Business Environments of Australia

Last Updated: April 26, 2023
The Outlook

Business Environment Outlook in Australia

Political stability in Australia is expected to deteriorate as China becomes more assertive in challenging Australia’s dominance in the Pacific and tensions rise between the country’s two main political parties. The macroeconomic environment is also likely to not perform as well as before. Despite the economy’s expected growth, the combination of rapid inflation and rising interest rates will make conditions difficult for both consumers and businesses, and the pandemic has resulted in an increase in public debt. To keep China away from national strategic interests, the country has become less welcoming towards foreign investment and funding has declined due to tighter liquidity.

However, when it comes to the attractiveness of the market, it is getting better than pre-pandemic. The economy has recovered from the 2020 coronavirus recession and is expected to continue growing overall, with both imports and exports predicted to increase in the next five years. The foreign trade and exchange control aspect is expected to strengthen further as Australia expands its free-trade agenda and signs major trade deals with the EU and India.

Table of Contents
The Labor

Labor & Productivity in Australia

Australia boasts a well-trained, literate, and productive labor force with a size of labor force at around 13.88 million, according to the latest figure in March.

Recruitment of skilled personnel typically occurs through online advertisements, management consulting agencies, professional journals, universities, colleges, and union contracts. The country has federal and state-level anti-discrimination laws in place that prohibit forced retirement based on age, leading many individuals to work until they become eligible for government pensions. However, a survey of HR professionals in the Australia and New Zealand Banking Group revealed that the costs range from an average of $9,772 for entry-level positions to $34,440 for recruiting new executives, representing a much higher cost-to-hire comparing with other OECD countries.

The Australian government announced a phased increase in the retirement age for both men and women in the 2009/10 fiscal year budget. The retirement age was set to increase from 65 to 67 years between 2017 and 2023, with increments of six months every two years. The process began on July 1st, 2017, with the retirement age reaching 66.5 years in July 2021. The next increase to 67 years is scheduled for July 2023.

In March 2023, the Australian Bureau of Statistics reported a 3.5% unemployment rate in the country, lower than the 4% rate a year earlier. Unemployment peaked at 6.2% in April 2020, the highest level since mid-2015, due to the coronavirus pandemic and associated economic lockdown. Underemployment reached a record high of 13.8% in April 2020, but had decreased to 6.1% by March 2022.

The Australian government implemented various measures since early 2020 to mitigate the economic impacts of the pandemic-induced lockdowns on workers. This included temporarily doubling the fortnightly JobSeeker Payment to A$1,115.70 and waiving liquid asset tests. The JobSeeker Payment returned to pre-pandemic levels in March 2021. Additionally, the JobKeeper Payment helped businesses retain staff, and affected individuals could access their superannuation (pension) funds early. By the end of May 2022, the government had committed A$343 billion in direct health and economic support.

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 was passed in March 2021. This legislation introduced a statutory definition of casual employees and mandated that employers offer these workers the option to become full- or part-time after a year of employment. This bill aimed to maintain and build on the temporary measures that improved labor market flexibility and resilience during the pandemic-induced lockdown.

In May 2021, the government released its 2021/22 budget, which included various job-creation initiatives intended to create 250,000 jobs over two years. These initiatives comprised tax cuts of A$1.5 billion in 2021, a A$2 billion investment in the Research and Development Tax Incentive Scheme, and A$3.2 billion for training and apprenticeships.

According to the latest estimates, In 2021-22, the market sector multifactor productivity (MFP) in Australia grew by 2.2% based on hours worked, with market sector labor productivity increasing by 1.4%. Out of sixteen market sector industries, thirteen experienced growth in MFP. The largest MFP increase occurred in the Agriculture, forestry, and fishing industry, while the most significant decline was in Mining. Some productivity estimates in this release differ from those published in the Australian National Accounts due to updated hours worked information from Labour Account Australia.

The COVID-19 pandemic has presented challenges for productivity measurement. In 2021-22, market sector gross value added (GVA) rose by 4.6%, while combined labor and capital inputs grew by 2.4%. Market sector labor productivity experienced a 1.4% growth as GVA increased more than hours worked.

