{"id":87263,"date":"2024-06-04T15:45:27","date_gmt":"2024-06-04T05:45:27","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=87263"},"modified":"2024-06-04T15:45:27","modified_gmt":"2024-06-04T05:45:27","slug":"paying-for-a-future-made-in-australia","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/paying-for-a-future-made-in-australia\/","title":{"rendered":"Paying for A Future Made in Australia"},"content":{"rendered":"
<\/figure>\n

Australians want a bold vision for their future economic prosperity. They want not just to create new opportunities but to align them with our values and international commitments, not the least of which is the clean energy transition. Critical minerals should be central to this vision, and dig-and-ship is no longer the answer. The government\u2019s 2024\u201325 budget outlines the vision and commits new funding to it, but more is needed to address commercial, technological and economic fundamentals.<\/p>\n

More will need to be done, and we\u2019ll have to pay for it. The government should invest more broadly in the sector via small loans at the early stages of project development. Demand-side investments are also needed. One option is to pay for it by improving taxation of the oil and gas sector.<\/p>\n

The budget is bullish on critical minerals, squarely locating them in the $22.7\u00a0billion Future Made in Australia program. The nation\u2019s mineral sector will feature significant upstream and downstream mineral production and even end-use manufacturing: $836\u00a0million to the Solar Sunshot program and $549\u00a0million for battery manufacturing through to the early 2030s.<\/p>\n

In that vision, Australia\u2019s extractive sector is more complex, the sector dovetails into advanced domestic manufacturing, and our economy is better integrated with those of our Indo-Pacific partners. Australia would capture greater value from our natural resources, play a bigger role in the international clean energy transition and have a greener domestic economy.<\/p>\n

The government is taking steps in the right direction\u2014even if it\u2019s uncertain whether Australia\u2019s end-use manufacturing is viable\u2014but we need to do more and to pay for it, particularly where we aim to compete against immense international industrial policies, such as the United States\u2019 US$369\u00a0billion Inflation Reduction Act.<\/p>\n

Central to the government\u2019s critical minerals measures is the Critical Minerals Production Tax Incentive, a 10 percent tax credit on processing and refining beginning in 2027. It will cost the government an estimated $7.0\u00a0billion over the next decade (and potentially $16\u00a0billion by 2040\u201341).<\/p>\n

In any regular market, that incentive should create strong outcomes for some existing projects in lithium, nickel and rare earths that already integrate processing capacity. It should also attract greater capital investment and incentivise integrated domestic processing for future projects. And those projects are vital for the clean energy transition. For example, 90 percent of lithium demand in 2040 will be driven by clean energy technologies.<\/p>\n

But this is a manipulated market. Subsidies alone won\u2019t overcome the challenges facing the sector, and industry alone can\u2019t overcome state-backed market manipulation.<\/p>\n

In 2023\u201324, the government committed significant investments into major critical minerals projects ($400\u00a0million in loans to Alpha HPA; $840 million in loans and grants to the Arafura Nolans project) and conditionally approved $185\u00a0million in loans for Renascor\u2019s Siviour graphite project (although that may be revised).<\/p>\n

Those are huge loans, and we can expect only a few more in the near term. The budget indicates that the government\u2019s critical minerals investment agencies\u2014the Critical Minerals Facility, the Northern Australia Infrastructure Facility and Export Finance Australia\u2014are approaching their limits.<\/p>\n

In a capital-intensive sector, the government has committed more than $1.2\u00a0billion to a small number of projects, but massive loans alone can\u2019t build this sector and quickly diversify supply chains.<\/p>\n

The government will need to invest more broadly through smaller loans at the earlier stages of project development. Those projects are riskier but could more quickly attract private capital. That would also link to other government initiatives, including $566\u00a0million in exploration funding and $182.7\u00a0million (over eight years) to speed up regulatory approvals.<\/p>\n

On the demand side, we need to continue to invest in Australian end-user solar or battery industries (and research and development) and expand Australia\u2019s integration into existing markets in the United States, Japan, South Korea and Taiwan. Notably, this budget commits $5.8\u00a0million to a critical minerals trade-enhancement initiative run by the Department of Industry Science and Resources and the Department of Foreign Affairs and Trade.<\/p>\n

Areas where government can commit to critical minerals investments in coming years are plentiful, but funding is not. To properly fund the Future Made in Australia policy, we must find a new source of serious revenue, and improving taxation of the oil and gas sector may be the best option.<\/p>\n

As argued by the Australia Institute, Australia\u2019s petroleum resource rent tax (PRRT) is lacking compared with international standards. Many liquefied natural gas projects expect never to pay the tax. There is a counterargument here that the second-order impacts of LNG projects, including direct jobs and broader industry activity, compensate. But, at a time when we need to create resilient supply chains and invest in our future economic prosperity, someone must pay the bill.<\/p>\n

Australia\u2019s LNG exports generated $92.8 billion in revenue in 2023, up from previous years. However, the government expects to collect less PRRT this year than in previous or future years. Our LNG production tripled from 53\u00a0billion cubic metres in 2010 to 154\u00a0billion cubic metres in 2022, but we aren\u2019t seeing commensurate economic or government revenue impacts. Other leading global LNG supplier nations, such as Qatar<\/a>, collect far more from their oil and gas sectors.<\/p>\n

Until recently, Australia has been an attractive destination for LNG investment, and we\u2019re near to major customers\u2014Japan, China, South Korea and Taiwan. The government\u2019s new Future Gas Strategy, which commits Australia to LNG through to 2050 and aims to reduce regulatory approval lag time, as well as the forthcoming revision of the National Hydrogen Strategy, are strong political signals that will counter growing concern about our regulatory environment.<\/p>\n

The government\u2019s vision for critical minerals and a Future Made in Australia boldly attempts to move Australia\u2019s economy forward amid slowing global growth and recent domestic economic stagnation. Future budgets will need to build on that investment and identify new income sources to do so.<\/p>\n","protected":false},"excerpt":{"rendered":"

Australians want a bold vision for their future economic prosperity. They want not just to create new opportunities but to align them with our values and international commitments, not the least of which is the …<\/p>\n","protected":false},"author":1737,"featured_media":87264,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[17,3479],"class_list":["post-87263","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-australia","tag-critical-minerals","dinkus-north-of-26-south"],"acf":[],"yoast_head":"\nPaying for A Future Made in Australia | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/paying-for-a-future-made-in-australia\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Paying for A Future Made in Australia | The Strategist\" \/>\n<meta property=\"og:description\" content=\"Australians want a bold vision for their future economic prosperity. 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