The BGA Australia Team, led by Managing Director Michael “Mick” McNeill, wrote an update on Australia’s new budget.

Context

  • The Albanese Labor government’s third budget has the short-term aim of putting downward pressure on inflation and the medium- to long-term goal of attracting investment by using the levers of government. At the political core of the budget are two high-stakes assumptions: first, that inflation will return to the Reserve Bank’s 2-3 percent target in 2024-25 and second, that government subsidies associated with the government’s Future Made in Australia initiative will attract global investment in the clean energy transition and advanced manufacturing.
  • The budget delivers a second successive surplus, in large part due to strong terms of trade, but the fiscal outlook has been downgraded on the back of “unavoidable spending” on social services and welfare and lower-than-previously-forecast GDP. Although corporate Australia accepts the net-zero transition, it is unconvinced that Treasurer Jim Chalmers’ “new growth model” will lift productivity, raise living standards or assist budget repair.

Significance

  • The Treasury Department will be provided resources to strengthen and streamline Australia’s foreign investment framework. This includes refunding 75 percent of fees for foreign investment applications (see BGA’s May 1 update | password: G9MaL1R4xJ4s).
  • The budget includes a critical minerals production tax incentive from 2027-28 to 2040-41 to support the downstream refining and processing of Australia’s 31 critical minerals (see BGA’s February 20 update | password: 6Ysqxkl9wPz).
  • The budget affirms an additional AUD 5.7 billion ($3.8 billion) over the next four years and an additional AUD 50.3 billion ($33.3 billion) over the next decade in defense funding, above the previous trajectory for the same period. The government will invest in strike capabilities to address Australia’s challenging strategic circumstances (see BGA’s April 17 update | password: G0NaL3xJ6De1).

Implications

  • The budget’s long-term nation-building vision is encapsulated in the Future Made in Australia initiative, which seeks investment in the clean energy transition and advanced manufacturing (see BGA’s April 12 update | password: APR12#MadeinAustralia). The federal budget has allocated AUD 19.7 billion ($13 billion) over 10 years to accelerate investment in Future Made in Australia priority industries, including renewable hydrogen, green metals, low-carbon liquid fuels, the refining and processing of critical minerals and the manufacturing of clean energy technologies, including in solar and battery supply chains.
  • With the polls tight and an election to be held within 12 months, the government is desperate to head off another interest rate rise from a Reserve Bank more hawkish on inflation than Chalmers and his Treasury Department. Prime Minister Anthony Albanese said he intends his government to run full term and that another budget will be delivered in March 2025, but he may consider holding an election in the second half of 2024 if the economic outlook changes.

We will continue to keep you updated on developments in Australia as they occur. If you have any questions or comments, please contact BGA Australia Managing Director Michael “Mick” McNeill at mmcneill@bowergroupasia.com.

Best regards,

BGA Australia Team

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Managing Director

Mick is a highly-experienced government relations expert and trusted advisor on consensus building, conflict resolution and legislative developments. He has played an integral role in helping parties achieve desired outcomes in areas of national security, health policy, foreign policy and reputational crisis management, as well as media relations, communications campaigns, immigration and human rights. Mick has two decades’ experience working with government as a media analyst, political adviser and NGO advocacy manager. After a stint serving as an adviser to an Australian senator, Mick took on the role of the locally engaged senior political specialist at the U.S. Embassy in ... Read More