On a quality adjusted labor input (QALI) basis, MFP rose by 1.9%, and labor productivity grew by 0.9%. This weaker growth on a QALI basis results from a positive contribution from changes in labor composition due to educational attainment and work experience. In 2021-22, the Agriculture, forestry, and fishing industry recorded the largest MFP growth of 19.2%, mainly due to a strong GVA growth of 21.0% and a combined inputs increase of 1.8%

The Politics

Political Environment in Australia

In 1901, the British passed legislation allowing the six colonies of Australia to be fully self-governing and formed the Commonwealth of Australia. Since then, Australia and the United Kingdom have gradually alienated, and in 1986, the legislation completely separated from the United Kingdom to become an independent Commonwealth of Australia. However, in terms of constitutional monarchy, Australia still respects the British monarch as its Head of State, similar to India, Canada, and dozens of others.

During World War II, as the United States became the dominant player in the Asia-Pacific region after the war, Australia and the United States increased military exchanges, and the United States also replaced the United Kingdom as Australia’s main military alliance. During the Cold War, intelligence cooperation by the Five Eyes alliance further strengthened this situation. In recent years, with the return of the United States to the Asia-Pacific under the Obama administration, and the establishment of the military-diplomatic-security partnership AUKUS during the Trump administration, exchanges between Australia and the United States have also been greatly strengthened.

In terms of trade, China has been Australia’s largest trading partner since the end of 2000. However, in recent years, there has been a strong deterioration between the two nations citing factors such as military alliance with the US, geopolitical tensions, and a much stronger stance took by the previous Morrison government. This has eventually propelled China to impose trade penalties on Australia through import restrictions and other means. However, due to factors such as China’s domestic demand and the new government (the Labor Party government)’s softening attitude towards China, the relationship between the two parties has gradually warmed up.

While the Labor party, the current governing body, advocate for a stronger role of the state in the economy, they also promote deeper collaborations with the private sector. They plan to prioritize green energy, workplace inclusion, and public-sector reform. In terms of climate change, the government is seeking to overhaul the “safeguard” mechanism that enforces emission-intensity reductions among big polluters by mid-2023. This reform is part of a package of measures designed to reduce emissions to 43% below 2005 levels by 2030 and achieve net-zero emissions by 2050. The government will provide financing for green energy, upgrading the electricity network, and promoting the adoption of electric vehicles to create business opportunities.

Labor intends to reorient the country’s institutions to achieve its vision. The Reserve Bank of Australia (RBA) may undergo an independent review that could broaden its mandate beyond inflation targeting, while the Productivity Commission may undergo reforms to prioritize productivity over other macro areas. The National Anti-Corruption Commission, which was legislated for in 2022, will begin operations in mid-2023.

The center-left Labor Party’s return to power in the May 2022 federal election bodes well for political stability. Despite a narrow majority in the House of Representatives, the party can count on support from Green and independent crossbench MPs for crucial policy areas, having already passed major legislation on climate change and counter-corruption. Under Prime Minister Anthony Albanese’s leadership, the Labor Party is more united than during its previous tenure from 2007 to 2013. The former ruling Liberal-National coalition’s weakness, coupled with leader Peter Dutton’s challenges in shifting the party back to the political center ground, will aid Labor. The coalition is expected to struggle in effectively addressing progressive Labor policies, particularly on environmental issues.

However, political stability may encounter challenges due to a tougher economic outlook. Efforts to tackle high inflation will result in an economic slowdown, characterized by falling house prices and rising unemployment. This could spark policy disagreements and bolster support for the opposition coalition. The coalition might also capitalize on potential difficulties faced by Labor in outlining plans for a referendum on establishing an Indigenous Voice to Parliament. Furthermore, conflicts within Labor, the Greens, and independents may arise over the government’s policy ambition, particularly in relation to tax plans for high-income households and climate policy amid increasing climate-related events and Australia’s economic dependence on mining and the global energy security agenda.

