Linkedin
Facebook
Email
more
AUTHOR
The Australian Government’s 2025-26 Federal Budget brings focus to the manufacturing sector, by addressing clean energy, innovation, and local production. These measures aim to make Australian manufacturing greener, more competitive, and future ready. Here’s what the Budget means for the industry.
A Green Future for Manufacturing
A major highlight of the Budget is the commitment to clean energy and green manufacturing, with $19.7 billion allocated over the next decade. This funding will support renewable hydrogen, green metals, and clean energy manufacturing, helping Australia reduce emissions and position itself as a leader in sustainable production. A key part of this initiative is the $2 billion expansion of the Clean Energy Finance Corporation, which is expected to leverage an additional $8 billion in private investment. The Industry Minister has emphasised that this Budget represents a turning point for Australian manufacturing, stating that the government is not just discussing change but actively funding it.
Driving Innovation with New Funding
To accelerate the transition to green technology, the government has introduced the Future Made in Australia Innovation Fund, worth $1.5 billion. This initiative is designed to enhance Australia’s role in the global push for cleaner industrial processes and strengthen its supply chains. Of this funding, $750 million will be directed toward green metals, $500 million will support clean energy technology manufacturing, and $250 million will be allocated for low-carbon liquid fuels. By investing in these areas, the government aims to drive technological advancements and create new opportunities for the manufacturing sector.
Tax Incentives for Growth
Manufacturers will also benefit from new tax incentives designed to encourage production in key industries. A $2 per kilogram incentive has been introduced for renewable hydrogen production, alongside a 10% incentive on processing and refining costs for critical minerals. Additionally, a $2 billion Green Aluminium Production Credit has been established to support sustainable aluminium production. These measures aim to improve the global competitiveness of Australian manufacturers while promoting environmentally friendly practices.
Support for Small and Medium Enterprises (SMEs)
The Budget also includes targeted support for small and medium enterprises (SMEs) through the Industry Growth Program. This program will provide advisory services and grants to SMEs, helping them commercialize innovative products and expand operations in high-priority sectors. By fostering growth in this segment, the government is ensuring that smaller manufacturers can participate in the broader transformation of the industry.
Workforce Reforms to Increase Flexibility
To create a more competitive labour market, the Budget introduces a ban on non-compete clauses for workers earning under $175,000 annually. This change is expected to increase worker mobility, encourage knowledge-sharing, and potentially drive wage growth in the manufacturing sector. By allowing skilled workers to transition more freely between employers, the government aims to foster a more dynamic and innovative workforce.
Encouraging Australians to Buy Local
Recognizing the importance of supporting domestic production, the government has allocated $20 million to the Buy Australian initiative. This funding is intended to promote Australian-made products and strengthen consumer demand for locally manufactured goods. By encouraging businesses and consumers to prioritize local products, this initiative seeks to reinforce the role of domestic manufacturing in the national economy.
Challenges and Considerations
While the Budget presents significant opportunities for the manufacturing sector, several challenges remain. The effectiveness of green manufacturing investments will depend on industry uptake and technological advancements. Global competition remains strong, requiring Australian manufacturers to innovate rapidly to maintain their market position. Additionally, workforce availability and skills shortages could limit the sector’s ability to scale up, making training and workforce development crucial components of long-term success.
Final Thoughts
The 2025-26 Federal Budget lays the groundwork for a greener, more innovative Australian manufacturing sector. By supporting clean energy, incentivizing production, and fostering local industry growth, the government is positioning Australia as a leader in sustainable manufacturing. However, the true impact of these measures will depend on how businesses adapt and how effectively funding is utilized in the years ahead.
FOR MORE INFORMATION
If you would like to learn more about the topics discussed in this article, please contact your local RSM office.
Sources:
Treasury Budget 2025–26 – Budget Overview:
https://budget.gov.au/2025-26/content/overview/index.htm
CEFC Clean Energy Investment expansion:
https://www.cefc.com.au/media/media-release/2025-budget-boosts-cefc-clean-energy-investment
Department of Industry, Science and Resources – Future Made in Australia Innovation Fund:
https://www.industry.gov.au/news/future-made-australia-initiative
Budget Paper No. 2 – Tax Incentives and Green Aluminium Credit:
https://budget.gov.au/2025-26/content/bp2/index.htm
Industry Growth Program Information:
https://www.business.gov.au/grants-and-programs/industry-growth-program
Jobs and Industrial Relations Budget Statement – Workplace Reforms:
https://www.dewr.gov.au/news/budget-2025-industrial-relations-reforms
Buy Australian Campaign – National Reconstruction Fund initiatives:
https://www.industry.gov.au/news/future-made-australia-initiative#buy-australian
