Budget focus on Labor’s Future Made in Australia policy

Federal Treasurer Jim Chalmers. Picture: NCA NewsWire / Max Mason-Hubers

Next week’s federal budget will be a Christmas in autumn for the lucky companies or sectors that will benefit from the Albanese government’s big spending Future Made in Australia policy.

If recent announcements are any guide, there could be some lucky companies indeed following the announcement in April of almost $1bn going to quantum computing company, PsiQuantum, to locate its Asia Pacific headquarters to Brisbane, a $1bn Solar Sunshot package to help make solar panels in the Hunter Valley in NSW and the Hydrogen Headstart program.

The budget is expected to see new tax breaks or investment allowances for companies whose ambitions can comply with the Future Made in Australia criteria.

Treasurer Jim Chalmers has said the tax breaks will be about “using the tax system in the service of our big national objectives”.

The tax breaks will be structured to “incentivise the kind of investment we want to see in the future of our economy and in a future made in Australia”.

In one sense it could be seen as a high sounding policy which is helping business – or some businesses – without the cost of an across-the-board cut in company tax.

The move is partly in response to the business community’s call for an Australian version of President Joe Biden’s Inflation Reduction Act in the US, a trillion dollar package of incentives and subsidies to encourage more investment in green energy projects.

But for the Albanese government it is also painting a high minded picture of the growth engines of the future for the Australian economy at a time when the many people are battling increasing rents, mortgages rates and the rising cost and companies are battling to cope with increasing waves of regulation.

The government’s expected second surplus will have come about largely because of higher than expected company taxes on the back of continued strong commodity prices and stronger than expected personal tax revenues – not as a result of any fiscal rectitude or significant belt tightening on spending.

Economic commentators such as Deloitte Access Economics have argued that Chalmers should use the budget to control spending to reduce the expected blow out in deficits in future years and not just pat himself on the back for not spending the unexpected higher revenues.

The government is banking on the Future Made in Australia to be seen as part of its vision for the future of the country – look over here where we are creating jobs in quantum computing and solar panels and not over there where companies across the board are being hit with higher energy costs, increasing waves of regulation and a costly and onerous industrial relations system.

Albanese sees the policy about restoring faith with blue collar workers with renewable energy creating the jobs of the future.

But it is a big gamble that the electorate – particularly those in middle to lower income brackets – will indeed look over there in the far distance where the government wants, and not over here where the cost of living is soaring with families struggling to pay higher rents, mortgages, energy and insurance costs.

There is some irony in the Labor governments (federal and state) spending millions to attract a foreign quantum computing company to expand its footprint in Brisbane while existing Australian small businesses are battling to stay afloat – and retain workers – as they deal with onerous new laws.

In contrast with Labor’s new industry policy, Liberal Senator Andrew Bragg, who has just been given the title of assistant minister for home ownership, has made it clear the Opposition sees housing affordability as a key plank for the next election.

Bragg outlined his thinking in a recent speech to the conservative Sydney Institute where he evoked the more prosperous era of Robert Menzies, who talked about Australians wanting to have “a little piece of earth with a house and a garden which is ours”.

His speech talked about the rising cost of housing in Australia and the fading dream of home ownership for a generation of young Australians.

Bragg made it clear that the Opposition will come to the next election with a slew of policies designed to encourage home ownership, including allowing first homeowners to dip into their super to the tune of at least $50,000 to fund the deposit on a home.

The superannuation sector – particularly the industry super sector – is strenuously opposed to the idea of early super release policies advocated by the Opposition, but by homing in on housing affordability as a hot-button issue for the electorate, Bragg is on a political winner.

The danger for Albanese is that the Future Made in Australia talk will not resonate with struggling would-be homeowners and renters which have been Labor’s natural constituency.

The policy is aimed at selling the big shift to renewable energy as one which creates jobs – look over there at this solar panel factory or this hydrogen hub – and not one which is pushing up energy bills (don’t look over here at those soaring electricity bills).

Interestingly the government is linking the Future Made in Australia policy with reforms to its foreign investment policies.

In a speech to the Australian British Chamber of Commerce on Tuesday, Energy Minister Chris Bowen said this was “important for our energy transformation.”

“Australia has all the ingredients of a successful renewable energy transformation except one. We have plenty of sun, plenty of wind, plenty of room and plenty of skills – but we need capital.”

That is not right.

Australia does have plenty capital in the form of the billions flowing into super funds each year. The super funds like the idea of investing in green energy and the energy transition story but they need projects which are economically viable.

Many now are investing overseas including in renewable energy and green energy projects as they cant find enough at home.

Is foreign capital prepared to come into Australia to invest in green energy projects that cash rich super funds won’t? Or what incentives will have to be handed out to encourage them to do so?

The budget will see more detail on the Future Made in Australia vision. Is it a real vision for the future or a dressed up new look winner-picking industry policy?

In the end it is the voters who will decide.