Australia boasts a high-quality bureaucracy with minimal corruption and a transparent, efficient legal system. The Senate structure makes it challenging for governing parties to obtain a majority, ensuring strong checks and balances on government policy. Although this promotes consensus-building, it can also lead to political ineffectiveness, as legislation passage typically requires backing from opposition or minor parties and independents. Cross-party cooperation has been observed occasionally, such as during the coronavirus outbreak and in addressing national security concerns posed by China.

Tensions between federal and state governments are a common feature of Australia’s political landscape, stemming from the country’s constitutional law that allocates revenue-raising powers to federal authorities but assigns financial responsibility for public services to states and territories. Disputes usually arise in areas where both tiers of government are active, and cost-cutting by one imposes additional expenses on the other, such as healthcare. Education, health, environment, water, ports, infrastructure, tax, and business regulation will likely be contentious due to overlapping responsibilities.

The 2018 legislation reforming the goods and services tax (GST) distribution framework has helped alleviate friction between states and the federal government. The GST was introduced in 2000 to provide states and territories with a growing revenue stream and eliminate annual funding disputes. The current Horizontal Fiscal equalization mechanism aims to equalize states’ fiscal capacities, but it can create perverse incentives. To enhance fairness, the federal government has started implementing a payment “floor” and reforming the GST-sharing formula. The new equalization standard will be introduced gradually from 2021/22, and the legislation guarantees that no state or territory will be worse off. Pandemic management has also been a source of friction, with state and territory governments taking more proactive measures than the federal administration.

In the May 2022 election, the Labor party won 77 out of the 151 seats in the House of Representatives, which was an increase from 68 in the 2019 election. These gains came at the expense of the Liberal-National coalition, which lost seats and now holds only 58, making it difficult for them to return to power in the next federal election in 2025. The election outcome was not necessarily a strong endorsement of Labor, as their share of the popular vote actually decreased. Instead, it was more of a rejection of the former governing coalition, whose vote share dropped even more.

The impact of minor parties and independent politicians on policy will be more significant. The biggest gains in the election were made by crossbench members, with the Greens winning four seats and the number of independent politicians (led by the loosely organized “teal” group) increasing. Labor will seek cooperation with these groups on a case-by-case basis and they will be crucial in getting legislation passed through the Senate, where Labor still only holds a minority of seats.

Labor has promised to hold a referendum on the creation of an Indigenous Voice to Parliament, which would be a permanent and constitutionally recognized Indigenous advisory body to the federal government. According to the government, it is likely that the vote will happen in 2023. Although this will be the primary focus for constitutional matters, the likelihood of a referendum on the establishment of an Australian republic has increased following the death of Queen Elizabeth II. Labor is expected to include it as part of their campaign in the 2025 election, and if they win again, a vote could be held soon after. The leader of Labor, Mr. Albanese, supports the idea of a republic and has appointed an assistant minister for the republic to his cabinet.

Australia’s current account has recently turned positive after 40 years of persistent deficits, and it is expected to remain in the black in the next five years. This is largely due to growth in the country’s goods trade balance, driven by strong exports of commodities like iron ore, coal, and liquefied natural gas. Although high commodity prices will keep the export bill high in the short term, the trade balance is expected to level off as demand for Australian goods from China decreases.

The end of pandemic travel restrictions caused the services account to return to a deficit in 2022, as a result of increased foreign travel expenses. Despite a boost in services exports from international tourists and students, the deficit is expected to persist in the coming decade. To reduce its reliance on China, Australia is seeking to establish free-trade agreements with other countries, such as India and the European Union. However, this shift in demand will be a long-term process. Australia’s abundance of rare-earth minerals and hydrogen resources presents an opportunity to expand its exports, especially as countries like Japan seek to diversify their import sources for geopolitical reasons.

Australia is positioning itself as a key strategic player in the Indo-Pacific region by strengthening its alliances with the US, the UK, and other regional powers such as India and Japan. The AUKUS defense pact and the Quad diplomatic grouping are crucial in supporting Australia’s position. The government is also focused on deepening its engagement with Pacific island neighbors to counterbalance China’s growing influence in the region. However, the tightening alliance with the US may lead to long-term tensions with China, and Australia could find itself involved in conflicts in the Taiwan Strait or the South China Sea.

