Inside Albanese’s bet on how the future will be made

Anthony Albanese’s grand vision to transform industry, decarbonise the nation and take a Labor message of hope and aspiration all the way to the next election is firming up as the next big political brawl.

The centrepiece of the federal budget is Future Made in Australia – a multi-pronged, 10-year, $22.7 billion whole-of-government package to back jobs and industry, largely through billions of dollars in production subsidies for emerging green hydrogen, critical minerals and local manufacturing. The policy mirrors Joe Biden’s half-a-trillion-dollar Inflation Reduction Act, introduced to turbocharge climate investment.

The first response from the Coalition has been to slam Future Made in Australia as “billions for billionaires”. They have promised to drop the policy if elected. This forces the government to deal with the Greens and the progressive cross bench to pass the measures, where the demand is for an end to Labor’s parallel support for coal and gas extraction.

“Most modern, strong economies depend on having a range of manufacturing capabilities,” Industry and Science Minister Ed Husic told The Saturday Paper.

“This is not just about making the transition to net zero, but it’s also important too in terms of economic diversity and opportunity longer term. Incredibly important. And it’s probably overlooked, I think, because the orthodox, commonplace view of manufacturing has mental images of smokestacks and large metal gears. That’s not Australian manufacturing anymore.”

Tuesday’s budget shows trouble ahead. There’s prediction of a string of deficits after the treasurer’s engineering of a surplus; pessimistic forecasts for prices of mainstay commodities such as coal and iron ore; groaning government debt, set to hit a trillion dollars in 2025-26; and immovable spending pressures in aged care, health, NDIS, defence and debt interest payments.

Restraint is on display through the modest $9.3 billion surplus, according to Finance Minister Katy Gallagher. She is dealing with outrage that the fresh power bill rebates are not means-tested, while welfare and domestic violence advocates are furious with the little extra for society’s most vulnerable.

“Once you take out the unavoidable spending, you’re left with the cost-of-living package, so we have tried to make sure that where we’re making investments that we’re doing it at the right time over the cycle, and that’s why you see a lot of the Future Made in Australia stuff towards the back end,” Gallagher told The Saturday Paper.

“There’s no shortage of requests for spending and we have said ‘no’ to the majority, but there’s things we have to do and there’s things that we think have been put off for too long or not dealt with.”

The budget papers show much of the cost of Future Made in Australia is off the budget ledger for spending as it is “pending consultation and design”. This money is tucked away for now in the billowing contingency reserve. It will start operating in the 2027-28 financial year and will support production to 2040.

The government says the policy is a “profound opportunity” for fostering “new globally competitive” industries. Albanese also wants the nation to remember the global shipping disruption during the height of the pandemic. The key words, which may not zing, are economic resilience.

“They are not just futureproofing the nation. This is futureproofing the budget. And that is really critical,” says Andrew Hughes, a lecturer in marketing at the Australian National University.

“There’s a lot of expansion coming up in the future, which they can’t get away from. They’re trying to but the schemes are so big, they are stuck between a rock and a hard place. Where’s the money coming from?”

As the investment saying goes: you have to spend money to make money.

The bundle of reforms under Future Made in Australia include government subsidies to get industry producing what is needed to transition to cleaner energy. There’s $6.7 billion in tax credits or “incentives” for hydrogen produced with renewable energy and $7 billion in tax credits for refining and processing 31 critical minerals. The budget papers show there’s scope for similar incentives for producing low carbon liquid fuels. That’s liquid biofuels, ammonia and synthetic liquid hydrocarbon fuels.

There will be a new “front door” to streamline investment and planning approvals; $1.7 billion over 10 years for a Future Made in Australia Innovation Fund; $1.4 billion over 11 years to support clean energy manufacturing, including the setting up of the Solar SunShot program; and $218.4 million over eight years to improve workers’ skills.

The Australian Renewable Energy Agency will also get $1.5 billion over seven years to “supercharge” its investments in renewable energy and related technologies, to help make Australia a renewable energy “superpower”.

Is this extra spending possibly inflationary? Gallagher replied that “wasn’t the advice to government”.

The lead portfolio ministers are Jim Chalmers, Gallagher, Husic, Infrastructure Minister Catherine King, Resources Minister Madeleine King, Climate Change and Energy Minister Chris Bowen and Education Minister Jason Clare.

As a large agenda item, Future Made in Australia came before the Expenditure Review Committee (ERC), chaired by the prime minister, multiple times.

Asked which minister the buck stops with, Gallagher said this was a “substantial piece of work” and “these are decisions taken at the ERC”.

