An Overview of the 2023-24 Budget
On Tuesday 9 May this week, Treasurer Dr Jim Chalmers unveiled the 2023-24 Government budget. Key themes for this latest budget included measures to ‘revitalise’ Australian industry, strengthen the minerals and resources sector and support the transition to net-zero emissions while maximising the potential of new and emerging technologies. While the Government has described this budget as a ‘significant realignment’, boasting the first budget surplus in 15 years, the response has been lukewarm, with some critics deriding the budget as ‘lazy’. The reply from the Opposition has been caustic, with federal opposition leader Peter Dutton accusing the Government of ‘fuelling inflation’ and disparaging measures as ‘band-aid’ fixes.
Whichever of these assessments is true, there is no doubt that the passage of this budget will have significant ramifications for government grants and funding. In order to keep you updated on these developments, the team at Avant Group have combed through both the commentary on, and the text of, the budget to identify all key interactions between the newest budget and government grant and funding programs. What follows is a preliminary summary of key changes and additions based on currently available information.
‘Reprioritising’ the Export Market Development Grant
A key disappointment from the Chalmers budget is the decision to drastically cut support for the Export Market Development Grant (EMDG). The EMDG program has a longstanding history as a vital support program for Australian exporters. Established several decades ago in 1974, the EMDG program has played a crucial role in facilitating international trade and expanding market opportunities for Australian businesses.
Initially established as a competitive reimbursement program, following severe overhaul undertaken by the former Morrison government, the EMDG program was transformed into a non-competitive entitlement program in late 2020. These changes, dubbed ‘EMDG 2.0’, greatly increased the pool of eligible applicants and scrapped key requirements, thereby significantly reducing the funding that was available on a per applicant basis under the program. To compare versions of the program, 56% of applicants received funds under $40,000 between 2011 and 2021 – this figure rose to 98.4% of applicants receiving under $36,600 since the enactment of EMDG 2.0. Further impacts on Australia’s success in exports will be scrutinised over the coming years.
The 2023-24 Budget has further reduced the funding pool available to EMDG applicants, with a $61 million cut over the next 4 years announced. While no funding already committed or applications currently under assessment will be impacted by this measure, it nonetheless raises red flags over continued neglect of export support by successive Governments. Export markets and international commercialisation constitute key pillars of growth for Australian companies, and the EMDG program has been instrumental in the development of many local businesses. Success stories of the program include the global software powerhouse Atlassian, and the EMDG program continues to be popular amongst startups. Indeed, while the Government has touted the importance of its newly announced Industry Growth Program for supporting local business, there is clear contradiction evident in its continued dismantling of the EMDG program, a program pivotal to the growth and success of so many local businesses.
Given the importance of the EMDG program, Avant Group has engaged, and continues to engage, in strong advocacy campaigns to curtail further attempts to undermine the program. We also encourage our clients to reach out directly to the Minister or their local member.
Encouraging Sustainable Urban Development
In contrast to the disappointing approach to export support, after decades of inaction the 2023-24 Budget has delivered a bold and proactive approach for supporting sustainable urban development, centring around competitive grants. In conjunction with the development of a new comprehensive National Urban Policy, the Government will provide $371.4 million in program funding over 4 years starting from 2023-24 to enable urban communities to partner with the Australian government in delivering essential community infrastructure and precinct-level development.
Of that $317.4 million figure, $211.7 million will be allocated over 3 years from 2023–24 to establish the Thriving Suburbs Program to provide funding for community infrastructure in urban and suburban communities through a competitive grants program. It is envisaged that this grant will provide grants for community infrastructure which will enhance ‘liveability and prosperity’. Similarly, $159.7 million will be invested over 4 years starting from 2023-24 to establish the Urban Precincts and Partnerships Program. This program aims to support investment in place-based priorities of local urban communities through a collaborative partnerships approach with local communities and state, territory, and local governments.
The 2023-24 budget has also demonstrated a heavy emphasis on industrial policy. The centrepiece of Australian industrial policy remains the $15 billion National Reconstruction Fund (NRF). The Chalmers budget has allocated $61.4 million over 4 years from 2023–24 (and $1.2 million per year ongoing) to establish the National Reconstruction Fund Corporation (NRFC). The aim of the NRF is to capitalise on Australis’ strengths by providing targeted funding and investment in seven priority areas, namely:
- Renewables and low emissions technologies;
- Medical science;
- Value-add in the agriculture, forestry and fisheries sectors;
- Value-add in resources;
- Defence capability; and
- Enabling capabilities.
The NRF aims to support projects aligned with priority areas by providing financing options such as loans, equity investments, and guarantees. It will operate as a co-investment scheme, encouraging private investment in projects that may otherwise lack funding. It is hoped that this will facilitate the commercialisation of innovation and technology, foster Australia’s national sovereign capabilities, and promote regional economic diversification. Initially, $5 billion will be available, with an additional $10 billion released in instalments by July 2, 2029. However, it is currently still unclear at what time the NRF will become operational.