The Infrastructure

Infrastructure Development in Australia

As Australia anticipates a population of 40 million by 2059, the nation is accelerating its infrastructure projects to keep pace with the booming economy. Investments in intelligent transport, advanced communications, future cities, critical water infrastructure, tourism, and warehousing and supply chains are expected to exceed A$218 billion between 2021 and 2025. Australia is recognized as a top performer by InfraCompass in all eight of its infrastructure drivers, showcasing its capacity to deliver large-scale, complex projects.

Australia’s infrastructure pipeline is robust, with major road, rail, airport, energy, and social infrastructure projects planned in cities and along key freight and transport routes in Northern Australia. The 2022-23 federal budget commits A$17.9 billion over 10 years to these initiatives, including the A$16.8 billion WestConnex motorway and the nation’s first fully automated metro rail system, Sydney Metro. The Melbourne Metro Tunnel, which will significantly increase train system capacity, is also under construction.

The nation’s economic and political stability, coupled with the strong government response to the pandemic, make Australia an attractive investment proposition. Interest in social infrastructure projects has surged due to factors such as population redistribution, an aging population, and increased pressure on health and education sectors. Additionally, the pandemic has fueled investor interest in telecommunications infrastructure and renewable energy generation.

The development of future cities is a priority for all levels of government, with around 80% of Australians living in the country’s 21 largest cities, which generate approximately 79% of GDP. Investments in innovative and smart infrastructure projects aim to create more livable urban spaces, supporting jobs, economic growth, and productivity. Australia is also an attractive destination for R&D in new infrastructure products and technologies, with research centers focused on innovations in transport, water, and the built environment.

Australia’s infrastructure ecosystem offers diverse financing options, including public-private partnerships, federal grants, and concessional loans. The Northern Australian Infrastructure Facility (NAIF) is a A$5 billion lending facility to support infrastructure projects in the region, and Australia’s large pool of superannuation funds presents additional investment opportunities. With cutting-edge technology, strong R&D capabilities, and lasting stability, Australia’s infrastructure development outlook is promising and poised for growth.

Risk Ahead

The global health pandemic has led to a supply chain pandemic, resulting in an inflationary pandemic that could potentially culminate in a bankruptcy pandemic for infrastructure players. As costs rise and inflation impacts affordability, infrastructure planners, owners, and investors are struggling to budget for projects that take years to deliver and decades to finance. Traditionally, price risk in contracts has been held by developers and contractors who managed costs, but current inflationary shocks, supply constraints, and volatile commodity prices have severed the link between risk and cost discipline.

While this is not the first time the world has experienced inflation and supply issues, many infrastructure stakeholders lack experience in dealing with these challenges. Moving forward, owners and investors must rethink who should own cost and price risks on assets and investments. Building strong trust and cooperation between public and private sectors, owners, contractors, developers, operators, and buyers and suppliers will be crucial. This may lead to a shift in contracting styles, maintaining price discipline while allowing for prudent risk sharing.

As global supply chains shift in response to geopolitical risks and pressures, contractors and developers may need to rebuild their strategic procurement functions, focusing on price and cost discipline and robust scenario planning capabilities. Governments might need to find the fiscal space to invest in infrastructure to boost economic activity. While supply chain bankruptcy is a worst-case scenario, the long-term risk of not building anything at all is far more dangerous.


Digital transformation in infrastructure has the potential to deliver massive benefits for owners, operators, and users. However, its adoption has been slow due to several challenges. Brownfield infrastructure is difficult to digitize, often faces data quality issues, struggles with investment timelines, resource commitments, and legacy system integration. Additionally, regulatory constraints limit the ability to optimize existing assets. Despite these challenges, many brownfield owners find opportunities to improve asset management through data analytics tools and adoption of newer technologies.

In greenfield projects, digital transformation should be embedded in every aspect and phase of infrastructure development. It should connect every player in the value chain and ecosystem, driving performance, monitoring, and reporting. The challenge lies in whether owners, procuring authorities, investors, and operators are willing to pay for it and offer the right incentives to encourage digital design and cooperation. Another question is whether they have the right skills and experience to translate digital capabilities into actual insight and value creation.

