Australia’s Inflation Reduction Act

TL/DR –

Australia’s Labor Party, led by Prime Minister Anthony Albanese, is planning to introduce a green industrial policy aimed at aligning the government with national interests and sovereignty. The Future Made in Australia Act will likely focus on improving the green technology and energy sectors, supporting domestic manufacturing, and investing in hydrogen, solar and critical minerals industries. Despite the country’s continued reliance on coal for energy and its status as the world’s second largest exporter of coal, Albanese has been promoting a vision of Australia as a “renewable energy superpower”.

Australian Labor Party’s Green Industrial Policy Initiative

Details of the Future Made in Australia Act

The Australian Labor Party is set to introduce a green industrial policy. Prime Minister, Anthony Albanese, aims to align his government with a “new and widespread willingness to make economic interventions,” through an approach similar to the Inflation Reduction Act. Details of the upcoming Future Made in Australia Act are scant, but it’s expected to boost the green technology and energy sectors and support domestic manufacturing. Investments into the hydrogen, solar, and critical minerals industries are also expected.

Australia’s Energy Transition

Australia’s Prime Minister has been promoting his vision of the country becoming a “renewable energy superpower.” The standing reliance on coal makes this a significant statement. According to the 2023 energy update, 47% of the country’s power still comes from coal, marking a substantial reduction from 84% at the turn of the millennium. Additionally, Australia remains the second-largest exporter of coal, trailing only Indonesia.

Changing Global Consensus on Industrial Policy

The shift in Canberra reflects the changing global consensus on industrial policy towards large-scale interventions. Decades of small government, low taxes, lax regulation, open markets, and a casualized workforce are giving way to state-led restructuring of markets and incentivizing certain behaviors. Governments are now endorsing projects and targeting subsidies to “crowd in” private money. This approach has seen success in the US, with every $1 of public investment prompting nearly $5.50 in private sector spending.

Global Race for Capital

As Europe responds to the Inflation Reduction Act with its Green Deal measures, and China continues its government-led capitalism, countries that do not act risk falling behind in the global race for capital. According to recent report by the Aldersgate group, Biden’s policies initiated the “largest redeployment of international capital since the 2008 financial crisis.” The UK government’s resistance to follow suit leaves it increasingly isolated in the net-zero investment competition.

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