In addition to the NRF, the Government has also unveiled a new flagship Industry Growth Program (IGP), intended to support Australian SMEs and startups to commercialise their ideas and grow operations. This new program, which replaces the often controversial Entrepreneurs Programme, is intended to act as a feeder program to the NRF by creating a pipeline of investment-ready projects. As such, the IGP will align with the seven priority areas of the NRF. It is believed that this new program will incorporate the grants-based component of the former Entrepreneurs Programme, namely the Accelerating Commercialisation grants, and combine those aspects with substantial mentoring and non-financial support. In order to facilitate the establishment of the IGP, the Chalmers budget has allocated the program $392.4 million over 4 years from 2023–24 (and $68.2 million per year ongoing). Operational details of this new program are, unfortunately, at the moment scant, though as details and specifics emerge, Avant Group will be able to provide more targeted advice.
Similarly to the IGP, $39.6 million over 4 years from 2023–24 (and $11.0 million per year ongoing) has also been allocated to continuing the Single Business Service, supporting SMEs engagement with all levels of government. This measure repurposes and expands funding that was previously supporting SMEs through the former Entrepreneurs Program and is additionally offset by redirecting funding from within the Industry, Science and Resources portfolio.
Developing Green Hydrogen Production Capacity
As part of the Albanese Government’s desire to become a ‘renewable energy superpower’, the 2023-24 budget has targeted support for the emerging hydrogen industry. As part of this support, the Government has committed $2.0 billion to accelerating the development of Australia’s hydrogen industry, catalysing clean energy industries and helping Australia connect to global hydrogen supply chains. This program at the heart of this investment, entitled the Hydrogen Headstart program, is targeted at bridging the gap between the market price and production cost of green hydrogen. It will be jointly run by the Department of Climate Change, Energy, Environment, and Water (DCEEW) in conjunction with the Australian Renewable Energy Agency. The program will entail a competitive application process, which will be used to select either two or three green hydrogen production projects.
Of the $2.0 billion committed to the program, $156.1 million has been allocated over the next four years, starting from 2023-24. The remaining $1.8 billion will be held in the contingency reserve, with no timeline committed to for its use thus far.
In the hopes of developing Australia into a ‘renewable energy superpower’, the Government has committed additional funding to the critical minerals sector.
In particular, the $400 million Critical Inputs to Clean Energy Industries stream of the Powering the Regions Fund (PRF) will provide grant funding to support the development of clean energy industries by investing in sovereign manufacturing capability of critical inputs, such as steel, cement, lime, and aluminium. Funding will allow these industries to take steps towards reducing their emissions while maintaining production, thus ensuring Australia has secure access to critical inputs for the transition to clean energy. The other two streams of the PRF have likewise received commitments of additional funding, with $600 million allocated to the Safeguard Transformation stream, and $400 million to the Industrial Transformation stream respectively. The former will support trade-exposed facilities covered by the Safeguard mechanism to reduce on-site emissions, with the latter supporting the development of new clean energy industries in regional Australia, with an emphasis on ‘innovative ways’ to decarbonise existing industries. These measures will be a boon for regional industry seeking to transition to net zero and seize upon the economic opportunities created by decarbonisation.
In addition to the renewables and critical inputs sectors, the Government has also identified quantum computing and artificial intelligence (AI) technologies as key sectors. With this in mind, the 2023-24 budget has committed $116.0 million over 5 years starting from 2022-24 to drive economic growth, boost key technology industries and support the creation of jobs. Of this $116.0 million, $101.2 million has been allocated to supporting businesses to integrate quantum and AI technologies into their operations. This funding will facilitate a Critical Technologies Challenge Program, designed to support projects that utilise critical technologies to solve significant national challenges (the initial stage of this program will focus on quantum computing), extending the National AI Centre, establishing an Australian Centre for Quantum Growth and supporting SMEs to adopt AI technologies to improve business processes and increase trade competitiveness.
It is envisaged that these programs will work in tandem with the National Reconstruction Fund and Australia’s first National Quantum Strategy, in order to bring Australia to the ‘forefront of technological developments that will shape the world in the years ahead’ stated Industry and Science Minister Ed Husic.
The 2023-24 budget has also provided for the establishment of a new Advanced Strategic Capabilities Accelerator. This Accelerator will constitute a new entity in the Department of Defence, established for the purpose of driving innovation to create capability for the Australian Defence Force. This new entity will replace both the Defence Innovation Hub and the Next Generation Technologies Fund and will seek to lift capacity to translate disruptive new technologies into Defence capability rapidly, in close partnership with Australian industry. The Government has allocated $3.4 billion over 10 years, starting from 2023-24 in order to establish this new Accelerator.