In the coming year, contractors and developers are expected to face significant pressure to improve their digital capabilities and integrate into the wider value chain. More infrastructure players will work to overlay data with experience, applying human capabilities to drive real value from data. However, progress may remain slower than most owners and operators hope. Identifying the key factors that can accelerate digital transformation in infrastructure will be crucial.

The Australian government has prepared a well documented list of their transportation/logistics database over the years. More detail can be seen in this website.

In terms of the near term outlook, the Australian government has recently released the 2022-23 Federal Budget, which allocates $55 billion for new and existing transport infrastructure projects over the forward estimates. This comes amid inflationary pressures, a global economic downturn, and a focus on reducing the national debt by $28.5 billion. The government aims to improve the quality of investments while limiting overall spending.

Significant infrastructure investments include $1.5 billion for the Freight Highway Upgrade Program, $1 billion for the 2,700km Outback Way, and $3 billion for the Road Safety Program. Furthermore, the budget includes substantial funding for state-specific projects such as Victoria’s Suburban Rail Loop and Melbourne Airport Rail Link, New South Wales’ Western Sydney Airport, Queensland’s Coomera Connector, South Australia’s North-South Corridor, and Western Australia’s Perth METRONET.

The transportation infrastructure plan for the Australian government will focus on the following key areas:

  • Enhancing freight transportation: With the allocation of $1.5 billion for the Freight Highway Upgrade Program, the government will improve and seal essential freight corridors in the Northern Territory, Western Australia, and South Australia.
  • Connecting rural areas and promoting tourism: The government will invest $1 billion in the Outback Way, a 2,700km route that spans from Laverton, Western Australia, to Winton, Queensland, via the Northern Territory. This project aims to enhance connectivity and stimulate tourism in the region.
  • Improving road safety: With $3 billion dedicated to the Road Safety Program, the government will partner with state and territory governments to fund nationwide road safety improvements.
  • State-specific projects: The government will invest in key projects across all states and territories, including the Suburban Rail Loop and Melbourne Airport Rail Link in Victoria, Western Sydney Airport in New South Wales, Coomera Connector in Queensland, North-South Corridor in South Australia, Perth METRONET in Western Australia, Bass Highway and New Bridgewater Bridge in Tasmania, Tanami Road and Central Arnhem Road in the Northern Territory, and Canberra Light Rail in the Australian Capital Territory.

On a state-level, below projects are the most important.

Victoria – Total spend: $7,647,700,000

  • $2.2 billion for the Suburban Rail Loop
  • $5 billion for the Melbourne Airport Rail Link
  • $447.7 million for the Gippsland Rail Line Upgrade

New South Wales – Total spend: $7,150,000,000

  • $300 million for the Western Sydney Roads Package
  • $5.25 billion for the Sydney Metro – Western Sydney Airport
  • $1.6 billion for the M12 Motorway

South Australia – Total spend: $5,124,000,000

  • $60 million for the Southern Expressway on and off ramps at Majors Road
  • $4.9 billion for the North-South Corridor – Torrens to Darlington
  • $164 million for the Strzelecki Track Upgrade – Sealing

Western Australia – Total spend: $4,827,000,000

  • $125 million for electric bus charging infrastructure
  • $1.002 billion for the Bunbury Outer Ring Road (stages 2 and 3)
  • $3.7 billion for the Perth METRONET

Queensland – Total spend: $2,052,000,000

  • $586.4 million for a major upgrade of the Bruce Highway through Brisbane’s outer northern suburbs
  • $1.07 billion for the Coomera Connector Stage 1 (Coomera to Nerang)
  • $395.6 million for Gold Coast Light Rail – Stage 3

Tasmania – Total spend: $1,319,000,000

  • $540 million for upgrades to the Bass Highway, Tasman Highway, and East and West Tamar Highways
  • $629 million for the New Bridgewater Bridge
  • $150 million for the Midway Point and Sorell Causeway

