Renewable energy the focal point of Australian federal budget

Australia’s energy transition proved to be the focal point of last week’s budget, with the federal government announcing AU$1.7 billion (US$1.1 billion) towards the new Future Made in Australia Innovation Fund. Administered by the Australian Renewable Energy Agency, the new fund is intended to support the development of renewable hydrogen, low carbon liquid fuels and clean energy technology manufacturing.

In addition, the government said it would put AU$6.7 billion towards a new ‘hydrogen production tax incentive’, over the next decade. The new initiative will provide a production incentive worth AU$2 per kilogram of renewable hydrogen produced and is expected to speed up the commercialisation of Australia’s pipeline of hydrogen projects.

The government also announced a further AU$1 billion towards the construction of housing in well-located areas, and a further AU$423.1 million over the next five years to support the provision of social housing and homelessness services via its existing National Agreement on Social Housing and Homelessness program. This will bring the total cost of the program to AU$9.3 billion. Alongside the funding provided to the construction industry in the budget – which includes AU$88.8 million towards the delivery of 20,000 new fee‑free courses and pre‑apprenticeships relevant to the construction sector – the new housing initiatives are part of the federal government’s plan to build 1.2 million homes by 2029.

By comparison, the federal government’s allocation of funds toward new infrastructure projects was less significant. It did, however, announce AU$2.95 billion towards rail and light rail upgrades in the Australian Capital Territory, Western Australia and Queensland.

Mark Waddell, a construction law expert at Pinsent Masons, welcomed the budget’s focus on renewable energy, social housing and defence – with the latter set to benefit from a further AU$50.3 billion being invested, over the next 10 years, in the implementation of the 2024 National Defence Strategy - but noted the lesser focus on new infrastructure projects.

“While those sectors which have been deservedly and predictably singled out - notably construction of social housing, energy transition and defence – have benefited from the budget, there is not a lot on offer for new infrastructure projects,” Waddell said. “This is unsurprising given fiscal constraints, but also slightly disappointing.”

Earlier this month, the Victorian state budget confirmed a significant reduction in infrastructure spending – from AU$24 billion to AU$15.6 billion – over the next four years, and cast doubt over the state’s project pipeline and procurement timelines.