Stoush over $13.7b tax credits threatens to stall flagship budget policy

Labor will be forced into talks with the Greens over new curbs on coal and gas in a bid to salvage the $13.7 billion tax credits in its “made in Australia” budget plan, after the Coalition rubbished the new measure as a handout for billionaire miners.

The clash in parliament threatens to stall the flagship budget policy despite Treasurer Jim Chalmers’ claim that the tax credits could build up new industries by unleashing investment in critical minerals and clean energy.

“Spare us the pretend outrage,” Treasurer Jim Chalmers told question time after shadow treasurer Angus Taylor asked about the $13.7 billion plan.Credit: Alex Ellinghausen

But the federal government has gained the Coalition’s support for a $300 rebate on electricity bills to start from July 1 after a debate about why the help would go to every household rather than being targeted at those on lower incomes.

Opposition Leader Peter Dutton is preparing a new assault on Labor by using his budget reply speech on Thursday night to call for tougher controls on migration, after he warned that the intake was too high.

While the budget shows that net migration should fall from 528,000 last financial year to 395,000 this year and 260,000 next year, Dutton accused Labor of increasing the numbers and making the housing shortage worse.

Labor needs parliament to back the tax credits in a new bill, called A Future Made in Australia, after revealing a surge in budget spending and sparking warnings from economists that the outlays would lead the Reserve Bank to keep interest rates higher for longer.

Greens leader Adam Bandt called on Labor to end policies that supported coal and gas as part of a negotiation over the tax breaks for new industries.

Bandt said the Greens wanted Labor to halt a draft law that could give the resources minister the power to approve coal and gas projects, as well as scaling back subsidies such as rebates on diesel fuel costs for miners.

“It’s time to stop opening up new coal and gas mines,” he said.

“We want the government to go faster. If you put one foot on the accelerator with one foot on the brake at the same time, you get nowhere.”

Chalmers attacked Dutton for complaining that the tax credits would help billionaires who developed critical minerals or clean energy, given the beneficiaries could include Hancock Prospecting owner Gina Rinehart and Fortescue executive chairman Andrew Forrest.

“Spare us the pretend outrage,” Chalmers told question time after shadow treasurer Angus Taylor asked about the $13.7 billion plan.

The tax credits are designed to start in 2027 and would give companies a subsidy if they developed facilities to process critical minerals such as lithium, or produced hydrogen from wind and solar.

Taylor said the tax credits would give miners and hydrogen companies a benefit denied to others.

“That’s money for every time you produce something in one of these businesses, and these businesses are owned by billionaires, and they’re going to get a big subsidy,” he told radio station 2GB.

“Now, if you’re running a cafe and you produce a coffee, you don’t expect $1 from the government for producing a coffee. You don’t, that’s not what you expect. But that’s what this budget is doing.”

But West Australian Liberal leader Libby Mettam backed the federal tax credits because they would support the state’s miners.

“We will always stand up for Western Australia, and we will support this measure,” she said.

Resources Minister Madeleine King said Dutton was “economically illiterate” for opposing a policy that would increase investment in mining and clean energy, adding it was against the interests of Western Australia and Queensland.

“His opposition is totally tone-deaf to the work the government is doing with the United States administration to drive the development of an Australian critical minerals and rare earths processing industry,” she said.

With the Coalition opposed to the tax credits, the government requires support from the Greens in the Senate to pass the Future Made in Australia bill, which is expected to go to a Senate inquiry after being introduced to parliament this week.

Chalmers insisted the government was keeping spending in check, even though policy decisions are adding $24.4 billion in spending over the next four years, and that the energy rebate would reduce electricity prices and help lower inflation.

Figures released on Wednesday by the Australian Bureau of Statistics revealed wage growth, a key inflation concern of the Reserve Bank, was starting to slow.

The wage price index lifted by a lower than expected 0.8 per cent in the March quarter, taking the annual rate down to 4.1 per cent. It was the first drop in annual growth since 2020 and the second successive quarterly fall.

When challenged in question time on the level of spending, Prime Minister Anthony Albanese noted that the previous government’s last budget, in March 2022, forecast that federal payments would be 27.1 per cent of GDP this financial year, while Labor expected it to be 25.4 per cent for the same year.

Federal payments will rise to 26.6 per cent in fiscal 2026, the highest level in 38 years outside two years of emergency pandemic measures, but Chalmers said this reflected “unavoidable” decisions to keep essential programs.

Payments will rise by 4.5 per cent in real terms this financial year and 3.6 per cent next year, but Chalmers said that growth would fall over the future years.

Dutton did not name a target for the migration intake but took issue with the government’s record.

“I was amazed that the prime minister didn’t acknowledge the fact that migration dramatically increases under this budget,” Dutton told ABC Radio on Wednesday.

“And that is going to put more pressure on people wanting to rent homes, it’s going to put more pressure on young Australians who want to get into the housing market.”

When ABC Radio presenter Sabra Lane noted that the budget said net migration would be halved, Dutton insisted this was “not the reality” and that migration continued to go up.

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