Northern Territory – Total spend: $1,072,000,000

  • $740 million for the Tanami Road and Central Arnhem Road
  • $332 million for the NT Strategic Roads Package

Australian Capital Territory – Total spend: $223,400,000

  • $218.4 million for Canberra Light Rail – Stage 2A
  • $5 million for the Garden City Cycle Route to encourage active travel

These state-level budget allocations and projects demonstrate the Australian government’s commitmentto improving connectivity, promoting economic growth, and enhancing road safety across the country. By focusing on targeted investments in critical areas within each state, the government aims to optimize the use of limited resources while delivering meaningful improvements to the nation’s transport infrastructure.

The Australian government has prepared a well documented list of their energy projects database over the years. More detail can be seen in this website.

Following the 2022 federal election, the centre-left Labor Party took the reins of the Australian government, prioritizing climate change abatement. The new government swiftly passed legislation committing to a 43% reduction in greenhouse gas emissions from 2005 levels by 2030 and net-zero emissions by 2050. This marked a substantial improvement over the previous government’s commitment under the Paris Agreement.

Australia has implemented several measures to transition towards clean energy. The Fuel Security Bill, passed in June 2021, offers funds for local refinery upgrades and production payments for specific transport fuels. The Renewable Energy Target (RET) scheme, set to expire in 2030, offers incentives for selected renewable power generators, creating alternative revenue streams. The Australian Energy Market Operator’s latest Integrated System Plan (ISP) outlines a 30-year roadmap for low-cost and reliable power, forecasting significant increases in renewable energy capacities and a phase-out of coal-fired power capacity by 2043.

The country’s natural gas consumption is estimated to have risen by 3.3% in 2022, driven by economic recovery after the pandemic. The construction of new gas-fired power plants, such as the 660-MW Kurri Kurri plant and the 316-MW Tallawarra B power station, is expected to contribute to an annual average increase of 1% in domestic natural gas consumption between 2023 and 2032. This growth will be influenced by price fluctuations and ongoing scrutiny of coal plants in light of the government’s 2050 net-zero emissions pledge.

Australia’s oil and gas industry faces challenges from maturing fields and refinery closures. While some projects to develop domestic reserves are scheduled, they are unlikely to offset the depletion rate of the country’s aging oil fields. Australia’s production of crude oil and natural gas liquids is expected to fall to 387,000 barrels per day by 2032, with the country relying increasingly on imports to meet growing demand for refined fuels.


Wind power has emerged as a promising source of renewable energy in Australia, with an estimated 10.6 GW of installed capacity in 2022, generating 10% of the country’s electricity. The government recognizes the potential of wind power, given Australia’s extensive coastlines and the proximity of its major cities to the ocean. Notable upcoming onshore wind projects include the 145-MW Flyers Creek and 157-MW Kaban Green Power Hub, set to become operational in 2023, and the 252-MW Wambo, 396-MW Rye Park, 412-MW Goyder South, and 923-MW MacIntyre facilities, due in 2024. While Australia currently lacks offshore wind farms, the November 2021 legislation establishing a regulatory framework for offshore electricity infrastructure projects has sparked interest in their development, with Victoria aiming to install 2 GW of offshore wind capacity by 2032. Despite challenges such as community concerns, grid congestion, and limited premium site availability, Australia’s installed wind capacity is expected to reach 23.4 GW by 2032.

In 2022, Australia’s installed solar power capacity is estimated at 29.1 GW, generating nearly 11.7% of the nation’s electricity. With rooftop solar installations making up 68% of this capacity, businesses are increasingly adopting solar power. A surge in approvals for large grid-connected solar farms, particularly in New South Wales, Victoria, and Queensland, has fueled the growth of solar capacity, which is projected to exceed 53 GW by 2032.

