Legislation to launch National Reconstruction Fund to be tabled tomorrow

The federal Minister for Industry and Science Ed Husic will introduce legislation to establish the $15 billion National Reconstruction Fund – the centrepiece of the government’s approach to boosting manufacturing – promised during the recent federal election campaign.

Husic told the national press club that the legislation would be introduced tomorrow which would set in motion extensive consultation with investors and industry on the shape of the fund and how it would work.

Noting that today is the anniversary of the day in 1948 when the first Australian Holden car rolled off the assembly line at Fishermans Bend in Melbourne, he described the fund as ‘one of the largest peacetime investments in Australian manufacturing capability’.

Husic said: “The $15 billion fund will be governed by an independent board built on the model that Labor previously championed in the Clean Energy Finance Corp[oration.

“It will be empowered to invest through a combination of loans and equity including alongside investment from institutional investors, private equity and venture capital.”

During 2020/21 the CEFC, which manages a $10 billion investment fund, attracted an additional $2.68 in private sector finance for each dollar of CEFC capital committed.

The CEFC investment portfolio received $823 million in repayments and returns during the year, building on $942 million in the previous year.

Total repayments since the CEFC began investing were almost $2.5 billion to 30 June 2021, with this capital available for CEFC reinvestment.

Husic said the NRF would similarly be expected to achieve achieve return on its investment to cover its cost of borrowings.

He said he would immediately move to establish a NRF reference group representing industry and investors to help guide the development of the fund and its investment mandate.

Husic rejected arguments that governments should not be involved in ‘picking winners’, but should only act when there are market failures.

“What a diminished view for the role of government and what a missed opportunity.

“Governments can and should strategically and thoughtfully invest in industries of the future, that’s what our friends and allies are doing.”

He said US President Joe Biden had recently announced more than $100 billion investment in electric vehicle batteries and more than $80 billion in semiconductor manufacturing, while Singapore had announced a 10 year plan to grow manufacturing by 50 percent.

The fund will be empowered to invest in priority areas including the value add of resources and agriculture, medical science, renewables, low emissions technologies and defence, as well as enabling sectors such as robotics and quantum computing.

“From next week my department will open broad public consultation to further define the seven priority areas of the economy for investment and how the fund will make investment decisions.”

During his address Husic made the case for manufacturing, noiting that Australia imported most of what it needed, a situation highlighted by the recent pandemic.

“Australia ranks dead last among OECD countries in manufacturing self sufficiency – we have the smallest manufacturing industry relative to domestic purchases of any OECD country.

“Our consumption of manufacturing output is nearly double our domestic manufacturing output, and we have slipped in economic complexity from a modest 55th in 1995, to 91st in the world in 2020.”

“…We are not the only country to realise this – around the world industry policy is being remade to shore up local manufacturing capabilities.

Picture: ABC News/Ed Husic