The federal government is celebrating the passage of its manufacturing investment scheme, the National Reconstruction Fund, through the Senate after it landed the support of the crossbench.
The $15 billion fund is aimed at broadening Australia’s domestic industrial base and reducing the nation’s dependence on imports.
It passed the Senate on Tuesday night after many hours of debate.
The Greens agreed to back the legislation after they struck a deal with the government earlier this month to include amendments that explicitly rule out using the fund to invest in coal, gas and native forest logging.
On Tuesday independent senators David Pocock and Lidia Thorpe as well as the two senators from the Jacqui Lambie Network also agreed to back the Fund.
So, what is the fund?
A significant election commitment, the fund has been designed to invest in renewables and low emissions technologies; medical science; transport; value-add in agriculture, forestry and fisheries; value-add in resources; defence capability; and enabling capabilities.
That investment can be in the form of loans, equity and guarantees.
National Reconstruction Fund Corporation’s independent board has been given the responsibility for deciding which projects receive funding.
An initial $5 billion has been made available from the commencement of the fund with the remaining $10 billion to be made available in instalments by July 2, 2029.
Revenue generated through the fund’s investments would then be reinvested to support new projects with the board to decide which projects receive funding support.
It is a co-investment scheme modelled on the Clean Energy Finance Corporation, which means the government would join with other private investors to support domestic manufacturing projects.
Who is it meant to help?
The government has framed the fund as a post pandemic measure to sure up Australia’s supply chain and reduce vulnerability to global pressures.
The Bill’s Explanatory Memorandum outlined the goal of the fund as to “invest to support, diversify and transform Australia’s industry and economy to secure future prosperity and drive sustainable growth”.
The $15 billion pool of funding was designed to attract private investment to make it easier to commercialise innovation and technology, with a focus on diversifying regional economies.
Finance would be directed to value-add projects which broaden the nation’s manufacturing capability and build on or use resources already mined or created here.
The government has said the investment would drive productivity as well as create secure, high value and skilled jobs.
Industry Minister Ed Husic said new and emerging firms would be prioritised for funding.
“We want new and emerging firms that sometimes find it hard to get that investment support,” Mr Husic said.
“The reconstruction firm is there to de-risk for other investors.
“We’ve seen so many great ideas that have left our shores only for us to import them back as product that somebody else has manufactured.
“There’ll be some of those established firms that may be embarking on new technology and commercialising an idea and we want to make sure the investment is there, that’s it’s not offshored and someone else develops it.”
Australia has ranked last in the OECD for manufacturing self-sufficiency, this fund was aimed at going some way to address that.
What changed to win crossbench support?
Almost three weeks after the bill passed the lower house the Senate voted to focus sitting hours on the National Reconstruction Fund.
Several hours of debate later, it passed 34 votes to 28, with amendments.
Those changes related to the size, experience and length of terms of members appointed to the independent board.
The first review of the fund has also be brought forward to 2026.
Those tweaks won the support of members of the Senate crossbench.
Is everyone on board?
In short, no.
While the government was able to secure the support of the Greens and several members of the Senate crossbench the Coalition opposed the bill.
Deputy Leader of the Opposition and Shadow Industry Minister Sussan Ley said the fund was bad for taxpayers, business, manufacturers and the economy and could be inflationary.
“Labor’s National Reconstruction Fund fails to address the issues our manufacturers need the Government to show leadership on: high energy prices, disrupted supply chains and acute labour shortages,” Ms Ley said.
“The government is once again rushing through flawed legislation and trying to side-step Parliamentary scrutiny.
“This is not an appropriate way to establish a $15 billion government investment body.
“The time it will take to establish the NRF will cumulatively cost our manufacturers some two years before they start seeing any government support for their work.”
The Australian Chamber of Commerce and Industry said it supported the objective of the legislation but called for amendments to clearly outline priority investment areas, and for the project assessment process to be made public.
A Senate Economics Legislation Committee report, released this month called for the space sector to be included in the priority investment list.
Last week Mr Husic said that remained an option.
“I can assure you that the National Reconstruction Fund will be open to support investment in space activity, particularly through the priority area of enabling capabilities but could easily go into a lot of other areas as well,” he said.