Although Australia is the world’s driest inhabited continent, its installed hydropower capacity reached 8.5 GW in 2022, generating 5.4% of the country’s electricity. Primarily located in New South Wales and Tasmania, few new large hydroelectric facilities are expected due to recurring droughts and the development of most suitable project sites. However, modernization and expansion of existing facilities are anticipated, along with the initiation of several small and pumped-storage hydropower projects. Among these are the 250-MW Kidston (2024) and the 2-GW Snowy 2.0 (2025), an expansion of Australia’s 3.8-GW Snowy Hydroelectric Scheme. The New South Wales government has also allocated A$45 million (US$29 million) in recoverable funding for the 600-MW Oven Mountain, 325-MW Central West, 250-MW Muswellbrook, and 235-MW Shoalhaven Expansion pumped hydro projects. By 2032, Australia’s installed hydropower capacity is expected to reach 11.3 GW.


Industries & Regional Incentives

The Australian federal government offers incentives for investments that present significant net economic benefits and might not otherwise occur within the country. These incentives encompass grants and concessions available to foreign firms conducting business in Australia and subject to Australian company tax. Additionally, Australia’s six states and two territories provide various incentives, including limited financial assistance, state tax holidays, concessional industrial land rentals, and assistance with staff recruitment.

Two federal government agencies, the Australian Trade Commission (Austrade) and AusIndustry, oversee most investment incentives. Austrade, operating under the Department of Foreign Affairs and Trade, offers investment advisory services and sector-specific market intelligence for foreign investors. The Major Projects Facilitation Agency (MPFA), administered by the Department of Industry, Science, Energy, and Resources, grants large projects a special status, providing assistance in identifying government services and facilitating the application process. However, the MPFA does not offer grant funding.

In 2019, the Treasury launched the A$540 million Australian Business Growth Fund (BGF), with seed capital of A$100 million provided by the government. This investment was matched by Australia’s “Big Four” banks and supplemented by Macquarie Group and HSBC. The BGF offers long-term equity capital investments of up to A$15 million to established Australian businesses with annual revenue between A$2 million and A$100 million and at least three years of revenue growth and profitability. The fund’s stake will be up to 49%.

Three incentives discussed in the 2022/23 federal budget remained uncertain following the Labor Party’s May 2022 general election victory. These incentives include a 20% deduction on training and technology investment for small businesses with turnover under A$50 million, a 30% digital games tax offset for local video game developers of up to A$20 million, and an expansion of the patent box scheme, enabling agricultural and low-emissions technology sector companies to access a concessional tax rate of 17% for certain profits.

The Australian government’s business program division oversees over 200 business programs offering grants, tax and duty concessions, industry support, and venture capital products. Some key general-assistance programs include Certain Inputs to Manufacture (CIM), Co-operative Research Centres (CRCs), Early-Stage Venture Capital Limited Partnership (ESVCLP), Research and Development (R&D) Tax Incentive, and the Tradex Scheme. State and territory governments also offer various incentives, such as limited financial assistance, state tax holidays, and concessional industrial land rentals.

Two industries that the government currently provide the most incentives are the TMT industry and the renewable energy sector.

The Renewable Energy Target initiative aims to ensure that 23.5% of domestic energy consumption comes from renewable sources, a target that was met in 2019. The initiative comprises two parts: the Large-Scale Renewable Energy Target, incentivizing large-scale renewable projects such as wind farms and commercial solar stations, and the Small-Scale Renewable Energy Scheme, promoting small renewable energy systems for households. The latter offers solar credits and rebates to homeowners for solar hot water systems, as well as partial exemptions for companies engaged in emissions-intensive trade-exposed activities. Both schemes are set to expire in 2030.

The Australian Renewable Energy Agency (ARENA) was established in 2012 as the central agency for renewable energy research, replacing the Australian Centre for Renewable Energy. Managing A$2 billion in grant funding, ARENA supports various projects including the Advancing Renewables Program, the Renewable Hydrogen Deployment Scheme, and the Innovation Fund.

The Carbon Capture and Storage (CCS) Flagships Program involves the federal government allocating A$125 million in grants for at least one commercial-scale CCS project, expecting matching contributions from relevant state or territory governments and the private sector. Two projects were selected for funding in 2018: the South West Hub in Perth and the CarbonNet proposal in Victoria. A third project, the Otway Geological Storage and Monitoring Demonstration Project, was selected for funding in 2019.

