2024-25 Federal Budget Wrap
The 2024-25 Federal Budget, announced by Treasurer Jim Chalmers on Tuesday 14 May, was another step forward for sustainable finance policy. It also announced $27.7bn in support for investment in priority sectors to enable Australia’s renewable energy superpower vision – particularly critical minerals, renewable hydrogen and battery supply chains – under the Future Made in Australia package.
This ASFI Budget Wrap unpacks the announcements to give you the highlights (roses), lowlights (thorns), and rosebuds (opportunities) for accelerating sustainable finance and investment in Australia and the region.
Roses
Future Made in Australia
The standout announcement in the 2024-25 budget was the Government’s $27.7bn package over 10 years to “help Australia succeed and remain an indispensable part of the global economy as the world undergoes the biggest transformation since the industrial revolution”. This includes $19.7bn for priority industries, including renewable hydrogen, green metals, low carbon liquid fuels, and solar and battery supply chains.
The package responds to major industrial policies in key overseas markets (notably the US and EU). It also seeks to address many of the concerns ASFI members have identified in policy engagement over the past year, such as the need for faster permitting and approvals, better coordination between the Federal and State and Territory governments, continued progress on Australia’s sustainable finance agenda, and streamlining how investors interact with Government.
Notable aspects of the package include:
A Critical Minerals Production Tax Incentive ($7bn)
A Hydrogen Production Tax Incentive ($6.7bn) and more funding for the Hydrogen Headstart program ($1.3bn)
Establishment of an investor ‘single front door’ to streamline approvals, funding and incentives for major projects ($54.7m) (see below)
Funding to strengthen environmental and cultural heritage approval processes, particularly for renewable energy, transmission and critical minerals projects, and streamline Australia’s foreign investment framework ($182.7m)
A $1.7b Innovation Fund administered by ARENA to invest in early stage renewable energy technologies
A Critical Minerals Facility ($655m) to be delivered through Export Finance Australia
Funding to support battery manufacturing ($549m)
Sustainable finance agenda
With climate disclosure legislation before Parliament and taxonomy development well underway, the Government has confirmed next steps for its sustainable finance agenda. Priorities in 2024 are the development of a sustainability product labelling scheme and corporate transition plan guidance.
The Budget also allocates $10m additional funding for ASIC to undertake greenwashing action, and $5.3m for Treasury, ASIC and APRA to support sustainable finance including green bond issuances, improving data, and international engagement.
ASFI welcomes confirmation of funding to expand the development of Australia’s sustainable finance taxonomy to cover the agriculture sector. This will enable the completion of a 6-sector taxonomy for climate mitigation by end 2024. ASFI and others have advocated for the taxonomy to be extended to climate adaptation which would help channel capital towards investments that build Australia’s resilience to climate change. This proposal was not taken up in this year’s budget.
International engagement including COP31
The Budget showed signs that Australia is getting more serious about its leadership role on climate and sustainable finance in the region. The Budget allocates $76m to support Australia’s engagement in international climate and energy transition issues, including through the International Energy Agency, G20 and United Nations Framework Convention on Climate Change, to bolster trade opportunities and enhance security relationships with key partners.
This funding will also support Australia’s bid to co-host the 31st Conference of the Parties (COP31) in partnership with the Pacific, and undertake initial planning in the event of a successful bid. More will be needed to execute a successful COP31, but this is a sign that the Government is leaning in behind the bid (Turkey remains the other contender to host this global event in 2026).
There is also $14m allocated to work with trade partners to negotiate benchmarks for trade in high quality critical minerals and support global rules on unfair trade practices. This will include identifying opportunities to drive greater supply chain transparency and better market recognition of high ESG standards in the critical minerals sector. ASFI welcomes this development and sees a strong opportunity to leverage the Australian Taxonomy’s world-first criteria for sustainable mining.
Affordable Housing Bond Aggregator
The Budget has a range of measures aimed at easing Australia’s housing crisis. This includes increasing the cap on the Government’s guarantee of Housing Australia’s liabilities from $2.5b to $10b, with an associated increase in the line of credit for Affordable Housing Bond Aggregator from $3b to $4b.
Thorns
First Nations
Following the outcome of the referendum on The Voice, we had hoped to see the Government progress a First Nations agenda, especially to ensure that First Nations communities are partners in Australia’s transition to net zero and nature positive. There is little in the budget by way of new initiatives or funding for First Nations communities. Exceptions include funding for the Future Drought Fund to partner with First Nations communities to support management of drought and climate risks ($15m) and an extension to the First Nations Renewable Hydrogen Engagement Fund (funding amount not disclosed).
The Government’s National Interest Framework, which will guide funding and programs under the Future Made in Australia package, includes community benefit principles but does not make specific mention of First Nations communities. It will be important to expand community benefit considerations beyond workforce transition to include the specific considerations of First Nations.
Household electrification and energy performance
Reducing energy consumption in households is a critical step to meet Australia’s emissions targets, and an important lever to close Australia’s projected gas supply gap. Last year’s budget saw some strong early steps to support household energy upgrades, including through $1bn for the CEFC’s Household Energy Upgrades Fund. This budget reflects the lack of ambition set out in the Government’s National Energy Performance Strategy and fails to capitalise on the opportunities to lower energy bills, improve living conditions, and tackle emissions.
Rosebuds
Investment Front Door
The Future Made in Australia package includes establishment of a new ‘front door’ for investors with major, transformational investment proposals. The Government says the front door will:
Provide a single point of contact for investors and companies with major investment proposals;
Deliver a joined-up approach to investment attraction and facilitation;
Identify priority projects related to the Government’s Future Made in Australia agenda;
Support accelerated and coordinated approvals decisions, and;
Connect investors with the Government’s specialist investment vehicles.
The Government will consult with the finance sector on the design and institutional arrangements for the Front Door, including: where this new centralised service will be housed, its name, core functions, and operations. ASFI anticipates that consultation will take place through the Treasurer’s Investor Roundtable working groups which various ASFI members are part of.
Jim Chalmers said, “through this process, we will also seek to strengthen collaboration across the Government’s special investment vehicles, as well as the Future Fund, to share market insights and find opportunities to crowd in new private investment”.
We welcome this move but note that effective design and implementation is critical, and dependent on public sector capability. We look forward to supporting ASFI members and the Government in this initiative.
Nature Positive Plan implementation
While it is encouraging that the Government is moving ahead with implementation of its Nature Positive Plan, and allocating an additional $40.9m to do so, the majority of this funding is to support the establishment, administration and uptake of the Nature Repair Market. There is still significant uncertainty about how the market will work, its credibility, and where the drivers and sources of demand will come from. Encouragingly, previously announced funding to establish Environment Protection Australia and Environment Information Australia has been maintained. Funding is also reserved for nature-related reporting and further legislative reform, with the EPBC Act reforms postponed until an unspecified date.
Sector Decarbonisation Plans
We expect the Future Made in Australia package to form important parts of the Government’s sector decarbonisation plans, particularly for mining and industry. The Budget also announced $63m to support emissions reductions in the agriculture and land sector, and $48m to improve the integrity of the Australian Carbon Credit Unit scheme. ASFI looks forward to more detail on the sector plans as they are developed over the course of 2024.