New, wide-ranging industry support is welcome, but structural problems remain, business says

Australia will struggle to compete internationally due to our high tax burden and elevated wages, Brickworks boss Lindsay Partridge says, while new industry support has been welcomed.

Outgoing Brickworks managing director Lindsay Partridge.

Australia will never be able to compete internationally on price due to our high tax burden and elevated wages, the head of major manufacturing company Brickworks Lindsay Partridge said, responding to the federal government’s announcement of new umbrella legislation supporting Australian critical industries and the energy transition.

Mr Partridge, who will step down from his role after a nearly four decade-long career with Brickworks, 25 years in the top job, said he did not envy the role of his successor in convincing the board to invest in Australia.

“Australia has a tax on petroleum, the United States does not,’’ Mr Partridge said.

“Australia has a tax on wages, the United States does not. Australia has a land tax on manufacturing sites.

“In the United States, they pay around $3/GJ for gas and here it is around $12/GJ. You can’t compete internationally with the cost of production and the tax burden,” Mr Partridge told The Australian.

“I am retiring soon but my replacement is going to struggle to convince the board to make further investments in Australia.”

A mining truck at the Covalent lithium mine in Western Australia, owned by Wesfarmers. Picture: Cameron England

Prime Minister Anthony Albanese, in a speech in Brisbane on Thursday, announced the government would this year draw up a Future Made in Australia Act, in direct response to policy manoeuvres offshore such as the US Inflation Reduction Act, which supports critical industries and emissions reductions projects via huge subsidies and tax breaks.

That program has been costed at as much as $US1.2tn by Goldman Sachs.

There was general consensus among Australian business leaders that, given the huge amount of intervention in the free market internationally, competing without some sort of government assistance was all but impossible in many sectors.

With Mr Albanese’s speech on Thursday containing virtually no detail beyond previously-announced initiatives such as the Hydrogen Headstart program and the Critical Minerals Facility, industry leaders said any new programs needed to be designed to ensure a genuine increase in sovereign manufacturing and production, while adding that reforms around areas such as land access and regulatory hurdles for new projects needed to be addressed.

Robert Millner, who is chair of both Brickworks and coal miner New Hope Corporation, said it takes five to seven years to develop a new mining project at the best of times.

“So where are you going to get your commodities for your renewables and your electrification?’’ he said.

Mr Millner said minerals such as lithium, cobalt and copper were essential in building a renewables industry and further electrification, however those minerals were almost all processed offshore at the moment.

“I think we need to process some of that ourselves,’’ he said.

“I think we should be subsidising industries to do that. It all goes to China at the moment.’’

Mr Partridge said he was “fully supportive’’ of supporting innovative and critical industries, but said Australia had to deal with the issue of taxes such as payroll and land tax which were “buried” in the cost of production.

The Association of Mining and Exploration Companies (AMEC) said yesterday it had been working with the government on the idea of a production tax credit, which could help level the playing field for Australian downstream minerals producers which were value-adding.

“A PTC would reduce the production cost disadvantage faced by Australian projects compared to other countries like the USA, who have the Inflation Reduction Act,’’ AMEC chief executive Warren Pearce said.

“The PTC is a proven mechanism that would reward those willing to take a risk in establishing new and costly industries, that if successful, will deliver a significant return on investment for the government

“To hear the Prime Minister sharpening the elbows of our nation to protect and prosper is very encouraging.

“It’s never been more important to have strong Government leadership and assistance as we realise the economic realities of this decade.”

In practice a production tax credit would generate a tax credit of perhaps 10 per cent, which could be offset against a company’s tax bill for qualifying downstream processing activities, or received as cash if the company was not generating profits.

The head of the Climate Energy Finance think tank, former Citigroup managing director Tim Buckley said the government’s assertion that state intervention “is the new competition’’ was correct.

“We can’t afford to ‘sit it out’,’’ Mr Buckley said.

“The Koreans, Japanese, EU, Indian and Canadian governments have all responded at scale to the massive once in a century challenge and opportunity of global decarbonisation with huge strategic public funding programs.

“The ‘Future Made In Australia Act’ puts Australia into the global race already underway. “Public capital is the investment signal and de-risking that private capital needs to flood into domestic zero-emissions economic opportunities.’’

Santos chief executive Kevin Gallagher said yesterday that any new programs should be “technology and sector agnostic’’.

Originally published as New, wide-ranging industry support is welcome, but structural problems remain, business says