The Emissions Reduction Fund (ERF), also known as the Climate Solutions Fund since 2019, was enacted in 2014 as part of the Direct Action Plan, which replaced the former Labor government’s carbon tax scheme. The ERF subsidizes emission-reduction projects through a reverse auction process, purchasing carbon abatements in the form of Australian carbon credit units from various sources. As of the end of May 2022, the Clean Energy Regulator, which administers the ERF, had conducted 14 auctions.

States and territories in Australia compete to attract international investment by offering advice, coordinating projects, and waiving or reducing certain taxes and fees. Some also provide direct grants and concessionary finance based on the potential economic benefit of the proposed project. Occasionally, the federal government creates assistance schemes called Regional Innovation Funds, focusing on specific regions. For example, the Tackling Tough Times Together grant program helps drought-stricken communities access grants of up to A$10,000 and is partly funded by private donors; its 23rd round was open until May 2022.

The federal government offers export-based incentive programs under AusIndustry, the Australian Trade and Investment Commission (Austrade), and the Department of Immigration and Border Protection. Tradex provides an upfront exemption from customs duty and sales tax on imported goods intended for re-export or used as inputs to exports, as long as they are re-exported within a year of entry. Austrade administers the Export Market Development Grant Scheme, offering grants of up to A$770,000 for small- and medium-sized businesses ready to export or already exporting and looking to expand export-promotion activities. The Department of Home Affairs administers a duty-drawback facility via the Australian Border Force, allowing companies to obtain refunds for duties and taxes paid on imported goods intended for re-export or use as inputs for other exports. The Australian Border Force also offers a duty deferral facility, allowing manufacturers to import and store goods in licensed warehouses without incurring duty liability until they are ready to pay it.


Financing in Australia

Australia has a sophisticated financial system where foreign and domestic firms compete equally. Foreign investors have access to local capital markets, and companies generally enjoy good access to medium-term finance. However, Australia’s score in financing is expected to decline in the coming years, causing a fall in global and regional rankings. This is due to real interest rates falling further into negative territory in early 2022, as consumer price inflation accelerated, but the Reserve Bank of Australia (RBA) maintained its ultra-loose monetary policy. The RBA’s subsequent interest rate increases have partially reversed this trend, but the central bank lost credibility for being slow to act. The risk of a banking sector crisis that might prevent access to credit or liquidity is very low.

Australia’s banking sector is open and competitive but will remain concentrated by international standards. The market-dominance provisions of the Competition and Consumer Act will prevent mergers between the four major Australian banks. Deposits of A$250,000 or less with any authorized deposit-taking institution in Australia are guaranteed under the federal government’s Financial Claims Scheme. In mid-2022, the Labor administration announced the first government review of the RBA since the mid-1990s. An independent three-person panel will conduct the review, considering the RBA’s inflation target, board composition, organization culture, performance, and objectives. The panel is expected to deliver its report by March 2023.

The Australian Securities Exchange (ASX) will remain an important source of financing. However, the stock market will be subject to shifts in global market sentiment, struggling over the past 12 months due to rapid inflation and rising interest rates diminishing the risk appetite of investors. As of the end of August 2022, the ASX was trading at around 10% below the all-time high it had set almost exactly a year earlier.

We are actively seeking experienced professionals in the field of finance, specifically for local markets. If you believe that our objectives align and there are potential collaborative opportunities, we kindly invite you to get in touch with us.

We are actively seeking experienced professionals in the field of finance, specifically for local markets. If you believe that our objectives align and there are potential collaborative opportunities, we kindly invite you to get in touch with us.

We are actively seeking experienced professionals in the field of finance, specifically for local markets. If you believe that our objectives align and there are potential collaborative opportunities, we kindly invite you to get in touch with us.


  • Infrastructure Developments: ICBOH, Energy Research Advisory Group
  • Labor & Productivity: UN, OOSGA, Expert Interviews, Country Statistics Office
  • Industrial & Regional Incentives: OOSGA Regulatory Database, Local Expert Partnership
  • Financing: Minister of Finance
Author: BE Team

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