Private Capital Industry Analysis

A continued focus of providing cost of living relief and facilitating investment in a future made in Australia

Overview

This year’s Budget provides a balanced approach to several domestic and international challenges, with a particularly encouraging outlook for Australia’s investment community, with Treasurer Chalmers noting in his Budget Speech that “business investment is now expected to record its longest annual expansion since the mining boom”. The Australian Investment Council believes that Australia’s private capital sector is poised to meet the Government’s vision for increased investment in Australia’s industries of tomorrow.

This Budget is the Government’s strongest signal to date that it recognises the scale of Australia’s investment challenge, with the Treasurer noting that the world’s 2050 net zero commitment “will demand the biggest transformation in the global economy since the industrial revolution.” Encouragingly, this recognition is paired with a commitment to working alongside investors to build a prosperous Australian future by “changing the way we attract and deploy investment”.   

Like last year, this year’s Budget provides a surplus of $9.3 billion – the first consecutive surplus in a Federal Budget in two decades.

The Budget continues this administration’s focus on generating cost-of-living relief for individuals – but signals a new commitment to working with industry through its ‘Future Made in Australia’ aspirations. This $22.7 billion package is particularly relevant to Australia’s investment community, and our private capital industry. It contains six key elements:

  1. Attracting Investment in Key Industries
  2. Investing in Innovation, Science and Digital Capabilities
  3. Making Australia a Renewable Energy Superpower
  4. Promoting Sustainable Finance Markets
  5. Strengthening Approvals Processes
  6. Workforce and Trade Partnerships for Renewable Energy Superpower Industries.

The funding commitments most relevant to Australia’s private capital sector within each of these pillars are summarised below, together with other relevant Budget measures. 

A Future Made in Australia

Pillar 1: Attracting Investment in Key Industries: $68 million over four years 
Most significantly for Australia’s private capital sector is the Government’s allocation of:

  • $54.7 million over two years to administer, coordinate and promote the Government’s Future Made in Australia agenda, including the development of legislation that establishes a National Interest Framework and consultation with industry, investors and major stakeholders on the development of a ‘single front door’ that improves the attraction and facilitation of major investment proposals.

    The ‘single front door’ will be focused on attracting more global and domestic capital by:
    • Providing a single point of contact for investors and companies with major investment proposals;
    • Delivering a joined-up approach to investment attraction and facilitation;
    • Identifying priority projects related to the Future Made in Australia agenda;
    • Supporting accelerated and coordinated approval decisions; and
    • Connecting investors with the Government’s specialist investment vehicles.
  • $11.4 million over four years to establish and manage a domestic National Interest Account with Export Finance Australia, supporting domestic projects in the national interest, consistent with the Future Made in Australia National Interest Framework. 

Pillar 2: Investing in Innovation, Science and Digital Capabilities: $1.7 billion funding over ten years

Most significantly for private capital funds actively investing in innovation, science and digitally focused businesses are the following measures: 

  • $566.1 million over ten years for Geoscience Australia to map Australia’s national groundwater systems and resource endowments.

  • $466.4 million for a financing package of equity and loans provided by Export Finance Australia on the National Interest Account to support the construction and operation of quantum computing capabilities and associated investment in industry and research development.

  • $448.7 million over 11 years to establish Australia’s partnership with the United States on the next generation of the Landsat satellite earth observation program.

Pillar 3: Making Australia a Renewable Energy Superpower: $19.7 billion over ten years 

 This pool of funding is designed to accelerate investment in Future Made in Australia priority industries, including renewable hydrogen, green metals, low carbon liquid fuels, refining and processing of critical minerals and manufacturing of clean energy technologies, including in solar and battery supply chains. For those members investing in the infrastructure and technology underpinning Australia’s clean energy transition, the following measures are most relevant:

  • $7.1 billion over 11 years to support refining and processing of critical minerals.

  • $8 billion over ten years to support the production of renewable hydrogen.

  • $1.5 billion over seven years to the Australian Renewable Energy Agency (ARENA) to supercharge its core investments in renewable energy and related technologies, including for the development, demonstration, commercialisation, manufacture and deployment of renewable energy technologies that will help make Australia a renewable energy superpower. 

