Federal Budget 2024: Generous resources tax breaks set to cement WA as engine room of national economy

Generous tax breaks for hydrogen producers and critical minerals refiners have cleared the runway for a new generation of resources giants to flourish in the west. Treasurer Jim Chalmers’ third budget seeks to unleash a tidal wave of investment in the commodities underpinning the global race to slash carbon emissions. Much of that capital – and the $32 billion in incentives and production tax credits expected to be handed out up until 2041 – will land in WA. The hope is the unprecedented financial springboard will spur a raft of resources companies – both established and emerging – to rapidly establish new projects across the State. If successful – and the likes of hydrogen and lithium can approach anywhere near the success of iron ore and liquefied natural gas – WA will cement its status as the powerhouse of the national economy for at least the next two decades. Mr Chalmers described his Budget as having two parts: short-term cost of living relief – such as the $300 power credit for all Australians – followed by “big, important investments in the industrial base of the country”. WA, the Treasurer said, would be “a big beneficiary” of the latter. Resources Minister Madeleine King went even further, claiming the 2024 fiscal blueprint as “the most significant resources budget that any government has ever released”. “The time was right,” she said. “The Prime Minister has always had a mind on making more things here. It was up to us to do the hard yards to convince him that making things here starts with what’s in the ground, and bringing it out of the ground and processing it.” The twin centrepieces of the Future Made in Australia plan are a $2/kg incentive for green hydrogen producers and a 10 per cent production tax credit for the processing and refining of the 31 resources on the critical minerals list. Both are available across the first 10 years of a project and set to expire in 2040, by which point the Commonwealth expects to have shelled out a combined $31.5 billion across the two programs. However, in a major blow to teetering nickel miners, neither incentive kicks in until 2027-28 -- and they production credit applies only to downstream processing, not simply extracting resources from the ground. The three-year lag, designed to bed down the details and pass necessary legislation, raises the prospect BHP will choose to mothball its entire Nickel West division – which includes a refinery – and axe 3000 workers. Beyond miners, WA’s other major Budget winner was Metronet – which scooped up an additional $1.7 billion in Federal funding. That included $300 million for a high capacity signaling program to allow more frequent of train movements, which has an estimated total cost of around $1 billion. There is also $1.4 billion in previously announced money for five existing Metronet projects: the Morley-Ellenbrook, Thornlie-Cockburn, Yanchep and Armadale line extensions, as well as a new Midland Station. That is double the $707 million blowout to Metronet revealed by WA Treasurer Rita Saffioti in her own budget last week. The Federal Government is also tipping $600 million of new funding into a range of road projects, headlined by $132.8 million for upgrades to Great Northern Highway. After severe flooding in South Australia severed the only east-west rail line twice in the past two years, resulting in widespread product shortages at supermarkets, the Budget includes $21.7 million to stand up a “strategic fleet” of freight-carrying ships promised ahead of the 2022 election. The first step is a pilot involving three privately-owned vessels “which would be available to requisition in times of need”. The Budget also confirms the Albanese Government’s ongoing commitment to funding half the cost of a $750 million comprehensive cancer centre first promised by the Morrison Government. The WA Government has been lukewarm to that proposal from the moment it was announced, and the cancer centre did not feature in last week’s State Budget. A business case that was meant to be completed by March has also not been publicly released yet. Announced by Prime Minster Anthony Albanese during his visit to Perth last week, $33.5m will go towards funding half the cost of ongoing planning for Westport. In addition to the new $4 billion port – which is slated to open by 2032, with a final business case due later this year – the project includes a network of new roads, rail connections and logistics hubs to support container trade. Also previously announced was $566.1 million over a decade for Geoscience Australia to map out the location of mineral deposits and groundwater systems. The data is intended to help resources companies make infrastructure and planning decisions that help them bring critical minerals and rare earths integral to the green energy transition to market faster.