Agree or disagree?

Whether you agree or disagree with the proposed Future Made in Australia Act, it has given the Prime Minister a fast, and much-needed change in narrative.  

Two years into the nominal three-year term, the Prime Minister desperately needs a boost. The Prime Minister’s net approval rating is in negative territory and the polls have the ALP ahead by the smallest of margins.   

The Voice, cost-of-living, housing, interest rates, a confused narrative around the energy transition, and issues regarding migration – have worried Australians. As a result, the Prime Minister has been fighting against negative news for a long time. The FMAA has already changed that.

The FMAA will be introduced in coming months, bringing together new and existing initiatives aimed at boosting investment and creating jobs in sectors like renewables, infrastructure, and advanced manufacturing. In part, it is an admission that the National Reconstruction Fund has been slow off the mark and has not delivered the headline wins the Government had hoped for.  

Even under the still conceptual FMAA, the Prime Minister has gained enormous traction with announcements in the last month through provisionally offering investment and loans:

• $1 billion investment into solar panel manufacturing in New South Wales.
• $400 million to deliver Australia’s first high-purity alumina processing facility in Queensland.
• $185 million to fast-track the development of a Graphite Project in South Australia. 
• $1 billion (with the Queensland Government) to build the world’s first fault tolerant quantum computer in Brisbane.

These are big, exciting announcements, and we can definitely expect to see more being rolled out as we draw closer to the election. 

Fitting within the Prime Minister and Treasurer’s ideology of governments playing a greater role as an active participant and shaper of markets, the FMAA approach is Australia’s scaled down version of US President Joe Biden’s Inflation Reduction Act. 

So, agree or disagree?  Supporters and detractors were fast to jump on the announcement.  

Government agencies and funded bodies, unions, peak industry groups covering manufacturing and renewables are all to be supportive – at least conditionally so.  And of course, those businesses who would be fortunate enough to receive government support will be very happy.  If Government actually backs a winner, then there will be an upside for the economy, communities, and taxpayers. 

On the flip side, there has been a conga-line of economists and commentators critical of Government’s role and ability to pick winners, to deliver taxpayer value and provide an ROI for the economy. Others are decrying a return to industry protectionism. Many remember Victoria in the 1990’s with the Pyramid Building Society debacle (costing Victorian taxpayers $0.9 billion) and the failed State Bank of Victoria’s merchant arm, Tricontinental ($2.7 billion losses).  

Productivity Commission chair, Danielle Wood, says that without a well-defined exit strategy, the Future Made in Australia Act risks creating a class of businesses forever reliant on subsidies. Some of the Federal cross-benchers are concerned about transparency and rigour behind the decisions being made, and equity in terms of ability to access these programs. 

Much of the Prime Minister’s proposed FMAA has sound policy merit, e.g., rebuilding supply chains, strengthening sovereign industry and defence capability, encouraging emerging industries, and pushing towards a lower carbon economy. 

But industry policy is always fraught with complexity and challenges. History has no end of examples, around the world, of well-intended industry policy failing and costing taxpayers dearly.   

Twelve months out from an election, the Prime Minister will need to address these concerns if he wants to see the positive, exciting narrative continue.