Allegra Spender (Wentworth, Independent) Share this | Hansard source

When we talk about climate change, we often focus on the consequences of inaction. We talk about the floods and fires, the extreme heat and the destructive storms, and the existential threat that a warming planet poses to our society. But, alongside this environmental imperative, the need for urgent climate action presents a significant economic opportunity. It's an opportunity that people in my community want to seize, that green tech entrepreneurs want to talk to me about and that is the focus of the bills before the House today: the Future Made in Australia Bill 2024 and the Future Made in Australia (Omnibus Amendments No. 1) Bill 2024. As the world weans itself off fossil fuels, Australia is uniquely positioned to take advantage of the clean energy transition. We have some of the best wind and solar resources in the world, we have many of the critical minerals that are key to the transition, and we have the skilled labour and stable institutional environment needed to make the most of these national advantages.

The size of the prize is significant. In the Sunshot report, the BCA, the ACF, the ACTU and the WWF estimated that Australia could create 395,000 new jobs by 2040 in clean energy exports, by selling commodities like green hydrogen or renewable ammonia, by processing critical minerals and higher-value metals, and by providing clean energy services to the world. Other analysis suggests the opportunity is even greater. The Superpower Institute estimate the annual value of green iron could be $295 billion, around three times the current value of our iron ore exports, and green aluminium could be worth a further $60 billion, around six times the current value of our bauxite and alumina exports combined.

It is vital that we seize these opportunities, not least because the export markets that have served us in the past will decline in the future. In 2022, two of Australia's top three exports were coal and gas, fossil fuels that are being phased out. Together, more than 97 per cent of our trade goes to partners with net-zero targets. That means a failure to shift out of fossil fuels and into the industries of the future would not only be a missed opportunity; it would also leave our economy dependent on industries in decline.

But this transition won't happen by accident. And whilst I'm not typically an advocate of intervention—and frankly, some of the government intervention mentioned by previous speakers makes me uncomfortable—in this case there are three reasons I believe that the state has a role to play. The first is that we don't have a price on carbon. The destruction of a carbon price by Tony Abbott's coalition government has meant that the cost of fossil fuel pollution—what it does to our environment—is not factored into the cost faced by producers or reflected in the price paid by consumers. The result of this unpriced negative externality means that low-emissions manufacturing processors face a significant green premium and can struggle to compete. An economy-wide carbon price is the best, cheapest and most effective way to address this market distortion. But a lack of courage from both the major parties means we are in the world of second-best policies, and financial support for green industries is necessary.

The second reason for intervention is that markets don't provide incentives for the early research and in-development stages of new technologies, and this is an appropriate area for government intervention, because early investors face high costs, low returns and the risk of free riding. And knowledge can be intangible, and there can be productivity spillovers that we do want to capture and foster in the early stages of technology development.

Thirdly, time is of the essence. We have only a couple of decades left to transform to a net zero economy, and the long life of many industrial assets means they are poorly suited to rapid change. Market forces alone won't deliver the pace of change we need to limit temperature rise to close to 1.5 degrees and avoid the most extreme impacts of global heating. Last year was the hottest year on record. This year temperatures are even higher. The clock is ticking.

Countries around the world recognise the need for action. In the United States, the Inflation Reduction Act contains more than $500 billion worth of funding to accelerate America's transition to net zero. In the EU the Net-Zero Industry Act provides extensive support to build manufacturing capabilities, matching many of the IRA subsidies. And in Japan the government has unveiled the green transformation policy to support more than $1 trillion in public-private financing opportunity.

In a world that competes for capital resources and talent, these packages put our peers at a huge advantage. I have spoken to many of our best and brightest companies in this space and to bankers as well, and they tell me of those challenges, of how to keep the most innovative and exciting of our companies in Australia. This is a real concern to us right now, because without an appropriate response the programs will permanently tilt the scales of world trade in these critical areas away from Australia, consigning us to a future of fewer jobs and less prosperity. The global race is on, and we can't afford to be left behind.

So, there is need for action; I accept that. However, there are many—and I would put myself on the list—who are concerned that the government's and previous governments' mixed track record when it comes to industry policy makes them nervous about the risk of picking winners, about the degree of ministerial discretion provided for in this legislation, about rent seeking by vested interests and about how ill-defined phrases like 'economic security' can be used to justify every minister's pet project. I'm worried about those who advocate for this policy on the basis of trying to bring back to Australia parts of manufacturing that have been gone for many years. While people do miss those jobs, we need to recognise that Australia's openness to trade, our ability to be a small trading nation, has actually been the bedrock of our prosperity and frankly the bedrock of the great economic quality of life that Australian consumers face. Frankly, if we had retained all the industries that I know many people wish were still here, Australian consumers would be the ones paying more, and that does no good for Australian prosperity.

So, I am concerned that this legislation can be used to justify things that are not in the interest of Australian consumers. Several of the concerns I have raised have been articulated by the chair of the Productivity Commission, Danielle Wood. And decisions made by this government, including things like the investment in a US quantum computing firm when there were other domestic options available and where they still haven't made a clear case as to why this company was invested in first, make me nervous. There are concerns here, but it doesn't mean we should do nothing. It doesn't mean we should sit on our hands. It means that we need to get this right. We need to get the legislation right, we need to get the actions right and we need to get the guardrails right to make sure that this policy is effective in delivering what is needed, driven by market failures, but is not used as an opportunity for wasting money and for wasting taxpayer money.

