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Australia to Mimic Biden’s Inflation Reduction Act

Climate change initiatives to be the focus of direct federal government investment and incentives.

The Australian Labor government will mimic moves by fellow democracies to intervene directly in their economies to create “sovereign” green energy supply chains and local manufacturing.

Prime Minister Anthony Albanese is set to unveil the Future Made in Australia Act, which will include taxpayer-backed incentives to subsidise advanced manufacturing and clean energy industries in the country.

“We need to be clear-eyed about the economic realities of this decade, recognising that the game has changed—and the role of government needs to evolve. Government needs to be more strategic, more sophisticated, and a more constructive contributor,” he will say at the Queensland Media Club in Brisbane on April 11.

“We need to be willing to break with old orthodoxies and pull new levers to advance the national interest,” he will say, in a justification for the government to play a larger role in the economy.

The prime minister will cite moves by the United States with its Inflation Reduction Act and its CHIPS Act, the European Union’s European Economic Security Strategy, Japan’s Economic Security Promotion Act, and South Korea’s National Security Strategy.

All involve government investment, tax breaks, and incentives targeting critical industries.

Moves to start developing Australia’s local advanced manufacturing of high-tech products began under the Morrison government.

PM Says It’s Not About Ideology

This shift also signals an attempt to veer away from traditional ideas of the classical liberal or free market economy, where authorities try to play a limited role in the economy and allow private enterprises (small and large businesses) to drive growth, and determine what industries and technologies are worth investing in.

Yet the prime minister will also play down this angle, saying the move is not about “ideology, it’s about opportunity—and urgency.”

Mr. Albanese said this last decade, namely due to the climate change push, there has been a “fundamental shift” to the way nations are “structuring their economies.”

“A change every bit as significant as the industrial revolution or the information revolution—and more rapid and wide-ranging than both,” he will say.

Much like the Biden administration, the Albanese government will back development in the renewable energy sector, including hydrogen, green metals, solar power, and emerging renewable sources, according to AAP.

“This is about giving Australian businesses, Australian communities, and the Australian people every possible opportunity to benefit from this moment,” he will say.

The announcement comes a month out from the federal budget, and Shadow Treasurer Angus Taylor has said the program will do little to bring down living costs.

“You don’t address a cost of living crisis by throwing hard-earned taxpayers money around,” he told Nine’s Today program.

“And that’s exactly what Albanese is proposing here.”

China and Green Energy

Initially, the announcement will likely address two goals: distance Australian manufacturing from Chinese supply chains, and give a further boost to the domestic renewable energy sector.

Chinese companies currently dominate supply chains in the renewable sector, with China controlling over 70 percent of the world’s critical mineral production—an important ingredient in wind turbine, battery, and solar panel manufacturing.

At the same time, moves to push taxpayer funds into renewables have been criticised by U.S. commentators.

Jonathan Lesser, president of Continental Economics, said Biden’s Inflation Reduction Act offered billions in incentives to renewable companies, instead of allowing the private market to work out how to make the industry viable.

“The single largest subsidy is the federal investment tax credit (ITC),” Mr. Lesser wrote in The Epoch Times.

“Most wind and solar projects will be able to claim a minimum 30 percent ITC, plus be eligible for an additional 10 percent credit if the projects rely on domestic manufacturing for components.

“The greater the costs, the larger the subsidies. Although wind and solar proponents still claim that costs are falling, the reality is the opposite. Offshore wind developers, especially, are clamoring to renegotiate contracts they signed previously.”

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