Supporting Small Businesses through the Energy Transition
The Small Business Energy Incentive is a newly introduced tax break to help small and medium businesses go electric and save on energy bills. This incentive will provide $310 million in tax relief and support up to 3.8 million businesses make investments like electrifying their heating and cooling systems, installing batteries, and upgrading to high-efficiency electrical goods. Businesses with annual turnover below $50 million will have access to a bonus 20% tax deduction for eligible assets supporting electrification and more efficient use of energy during the period of 1 July 2023 until 30 June 2024. Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.
This is in addition to $62.6 million towards energy efficiency grants for small and medium enterprises in the October Budget. While laudable, these measures nonetheless pale in comparison to comparable overseas efforts to encourage the shift to net zero. Critics have, in particular, pointed to the Inflation Reduction Act in the USA, the ‘Green Deal’ in the European Union.
Providing Cash Flow Support for Small Business
While the Government has extended the instant asset write-off, it is a far cry from the largesse of the COVID-era Temporary Full Expensing program. This new targeted program aims to make it easier for small businesses to invest and grow by providing $290 million in cash flow support. Namely, small businesses with an aggregated turnover of below $10 million will be able to immediately deduct the full cost of eligible assets with a value of up to $20,000. It is worth noting that this $20,000 threshold will apply on a per asset basis, and as such, small businesses will be able to write off multiple assets immediately. In order to be eligible, assets must be in use or installed ready for use some time between 1 July 2023 and 30 June 2024. It is hoped that this new measure will improve cash flow for small businesses, while at the same time reducing the compliance and accounting burden associated with managing depreciation over several years. Industry groups have welcomed the new measure, though it falls short of the $100,000 instant asset write-off for which some groups, such as the Council of Small Business Organisations Australia, were advocating.
Helping Social Enterprises Access Finance and Become Investment Ready
In response to recommendations made by the Impact Investing Taskforce’s Expert Panel, the Government will convene an Investor Roundtable to discuss ways to unlock private capital to support social impact investing initiatives. Discussions will include how institutional investors can provide wholesale capital and support new and emerging organisations with a social mission to bring their good ideas to market and scale up their initiatives. The Government will also deliver a $11.6 million Social Enterprise Development Initiative, which will provide grants, online education, and mentoring for eligible organisations. This will support these organisations in building their capability to access capital and thus support improved social outcomes. These moves have received ‘tentative’ approval from NFPs and charities, characterising them as important steps in the right direction.
Supporting Women in the Workplace
The Government has once again emphasised its commitment to fostering diversity and inclusivity in the workforce, recognising the importance of empowering women in historically male dominated areas, and in particular, in trade apprenticeships. As such, grant funding of $5.0 million over 3 years starting from 2024–25 will be provided to organisations with appropriate expertise in supporting women in the workplace to aid further support for women in historically male dominated trade apprenticeships. Examples of the type of support, include providing education, advice, or support to increasing culturally safe and inclusive workplaces, reducing cultural barriers to women’s participation, addressing workplace challenges, and supporting businesses to attract and retain women. The new model will also provide support to women who commence their non-traditional trade apprenticeships prior to 1 July 2024 during their transition to new service arrangements. The Government is yet to elucidate further on this program.
Similarly to ensuring the inclusion of women in apprenticeships, the Government is also committed to ensuring women are represented in leadership at all levels. The Government is working with businesses, industry groups, academics, and civil society to support women’s advancement and sustained success in leadership roles, building a better future for all women in Australia. The Women’s Leadership and Development Program provides grant funding to a range of organisations that support women from diverse backgrounds to prepare for and enter leadership positions.
Increasing Support for Motorists and Transportation
The Government will provide $267.4 million starting from 2022–23 to support land, maritime and aviation transport priorities, including to increase productivity and maintain safety across the sectors. Of this $267.4 million, $43.6 million will be allocated over 4 years starting from 2022–23 to establish a new National Road Safety Action Grants Program to support community education and awareness, vulnerable road users, First Nations road safety, technology, innovation, and research.
How Can Avant Group Help?
Ultimately, the budget from the Chalmers Treasury appears to be a mixed bag with respect to grants and funding. While there are strong commitments to developing industrial policy, renewables capacity and sustainable urban communities, the continued neglect and oversight with respect to export support is a disappointing setback.
The ever-evolving funding and grants landscape highlighted in the recent developments of the 2023-24 budget underscores the need for reliable support and guidance. At Avant Group, we are fully committed to providing businesses with comprehensive assistance in securing grants and funding. Our team specialises in navigating the intricacies of grant and funding applications, leveraging our expertise to connect your business with suitable funding opportunities, and preparing high-quality applications and submissions.
If you have any further queries with regard to the 2023-24 budget, or to speak to our team about our services, please do not hesitate to reach out to us.