Industry to face "strict tests" for public funding to incentivise green energy, Jim Chalmers says

15 04 2024 | 14:38Josh Butler

Tax breaks and subsidies may be offered to industry as part of the government’s yet-to-be-detailed Future Made in Australia plan - but Jim Chalmers says there will be “strict tests” on public funding for the green energy strategy.

The treasurer says there must be “generational change” in Australia to match similar major green economy programs being undertaken by other nations including the US.

“We’re looking for where we can make our businesses more competitive, build the capacity of our people and our regions,” Chalmers told the ABC’s Insiders program on Sunday.

“Become part of that net‑zero global economy, turbocharge the private sector, get value for money.”

Anthony Albanese last week signalled a dramatic shift to directly supporting Australian industry through an interventionist green industry policy similar to the US president Joe Biden’s Inflation Reduction Act. Albanese promised direct government support to speed up the energy transition and stem the flow of money and ideas to countries offering investment incentives.

The speech to the Queensland Media Club did not detail exactly what the plan would involve, although concessions, grants or underwriting of projects were all expected.

Chalmers on Sunday sketched out some more detail of what the plan - to be unveiled more fully in the lead-up to the 14 May budget - could entail.

Asked by the Insiders host, David Speers, about tax changes, Chalmers said a broad company tax cut was not on the agenda but indicated more targeted tax concessions were likely.

“That’s obviously one of the tools that we are considering but not the only one,” he said of tax breaks for certain industries. “What you’ll see on budget night is a broad and comprehensive strategy of which incentives for industry is a part but not the only part.

“We are prepared to consider the tax system as one of a whole range of levers that may be useful as we pursue a Future Made in Australia and make ourselves that indispensable part of the global net‑zero economy … The tax system may play a part, public investment will play a part, but overwhelmingly what we’re trying to do here is incentivise private investment, not replace it.”

Asked if there would be a focus more on “tax incentives than direct handouts”, Chalmers said there would be “some combination of all of the levers available to government”.

He stressed there would be "crigorous and robust tests" on any funding, saying it "isn't some kind of free-for-all of public funds".

“The heavy lifting will still be overwhelmingly done by the private sector but there’s an important role to play by governments and by public investment as well,” he said.

“The world is changing and that pace of change is accelerating and we want a slice of the action for our workers and our businesses and our investors.”

The Productivity Commission chair, Danielle Wood, last week raised concerns that such a program could potentially divert resources and cash away from more productive areas of the economy.

Chalmers said she had made “important but obvious” points about getting value for money from any program, stressing that the strategy would have “strict frameworks” and “exit strategies” in consideration of broader economic impacts.