Opinion
Coalition slams the billionaires’ budget as miners cheer
Elizabeth Knight
Business columnistThere was always the risk that a centrepiece of the federal government’s budget, to deliver incentives for the processing of critical minerals, would trip on the fact that billionaires and some of our largest companies would be beneficiaries.
That doesn’t make it bad policy, it just leaves it vulnerable to criticism and plays into a populist view that the rich are getting handouts better spent on needier members of the community.
There is an even noisier clickbait response from some circles that the Andrew Forrests and Gina Rineharts of the world are getting a $300 cut on their power bills. Those howls of protest would be better directed at asking why millions of Australians not suffering a cost-of-living crisis are getting this handout.
But it was the tax credits for the downstream processing of critical minerals that were a gimme for the opposition, which predictably shouted that it wouldn’t support “billions of dollars in handouts to billionaires”.
Sure, the likes of Forrest, Rinehart and fellow billionaire Chris Ellison’s companies will receive some indirect boost to mine and process critical minerals or develop green hydrogen.
Companies including BHP and Wesfarmers will also be assisted by the government’s desire to have Australia create a global producer and processor of the critical minerals needed to decarbonise the world. The fact that these companies or individuals with track records in making money are already investing in critical minerals should provide some comfort that the government is also picking winners.
It is also important to note that many of these mining companies are not engaged in downstream processing activities, but fair to say that they will receive some, if you like, spill-back benefit if there is additional demand for the minerals they mine.
The government’s aim appears to be pushing the likes of Rinehart and Ellison’s mineral resources to move production further downstream.
The more salient criticism – made by economic rationalists – is that Australia shouldn’t be looking to compete with low-cost offshore manufacturers or support infant industries that will ultimately need perpetual backing.
The government has a different spin.
Andrew Forrest is delighted with the federal budget.
As with so many mineral resources that fuelled the industrial economy over the past century, Australia is endowed with those that will fuel future generations – not just wind and sun but critical minerals for the crucial manufacturing of batteries.
The government is seeking to avoid the old “Australian quarry” mindset but wants to encourage companies to process minerals here. It is attempting the onerous task of pushing for downstream processing and manufacturing despite being at a serious cost disadvantage to China, which has cheap labour, or the US and Europe, which have offered mammoth incentives to companies to invest in the green transformation.
The Australian government’s budget move is dwarfed in size and is late to the game compared with those in other parts of the world.
Miners of critical minerals recognise the budget move as a positive but suggest that the devil is in the detail, particularly which processing stage will attract the government’s incentives.
Whether it is enough to rescue BHP’s struggling nickel business is a question that still hangs in the air. BHP is still working out the economics of its nickel mines, smelter and refinery in WA, and has previously warned that government subsidies may not be enough to offset the impact of cheap supplies from Indonesia flooding the market.
For those like Wesfarmers, which is in the throes of building its third lithium hydroxide refinery and a major winner from Tuesday’s budget, it is unsurprisingly exciting. Chief executive Rob Scott described the support as “smart, targeted use of the tax system to solve big problems, leverage our competitive advantages and enhance Australia’s prosperity”.
And for Forrest, whose Fortescue has been championing green hydrogen for a few years now, the budget prompted unbridled euphoria and a large dollop of praise.
Forrest declared: “Prime Minister Albanese and his government had a one-shot-in-the-barrel opportunity to ensure Australia fulfilled its potential to become the Saudi Arabia of energy production. Through the $2 per kilo tax credit for green hydrogen production, the government has seized this opportunity for the Australian people.”
Once, Australia was considered as riding on the sheep’s back. Then the resources sector kept the steel in Australia’s economic spine. Kept simple, this incentive will give much greater and longer-term benefits to our economy.
Forrest will be a direct and arguably the largest beneficiary, as green hydrogen production will attract a tax incentive of $2 a kilogram from 2027, for projects that reach final investment approval by then. And there will be an additional $1.3 billion for the already established Hydrogen Headstart program.
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