Fuel, energy and industry[1]

Budget Review 2019–20 Index

Dr Jonathon Deans and Dr Hunter Laidlaw

Australian Government expenditure on fuel, energy and industry (mining, manufacturing and construction) in 2019–20 is estimated to be $11.6 billion, representing 2.3 per cent of the Australian Government’s total expenditure.

This administrative category consists of:

Table 1: Total fuel, energy and industry

($ million) 2018–19
(est.)
2019–20
(est.)
2020–21
(est.)
2021–22
(proj.)
2022–23
(proj.)
Fuel and energy  7 956  8 171  8 515  8 865  9 285
Industry  2 592  3 422  3 730  3 408  2 926
Total  10 548  11 593  12 245  12 273  12 211

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2019–20, 2019, p. 5–31. Note: Figures may not add due to rounding.

Table 2: Proportion of total budget expenditure

Proportion of expenditure (%) 2018–19
(est.)
2019–20
(est.)
2020–21
(est.)
2021–22
(proj.)
2022–23
(proj.)
Fuel and energy 1.6 1.6 1.6 1.7 1.7
Industry 0.5 0.7 0.7 0.6 0.5
Total 2.2 2.3 2.4 2.3 2.2

Source: Parliamentary Library calculations. Note: Figures may not add due to rounding.

Table 3: Fuel and energy expenditure

($ million) 2018–19
(est.)
2019–20
(est.)
2020–21
(est.)
2021–22
(proj.)
2022–23
(proj.)
Fuel Tax Credits Scheme  7 168  7 504  7 937  8 424  8 966
Resources and Energy   141   126   83   71   70
Renewable Energy   405   352   284   207   102
Other - fuel and energy   242   189   211   163   147
Total fuel and energy  7 956  8 171  8 515  8 865  9 285

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2019–20, 2019, p. 5–31. Note: Figures may not add due to rounding.

Table 4: Industry expenditure

($ million) 2018–19
(est.)
2019–20
(est.)
2020–21
(est.)
2021–22
(proj.)
2022–23
(proj.)
Research and Development Tax Incentive  1 967  2 237  2 249  2 292  2 410
Growing Business Investment   317   279   219   194   172
Northern Australia Infrastructure Facility   45   639  1 001   687   116
Other mining, manufacturing and construction   262   267   261   235   227
Total industry  2 592  3 422  3 730  3 408  2 926

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2019–20, 2019, p. 5–35. Note: Figures may not add due to rounding.

Significant policy announcements

There are two significant expense measures announced for these functions:

  • Climate Solutions Package, which includes a Climate Solutions Fund that is effectively an expansion of the existing Emissions Reduction Fund (with $189 million over four years to 2022-23 and a total of $2 billion over 15 years from 2019-20); an equity investment of up to $1.4 billion for the Snowy 2.0 pumped hydro electricity project; the Energy Efficient Communities Programme; and funding for a feasibility study into a second Tasmanian interconnector (known as Project Marinus) and the Battery of the Nation initiative in Tasmania. The measure provides $317.3 million over the Budget period and a total of $3.5 billion over 15 years from 2018–19 (see pp. 73–74 of Budget Paper No. 2).
  • Supporting Reliable Energy Infrastructure program, which supports feasibility studies into micro-grids (local electricity grids for communities which are outside the established electricity networks).
    The measure includes funding for feasibility studies to accelerate gas development in the Beetaloo sub-basin of the Northern Territory and support the Underwriting New Generation Investment initiative. It also provides $10 million to develop business cases for energy supply in North and Central Queensland. The measure provides $75.5 million over seven years from 2018–19 (see p. 78 of Budget Paper No. 2).

This builds on the Action Plan to Reduce Power Prices. That initiative was incorporated into the Mid-Year Economic and Fiscal Outlook 2018-19 (p. 174) and provides $131 million over seven years from 2018–19 for the Underwriting New Generation Investment initiative, price monitoring of the electricity market by the ACCC, and other initiatives.

The spending profile for a number of initiatives across the fuel, energy, and industry functions has also changed, as discussed below.

Fuel and energy

An anticipated increase in the use of eligible fuels is forecast to drive an 11.4 per cent increase in the use of fuel tax credits between 2019–20 and 2022–23. Petrol and diesel excise is forecast to rise from $18.7 billion to $21.3 billion over the same period.

Expenditure for the renewable energy component is anticipated to decline across the budget period. Most of this reduction is due to a decrease in grant expenses for the Australian Renewable Energy Agency (ARENA). This decrease is stated to be partially offset by increased expenses for the Clean Energy Finance Corporation (CEFC). There are no 2019–20 Budget measures that relate directly to ARENA or the CEFC.

These figures do not represent the Government’s only support for renewables. The Government’s broader suite of programs includes other support for renewables, such as through the Renewable Energy Target (RET). However, as programs such as the RET are not funded by the Commonwealth, they are not budget items.

Industry

The temporary increase in receipts for the Research and Development Tax Incentive in 2018–19 to 2019–20 is due to a one-off adjustment recognising the small number of claims made in past years. Expenses then return to a path of gradual growth between 2019–20 and 2022–23.

Changes in expenditure for the Northern Australia Infrastructure Facility reflect an accounting change for the treatment of concessional loans. The Facility’s total possible investment has not been changed from $5 billion. According to the NAIF website, final investment decisions worth $537.8 million have been agreed by the NAIF Board but much of this funding has not yet been delivered to projects.


[1].          In the Budget papers industry is referred to as mining, manufacturing and construction.

 

All online articles accessed April 2019

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