The Business Council of Australia (BCA) welcomes the opportunity to provide a submission to the consultation paper for the proposed Critical Minerals Production Tax Incentive (CMPTI). A well-designed CMPTI can provide the foundation for Australia to be a competitive destination for critical minerals processing and refining.

A successful transition is being able to achieve a net zero economy while maintaining energy security, reliability affordability, and our international competitiveness – each vital to maintaining living standards and economic prosperity. Australia’s abundance of critical minerals present an exceptional opportunity to diversify supply chains and support low emissions technologies. Demand for these minerals will increase over time, and Australia is uniquely positioned to play a continued and growing role as a trusted and reliable trade partner in this sector.

The eligibility criteria and design of the CMPTI must not be so restrictive as to limit support for projects that otherwise meet the policy objectives, or that may otherwise result in investment going overseas. Many of these projects will deliver benefits across local communities and supply chains, but at the same time, the Community Benefit Principles must not be so narrowly or rigidly defined as to undermine the success of the CMPTI. It is important to be aware that these principles, while positive in the broad sense, risk increasing costs and offsetting competitive gains achieved through the CMPTI. There is evidence emerging in other countries that providing subsidies has increased project costs, particularly when labour and product markets are tight.

The Future Made in Australia agenda reflects the balanced intent of the Government to craft an Australian response to the US Inflation Reduction Act (IRA), as called for by the BCA. Australia should respond if other nations are taking significant action to attract investment. Ideally, this is achieved by learning from the errors made in other programs and getting the investment fundamentals right. As with any policy though, there is a need for firm and clear guardrails to ensure the policy is a success, there is judicious use of taxpayer dollars, and to deliver a sustainable and enduring policy agenda that allows businesses to plan confidently. The BCA has previously proposed a set of guardrails to help select priority industries and develop any policy response:

• All investments must be expert-led, with expert advice provided to government as the origination point.
• The process must be open, transparent, evidence-based and unimpeachably independent.
• It should be carefully targeted and avoid parameters which can be broadly interpreted.
• There must be the scope to withdraw, or limit, funds based on outcomes being missed or achieved.
• We must not invest in projects that can stand alone with private investment, or those which will never stand alone without government support.
• All our investments must be in areas in which we have a comparative advantage and where the investment helps those projects get to market faster, or there is clear national interest in making that investment.

Just as Australia should not sit still while other countries are increase incentives, nor can we sit still while they are growing their competitiveness at a foundational level. To reinvent our economy we must, as a point of national urgency, become a more competitive place to do business. This requires a focus on getting the fundamentals right to make Australia an attractive investment destination through reform of our tax system, easing the burden of regulation, a streamlined project approvals process, a high-quality skills and education system, a well-managed migration program, a streamlined foreign investment screening regime, and improvements to the workplace relations system. Getting these fundamentals right will spur innovation and lift productivity.

Simply put, the benefits of the CMPTI cannot be realised if a project is unable to proceed in Australia – be it through complexity in the project approvals process or a fundamentally uncompetitive business environment. Similarly, the CMPTI cannot succeed if upstream mining activities continue to face increasing costs and regulation, and are mired in the project approvals process.

Read our full submission here.