Australian Federal Budget 2024-25: Building a 'Future Made in Australia' and the implications for Australian foreign investment

Key takeaways

On 1 May 2024, the Australian Treasurer announced proposed reforms to Australia’s Foreign Investment Policy with a view to enhancing scrutiny and monitoring of sensitive investments, streamlining approval processes for low-risk investments, and making the regime more transparent overall. A summary of the proposed reforms, together with our views on the likely practical implications of the reforms for foreign investors and other transactional stakeholders in Australia, is available in our 3 May article.

The Treasurer’s announcement on 1 May 2024 foreshadowed a broader ‘Future Made in Australia’ regime included in the Australian Federal Budget which was released on 14 May 2024. The Australian Government has committed AUD22.7 billion of investment to this regime with a view to maximising the benefits of continuing global momentum towards net zero and securing Australia’s place in a changing economic and geostrategic environment.

New ‘Future Made in Australia’ Regime

The ‘Future Made in Australia’ regime will be implemented through a new Future Made in Australia Act and by way of the Australian Government establishing a new ‘National Interest Framework’ to guide identification of priority industries and investments.

The Budget also includes a promise to establish a new ‘front door’ for investors to accelerate and coordinate transformational projects in Australia, along with a domestic ‘National Interest Account’ designed to add discipline to investments in the Australian national interest and strengthen and streamline approvals – including across Australia’s existing foreign investment regime.

Details regarding both proposals are somewhat limited at this stage and we can expect Treasury to release further guidance over the coming weeks and months. However, we are buoyed by the prospect of the introduction of a refined and targeted regime which seeks to encourage and streamline investment in core sectors which drive Australia’s energy transition while also protecting Australia’s national security interests.

Changes to Australia’s Foreign Investment Regime

The Budget includes specific investments targeted at providing faster decisions on environmental, energy, and foreign investment approvals (amongst others). These investments include AUD134.2 million to streamline approvals for significant renewable energy projects and AUD15.7 million to, amongst other things, support faster processing times for foreign investment applications submitted to FIRB.

As noted in our 3 May article, we remain hopeful that the proposed increased resourcing for Treasury and FIRB, in conjunction with the proposed introduction of application processing timeframe targets for FIRB, will help relieve the current foreign investment approval bottlenecks and extended approval wait times that we are seeing for applications across the board. However, Australia’s foreign investment approval process, whilst led by FIRB, is heavily dependent on the approach and resourcing applied to reviewing and considering foreign investment applications by FIRB’s Australian Government consult partners (including agencies such as the ATO and ACCC). To maximise the upsides of the investments flagged in the Budget, it will be important that FIRB’s consult partners approach the updated regulatory settings with an aligned commitment to enhancing the efficiency of the foreign investment regime.

The Budget has also clarified the Australian Government’s earlier announced reforms to refunding of FIRB application fees for unsuccessful bidders in competitive acquisition and investment processes by confirming that refunds of 75% of FIRB application fees will be offered to unsuccessful bidders. Notwithstanding that refunds will not be offered for 100% of application fees, we welcome this reform in the context of the Australian Government’s objective to further stimulate a competitive Australian investment landscape.

 

Australian Federal Budget 2024-25 | Key implications for foreign investment

The Australian Government released the 2024-25 Federal Budget on 14 May 2024. For foreign investors to Australia, one of the key underlying themes of the Budget was ensuring that Australia remains an appealing jurisdiction for foreign investment whilst also protecting domestic economic and national security interests.

The Australian Government maintains that it is eager to encourage investment in sectors such as clean energy and industrials, underpinning Australia’s commitments and push towards a net zero future, as well as local manufacturing and mining of non-critical minerals to secure Australia’s place in a changing economic and geostrategic environment.

