Analysts have said the US Inflation Reduction Act could deliver up to $1.56 trillion in production credits for green products such as solar technology, and the European Union, Korea and Japan have also announced similarly ambitious schemes.
“This is Australia in the new global competition fighting for good skilled jobs in regions and outer suburbs,” said Assistant Trade Minister Tim Ayres, who is responsible for Future Made in Australia.
Greens leader Adam Bandt will wait for the inquiry report until he finalises his position on the fund, but he declared that to win his support, the government must not fund projects that use fossil fuels.
“With Labor now backing coal and gas past 2050, this could be another coal and gas slush fund, with no guardrails to stop them tipping even more public money into fossil fuels,” Bandt said.
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“The Greens will continue to consider this bill, but we want to ensure everyone benefits from the mining boom 2.0, not just profit gouging big corporations, and that Labor stops opening new coal and gas mines.”
Ayres said some projects backed by the scheme may need gas, which is used in manufacturing as both a fuel and a feedstock, as they make the switch to cleaner technology that is not yet in commercial production.
“It’s the goldilocks amount [of gas], just the right amount, that is required to support manufacturers as they transition to electrifying their production processes,” he said.
But many economists are wary of the scheme and its potential to squander taxpayers’ money.
Independent economist Saul Eslake said the government risked wasting taxpayers’ money on projects that would likely fail due to inherent challenges for local manufacturers.
“Australia’s problem is that we neither have a big domestic market nor are geographically proximate to any big domestic markets,” he said.
“[The scheme] reeks of what I’ve long called manufacturing fetishism, the belief that there is something inherently more noble about manufacturing than other types of economic activity,” Eslake said.
He warned that using public investment to lure in private capital could suck resources away from more profitable industries like mining, agriculture and services.
However, Eslake stressed he supported government spending to drive the switch in the energy grid from fossil fuels to renewables.
Grattan Institute energy director Tony Wood said it was crucial that guardrails were put in place to force the responsible minister to act on advice from his department and experts.
“When government is picking winners you don’t want the losers picking governments - what I mean by that is when vested interests come out in strength.”
There are bright opportunities for the Future Made in Australia funds, Wood said, but rather than making batteries or solar panels the government should back green minerals processing.
Wood said Australia’s vast landmass and abundant supply of wind and solar energy could be harnessed to power energy-hungry processing of commodities with strong demand through the green transition like iron ore, bauxite copper, nickel, lithium, cobalt and other critical minerals.