  • $1.7 billion over ten years for the Future Made in Australia Innovation Fund, to be administered by ARENA, designed to support innovation, commercialisation, pilot and demonstration projects and early-stage development in priority sectors, including renewable hydrogen, green metals, low carbon liquid fuels and clean energy technology manufacturing such as batteries. 

Pillar 4: Promoting Sustainable Finance Markets: $17.3 million over four years 

The Government’s commitment to encouraging the private sector to adopt best-practice ESG processes is reflected in the measures contained within this package. The Council will continue its ongoing consultation with the Government on the following sustainable finance measures to ensure that the new regulations do not impose undue burdens on Australian investors:

  • $10 million over four years for additional resourcing for ASIC to investigate and take enforcement action against market participants engaging in greenwashing and other sustainability-related financial misconduct.

  • $5.3 million over four years for the Treasury, ASIC and APRA to deliver the sustainable finance framework, including issuing green bonds, improving data and engaging in the development of international regulatory regimes related to sustainable finance.

  • $0.5 million to continue the development of Australia’s sustainable finance taxonomy, including expanding the taxonomy to cover the agricultural sector. 

Pillar 5: Strengthening Approvals Processes: $182.7 million over eight years

This funding is designed to strengthen approval processes to support the delivery of the Government’s Future Made in Australia agenda, including Australia’s transition to a net zero economy. The Council has long advocated for reforms to strengthen the efficiency of Australia’s foreign investment framework. Encouragingly, this policy outcome are realised in the following commitment: 

  • $15.7 million over four years for Treasury to strengthen and streamline Australia’s foreign investment framework, through more effective monitoring, enforcement of conditions and timely review of foreign investment applications. This includes refunding 75 per cent of fees for foreign investment applications that do not proceed because the applicant was unsuccessful in a competitive bid process. 

  • The Government has also committed to a ‘smarter use of data’ to improve decision making processes and appropriate resourcing to facilitate a faster pathway to better decisions on environmental, energy, planning cultural heritage, and foreign investment approvals. 

  • The Council will continue to engage with the Government on process improvements of the foreign investment framework. 

Pillar 6: Workforce and Trade Partnerships for Renewable Energy Superpower Industries: $218.4 million over eight years

Relevant for private capital funds actively investing in energy-related industries are the following budget measures:

  • $38.2 million over eight years to provide funding for a range of Science, Technology, Engineering and Mathematics programs to increase diversity in STEM education and industries.

  • $14.3 million over four years to improve the competitiveness of the Australian economy by working with trade partners to support global rules on unfair trade practices and to negotiate benchmarks for trade in high quality critical minerals.

Other relevant Budget measures

The Budget contains a range of additional measures in specific portfolios relevant to Australia’s private capital industry:  

Enhancing Productivity – abolishing nuisance tariffs:

  • The Government will permanently abolish 457 nuisance tariffs from 1 July 2024, in the largest unilateral tariff reform in two decades.

Small Business Support – $20,000 instant asset write-off: 

  • The Government will extending the $20,000 instant asset write-off by 12 months until 30 June 2025, designed to improve cash flow and reduce compliance costs for small businesses.

Defence Industry Development Strategy:

  • The Government will provide $165.7 million over five years to establish the Defence Industry Development Grant program for Australian defence industry, supporting Australian businesses to increase their scale and competitiveness and respond to Defence’s capability requirements.

  • Significantly, in his speech the Treasurer noted that “in a world of rapid economic change and heightened strategic competition, investing in modern defence industries serves our economic and national security interests.” This sentiment, bolstered by this funding measure, is particularly relevant for our members investing in Australia’s defence and sovereign capabilities – and will better enable them to compete with established global businesses.

Investing in the Future of Industry and Science: 

  • The Government will allocate a further $18 million in 2024–25 to continue to build the capability of the National Reconstruction Fund Corporation to undertake investments and deliver on its policy outcomes.

Net Zero Economy::

  • The Government will provide $399.1 million over five years in additional resourcing for the Net Zero Economy Authority, the Department of Employment and Workplace Relations, and the Fair Work Commission to promote orderly and positive economic transformation associated with decarbonisation to ensure Australia, its regions and workers realise the benefits of the net zero economy.

  • Specifically relevant to Australia’s investment community is an allocation of $209.3 million over four years to expand the Net Zero Economy Authority to coordinate policy and deliver across government, broker investments that create jobs in regions, and support workers affected by the net zero transition.