“This will be largely Treasury-led and I think it should be because it is about economic transformation,” Gallagher said.

“I will have a lot to do with the single front door, but this is a whole-of-government effort and it’ll have massive central agency involvement.”

When it comes to protecting taxpayers’ money from rorting and unlimited spending, protections are promised to be built into the legislation and national interest criteria will have to be met.

“Companies won’t receive any credit until they have produced these resources,” Albanese told parliament.

“That’s why it’s been designed in this way. So it pays on success. It pays on creating jobs. It pays on creative not just domestic use, the export potential as well.”

A new political battleground has opened up, however.

Peter Dutton backs critical minerals projects, but there is no support for “giving out billions of dollars to billionaires”. The opposition leader said those projects should “stand alone”.

He is no fan of the recently announced $1 billion funding deal, with the Queensland government, to get the United States-based PsiQuantum to build the first commercially useful quantum computer in Brisbane.

Greens leader Adam Bandt wants more public funding for the transition out of gas and coal and he points to Labor’s hypocrisy over support for coal and gas.

“The Greens are sick of Labor’s greenwashing, pretending to care about climate, while fast-tracking coal and gas and then saying they’re going to keep it in this system past 2050,” he said. “It’s time for Labor to choose.”

The prime minister wants the package to stand on its “own merits”, another way of saying coal and gas policy is not on the table.

Husic roundly rejects the claims that Future Made in Australia will underwrite billionaires such as Gina Rinehart and Clive Palmer. He insists it is about expanding small and medium-size businesses.

“If you’ve got capability and you can show us how you can scale up and deliver for what we need to do for the transition, then we’ll find ways to work with you,” he said. “And this has been going on in economies across the planet, where governments have had to play the important leading-edge role to help those companies mature and then they get the private capital long term.

“We’ve got to change the composition of Australian industry. There are moments in time like the transition on net zero, where if we play our cards right, this will set us up for the long term. We’re playing catch-up after a wasted 10 years of the Coalition in this space.”

According to Saul Griffith, the co-founder of Rewiring Australia, there is promise in the package but not enough holding it together. He worries the program lacks coherence.

“I’m concerned that it doesn’t fit with the larger climate strategy. I’m concerned that our agencies and governing bodies are not prepared to do this fairly nor well. And it might in fact kill innovation,” he told The Saturday Paper.

“I should probably be unreservedly optimistic, but I think one should be wary and cautious and loud to make sure that we hold the government to doing this well, instead of doing it forward.”

Griffith fears Australia may try to compete against China on the things it does well and that is a “losing game for everyone”.

“The government seems to be doing this backwards,” he said. “So, the Future Made in Australia, by the time you’re building whatever factories amount from that, we’ve lost five or 10 years of emission reductions, so it happens late in the game. We need to do it, but it shouldn’t be part of the future.”

According to Kos Samaras, a pollster and former Labor strategist, the key to Future Made in Australia will be positioning it as a transition for local jobs and businesses.

“It’s something that they can pitch to very significant numbers of Australians who feel like our governments don’t have a long-term plan for the country. And this policy, you know, pitches that sort of employment, industry climate change narrative in a really nice space. But again, it is all in the sell!”

In other words, it is about jobs and it offers hope.

“They need to run this like it’s an election campaign and run it for 12 months, without pause,” Samaras told The Saturday Paper. “They need to run this consistently as a narrative now in terms of ‘this is their vision for the country’. And if they pull it off, it could be quite a significant coup, politically, if they pull it off.

“The question is whether they actually are able to pull it off, because the one weakness the government has had is its ability to stay on a narrative for longer than three days.”

It will be a sell inside parliament, where legislation is needed to pass for the tax incentives. It will also be a sell outside, to the wider electorate and to industry.

Andrew Hughes suggests Labor must learn from the failed Voice to Parliament campaign and not leave Future Made in Australia rudderless. He suggests they appoint a minister or assistant minister who reports directly to the prime minister.

He warns the new vision could be too aspirational and its outcomes too far in the future, so it will need to be anchored by putting someone in charge.

“The reason why ‘No’ got up was they had someone who was a clear leader on that messaging and that was Senator [Jacinta Nampijinpa] Price. And she did so well,” Hughes said.

“Let’s say they get a minister in charge. Let’s say it’s a young charismatic person. Andrew Charlton is a person which springs to mind pretty quickly because he’s got the ability in business and he’s an up-and-comer.

“Now we’re talking hope.”

Albanese believes he is on a winner, casting anyone not backing it as “not backing Australian jobs and not backing Australian industry”.

The future beckons, but the past shows everyone in Parliament House has their own agenda.