It means that we need policy where government builds a portfolio of investments that is developed using arms-length expert advice with appropriate off ramps and using instruments where taxpayers share the benefit. It means that we need strong institutional guardrails that put a robust framework around decision-making, that provide transparency over where funds are invested and that ensure accountability for how money is spent. It means that we need an Australian response to the IRA that doesn't go toe to toe with the financial might of the USA but leverages the specific opportunities available to Australia in those critical areas.

This brings me to the bill before the House today. The bill creates the National Interest Framework to help assess sectors for support under Future Made in Australia. It sets out the community benefit principles to ensure investments deliver for the community, and it makes changes that ensure the EFA and ARENA can support this agenda. I support the intent of the legislation, and the submissions to the Senate inquiry show that there is broad support for this agenda from those in the environmental sectors, finance sectors and the business community, including the Clean Energy Council, the Investor Group on Climate Change, the Climate Council, Climate Energy Finance, the Superpower Institute, the Australian Conservation Foundation, the Australian Industry Group, the Australian Aluminium Council, the Business Council of Australia and many, many others. But the submissions also highlight that, as currently drafted, the bill fails to deliver the framework we need to effectively seize Australia's opportunity to become a clean energy superpower.

When it comes to industry policy, it's imperative that a robust and transparent framework is in place to ensure taxpayers get value for money. We can't afford to make the mistakes of the past, where money was wasted on bailing out failing industries that never had a chance of standing on their own two feet, which, frankly, only delivered higher prices for Australian consumers. That does not work. And so, with that in mind, I urge the government to consider six key changes.

First, sector assessments must be required before a sector can receive support. The bill is supposed to provide financial discipline around Future Made in Australia spending, but sector assessments are not currently required before a sector can receive support. The loophole needs to be closed so that there is appropriate discipline around government spending. The government must also publish the assessments it has conducted so far, including those which relate to announcements in the May budget.

Second, Treasury must consult with the Productivity Commission during these sector assessments. The independent Productivity Commission has vital expertise, experience and methodologies in this kind of analysis and a healthy degree of scepticism, which I appreciate. They are experts, and we should listen to them.

Third, the government should clarify that, under Future Made in Australia, the support is not just financial. I think this is really critical because, time and time again, businesses have said, 'It's not just about government handouts and money. We actually have to get the operating environment right,' and this is where I do agree with elements of what the coalition is saying in this space. We have to get the operating environment right as well as ensuring that, where there is market failure, we are providing the support from a financial point of view. Both of those are critical if we are going to move forward.

Fourth, existing policies must be considered in sector assessments so that we can ensure additionality in measures put forward under Future Made in Australia and avoid duplication.

Fifth, sector assessments must consider the Climate Change Authority's Sector Pathways Review, which is already undertaking detailed analysis of the technology and emission pathways that will best support our transition to net zero.

Sixth, it should be mandatory for sector assessments to be periodically reviewed so that taxpayer money is invested wisely on an ongoing basis. This would also help in building the off ramps in policy design, as has been recommended by the Productivity Commission.

While these six areas are my focus, I would like to acknowledge the importance of other amendments being pursued by the crossbench, which are focused, again, on stronger transparency and accountability provisions. These are things like accelerating the creation of a single front door for investors to help make sense of the plethora of government supports available across Future Made in Australia and programs like the NRF. These amendments from across the crossbench also try to ensure that the focus of Future Made in Australia is on supporting emissions reduction and net zero, rather than the broader and, frankly, much less well-defined notion of national or economic security. I believe there are issues of national and economic security. But those are, frankly, very broad areas where all sorts of issues can be hidden and popped away, and where money can be wasted. I think we need an absolutely robust indication of why a sector deserves support that cannot be provided by the market before we make these sorts of investments. It is clear, in relation to green technology and in other areas of technology, that the case still needs to be made and needs to be made clearly.

Taxpayer support under the economic security stream of this legislation is much more open to porkbarrelling and abuse, and less justified by the market failures I outlined previously. We therefore need much stronger guardrails around investments and much greater clarity around the objective the government is trying to achieve.

I'd like to finish by talking about community benefits. The bill sets out a set of principles which should be adhered to by firms awarded support under the Future Made in Australia plan. It has good intent, and similar provisions are considered under the IRA. It is important that taxpayer investments do deliver well-paid jobs, and that First Nations people benefit in these new industries. However, these principles need to be defined in a way that also provides policy certainty for business. I have concerns that, as it's currently drafted, this may not be the case. I'm suggesting that the government considers and engages further with people like the Clean Energy Council and the Australian Industry Group to ensure that they have the right guardrails in this case.

I also would like to talk about how perhaps the most significant community benefit will be through future tax revenues, which we hope these future industries will generate. The Future Made in Australia plan will provide significant tax credits to industries like critical minerals and green hydrogen. I support these areas for those startup pieces. However, when companies get this great support from taxpayers and then earn, in the future, supernormal profits—if they have high prices—I also think it is appropriate for the Australian consumer, who has paid for the tax breaks, to get some of the benefits. It's vital that we don't repeat the mistakes of the past, where gas and mineral exporters have generated billions of dollars in profits for foreign-owned corporations but have not delivered for Australian taxpayers. I again urge the government to look at more serious tax reform.

I'd like to finish by concluding that the government needs to undertake this work with other pieces that will make it possible for us to realise our superpower advantages, because this will not deliver that on its own. Specifically, regulation reform through the EPBC, industrial relations reform through these areas and also an agenda around reducing complexity and red tape for businesses are all critical elements of a future made in Australia as well.

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