 

1. New front door for investors

The Australian Government has promised to reform investment settings and regulatory processes to attract and enable the investment Australia needs by establishing a new ‘front door’ for investors with transformational investment proposals related to the Future Made in Australia agenda. This ‘front door’ is proposed to:

• provide a single point of contact for investors with major investment proposals;
• deliver a joined-up approach to investment attraction and facilitation;
• identify priority projects related to the Future Made in Australia agenda;
• support accelerated and coordinated approval decisions; and
• connect investors with the Government’s specialist investment vehicles.

The Australian Government has indicated that the ‘front door’ will complement and leverage existing institutions, including (presumably) FIRB. The final form of the ‘front door’ will be developed in consultation with investors, businesses, governments, unions, communities, and other experts over the course of 2024.

While we welcome the objective of making it simpler to invest in Australia, we will be keeping a close eye on the final form of the ‘front door’ and how it interacts with existing approval processes. In our view, it will be critical to the success of this new regime that it operates efficiently and in alignment with existing regulatory bodies (including FIRB) so as to avoid creating an additional layer of considerations, consultations and/or approvals for investors.

Relatedly, as the alignment of the Australian foreign investment regime with other regulatory settings (such as Australia’s critical infrastructure security framework) appears to be an area of future focus for the Treasurer, the extent to which the Australian Government can synchronise the operations of Australia’s various investment review institutions will likely be a key factor in determining the success of the proposed new “front door”.

 

2. Strengthening and streamlining approvals

The Budget also provides for various commitments targeted at providing a faster pathway to better decisions on environmental, energy, and foreign investment approvals (amongst others), including via:

• AUD134.2 million to better prioritise approvals for renewable energy projects of national significance, including support for faster decisions on environment, cultural heritage and planning approvals. This is a pleasing announcement which hopefully will reduce the consistent delays we are seeing for significant projects on account of regulatory approvals and provide greater certainty for investors.
• AUD15.7 million to strengthen scrutiny of high risk foreign investment proposals, enhance monitoring and enforcement activities and support faster decisions. This investment is aimed at ensuring that Australia can attract the foreign capital flows that its economy needs, while strengthening protection of Australia’s national interest.

While we of course welcome the Australian Government providing more resources for screening sensitive investments to facilitate enhanced but efficient scrutiny of complicated or higher risk proposals, as noted in our 3 May article, in our experience, there is already considerable scrutiny of such investments. The increase in resources for Treasury is positive, but it is also necessary to enhance the resources available to FIRB’s Australian Government consult partners to really unlock the objectives of a streamlined review and approval process.

 

3. National Interest Framework

The new National Interest Framework is designed to impose rigour on the Australian Government’s decision making on significant public investments, particularly those used to incentivise private investment at scale. Through the framework, priority industries will be identified under two streams.

First, the ‘net zero transformation’ stream will identify industries that can make a significant contribution to achieving net zero, where Australia has grounds to build enduring comparative advantage.

Second, the ‘economic security and resilience’ stream will identify sectors that are critical to Australia’s resilience, are vulnerable to supply disruptions and that require support to unlock sufficient private investment.

As part of the Budget, the Australian Government has announced the following five industries as being aligned with the National Interest Framework: renewable hydrogen, critical minerals processing, green metals, low carbon liquid fuels, and clean energy manufacturing (including battery and solar panel supply chains). Although it is not clear on what basis these sectors have been selected as priority industries, we hope that the National Interest Framework will be given sufficient weight by FIRB and other regulatory bodies when reviewing applications related to investment proposals in these key sectors.

 

Next steps

While the Budget and Australia’s updated Foreign Investment Policy provide a useful insight into the Australian Government's regulatory focuses and investment priorities, Treasury is yet to release detailed guidance on the proposed reforms – which would allow a more detailed assessment of the practical implications of the changed policy settings on current FIRB applications or FIRB applications to be lodged before 1 July 2024.

Foreign investors should stay alert for further details regarding the relevant Budget announcements. In particular, we expect that many foreign investors may wish to participate in the proposed consultation process regarding the establishment of the proposed new ‘front door’ and we would encourage any such investors to contact either of the authors or your usual DLA Piper contact if you would like to discuss.

A summary of some of the broader elements and commitments included in the Budget can be found here.