a Future Made in Australia innovation fund.
Almost $135 million has been set aside to prioritise environmental, cultural heritage and planning approvals for nationally significant green energy projects and deliver faster decisions.
HIstorically, renewable energy investment has suffered from significant uncertainty about the layered and lengthy approval process for projects at each of the various local, state and federal levels in Australia.