Manufacturing News

Federal Budget redirects industry grant funding

Federal Budget redirects industry grant funding to the NRF

The manufacturing industry has reacted to the Federal Budget, suggesting the right type of support must be given for the government’s reallocation of funds to bear fruit.

Off the back of Scott Morrison’s Modern Manufacturing Strategy, Tuesday night’s budget announced a commitment of $15 billion over seven years from 2023-24 to establish a National Reconstruction Fund (NRF).

RSM Australia‘s budget analysis explains funds will be delivered under the expectation of receiving a return to cover borrowing costs – that is, it will be provided in the form of loans, guarantees and equity.

Jessica Olivier, RSM Australia Manufacturing National Leader, saw the Budget’s investment in key national priority sectors and a reconstruction fund as a winning strategy.

“New, targeted manufacturing initiatives will help support, diversify and transform Australian industry,” she said.

“However, the redirection of $303.7m funding previously committed to the Modern Manufacturing Initiative and Modern Manufacturing Fund may significantly disadvantage manufacturers unless such support is appropriately redirected and distributed.”

The priority areas of the NRF are resources, agriculture, forestry, and fisheries sectors; transport; medical science; renewables and low emission technologies; defence; and enabling capabilities.

“Manufacturers will welcome the commitment of $135.5m to support Australian industry to develop domestic manufacturing capabilities and upskill the manufacturing workforce,” Olivier explained. “It’s also notable that there were no Budget announcements in relation to the R&D Tax Incentive which is positive news for current and future beneficiaries of the program.”

“The significant increase in skilled visas under the Albanese government will also hopefully help with the labour shortage currently impacting many manufacturing businesses.”

RSM detailed the announced support for the defence industry, with new manufacturing measures to provide $37.3 million over three years from 2022–23 to the Department of Defence to support the development of defence and fuel manufacturing industries.

“These measures include supporting the construction of the North Queensland Simulation Park in Townsville to support the development and growth of the defence industry in the region as well as supporting the development of sovereign capacity in renewable fuel manufacturing, particularly for the Australian Defence Force.”

Businesses currently eligible for the government’s R&D Tax Incentive have come out as winners according to the financial services firm, with key measures including:

  • $141.1m over ten years to support carbon capture technologies.
  • $4.8m over four years to support the development of Australian quantum technologies.Industry-specific measures
  • $204.8m over five years to support industry training and R&D to improve innovation and assist with Australia’s timber industry.
  • $118.9m over four years for the Trailblazer Universities Program to support select regional universities to boost R&D.
  • $5.8 over five years to support women in science, technology, engineering, and maths (STEM).

Additionally, a number of other manufacturing measures have been proposed as part of the 2022-23 Budget to assist in Australia’s general manufacturing capabilities, including $49.5 million over four years from 2022–23 to increase the security of the diesel exhaust fluid (DEF) market in Australia.

RSM detailed in its report, “this relates to $45m over four years from 2022–23 to secure a stockpile of five weeks of emergency supply of technical grade urea, a key ingredient for DEF, and to create a grant program for small-scale DEF manufacturing projects.”

Nicola Purser, research and development partner at BDO Australia said, “The delivery of the NRF via loans, guarantees and equity is a marked different to the previous government’s strategy, which saw the delivery of funds via generous grant programs upon successful applicants meeting pre-stipulated milestones relating to increased employment and other project objectives.

“Given the current economic climate, such fund delivery is a good compromise to competitive grants and will hopefully continue to promote increased employment and regional development, while developing sovereign capability.”

She added that a point of  concern is that the funds may start flowing after the NRF is established over the next two years.

“Overall, we’re pleased to see the new government is continuing to prioritise the reinforcement of the local industry, but it is disappointing to see the patent box regime has not been reintroduced,” Purser explained

“Without this, the attractiveness of commercialising intellectual property in Australia is lessened and it is likely the associated flow-on benefits, such as further investment and development activities, will instead be reaped by other jurisdictions that provide more generous incentives.”

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