Probe flagged for Labor’s $1b showcase quantum computing deal

The auditor-general has opened the door to probe public investment of almost $1 billion in a quantum computing firm, as new documents raise questions about the deal’s probity and the company’s pitch.

The Coalition has for months argued that federal Labor gave a sweetheart deal to PsiQuantum in April when it pledged $470 million in equity, loans and grants, using the outlay as a tool to talk down the government’s headline Future Made in Australia policy.

The opposition earlier this month wrote to the Australian National Audit Office asking for a review into what it has described as a “sham process” to fund PsiQuantum while pretending other firms were genuinely considered. Industry and Science Minister Ed Husic has repeatedly accused the opposition of overreach and spurious claims.

Prime Minister Anthony Albanese, flanked by Queensland Premier Steven Miles (left) and Science Minister Ed Husic announcing the deal in April.Credit: Jamila Toderas

Acting Auditor-General Rona Mellor said after considering the Coalition request, she decided to add a potential audit topic on government investment vehicles.

“This audit, if commenced, may include the Australian government’s investment in PsiQuantum,” she said in a letter to opposition science spokesman Paul Fletcher.

Fletcher argued the auditor’s stance was a “victory for taxpayers” even though the letter did not guarantee an inquiry, adding “a cloud now hangs over this investment”.

Opposition science spokesman Paul Fletcher.Credit: Alex Ellinghausen

PsiQuantum aims to build the world’s first so-called fault-tolerant quantum computer, which could solve previously impenetrable problems and have applications for pharmaceuticals, agriculture and many other industries.

The federal and Queensland governments will invest $470 million each into the PsiQuantum project, through direct grants, equity stakes and loans. Part of the equity stake includes intellectual property held by PsiQuantum in the United States that will generate a rate of return for the government.

Minister for Industry and Science Ed Husic’s spokesman said he welcomed any review because the project was subject to “rigorous, lengthy due diligence covering legal, technical, financial and national security assessments, conducted at arm’s length by … departmental officials and external experts”.

The minister has described the PsiQuantum deal as a unique opportunity to hook Australia into a frontier technology that could reshape the economy. He recently said Australia missed out on bringing Intel to Australia in the 1990s, suggesting the quantum start-up presented similar prospective value.

“We’re in a race in the world to build the first fault-tolerant quantum computer that can be used by industry to crack problems that current computing power can’t crack,” he said in parliament this month, highlighting the potential for 400 manufacturing jobs in Brisbane if the project reaches potential.

Critics of the Future Made in Australia plan, a key plank of Labor’s re-election agenda, have used the quantum deal to argue that the investment program will be used by the government to pick winners rather than fund merit-based projects.

Fletcher has claimed Husic was “bedazzled” by PsiQuantum, whose US headquarters he has twice visited and who hired a Labor-aligned lobbying firm to spruik the company.

Previous reporting has cited December 2022 as the first point at which it was known Husic commissioned an assessment of an unsolicited PsiQuantum proposal to the government.

This was eight months before the government tested other firms in the open market through a tightly guarded process the Coalition believes was designed to tick off the PsiQuantum bid.

This masthead has learnt that the government’s thinking on the Californian tech firm goes back months earlier to August 2022.

In late August, chief scientist Dr Cathy Foley gave advice to the government on PsiQuantum’s capacity before the firm submitted its unsolicited bid.

Fletcher said the new information made clear Husic was “planning his unorthodox and irregular one-off payment to American company PsiQuantum as early as August 2022”.

“Why else would his department have asked the chief scientist for a technical assessment?” Fletcher said.

“What is entirely perplexing is why the request was only for information about this one company’s capabilities. Why has the chief scientist’s advice not been made public?”

Husic’s office did not respond directly to a question about the advice in August.

A report released by the NSW chief scientist in March, just before the deal was announced, casts doubts on PsiQuantum’s claims that its work will reach 1 million qubits – units of quantum information or data – by the end of the decade, giving its project unprecedented computing force.

“The scale of quantum computing hardware, estimated by the companies themselves, is likely to be too optimistic,” the NSW report states.

“In the case of non-solid-state architectures, such as PsiQuantum’s photonic approach, even more extrapolation and interpretation is required to understand the claim of 1 million qubits by 2028.”

The NSW agency was not involved in federal assessments of PsiQuantum.

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