Australia’s Race to Develop a Critical Minerals Sector
- Australia is developing its critical minerals sector to support the global green transition.
- The government has launched strategies and tax incentives to attract investment and boost production.
- Australia holds significant deposits of critical minerals, including lithium, cobalt, and rare earth elements.
Australia has been developing its critical mineral sector in recent years, aiming to become a major producer and processor of the high-demand minerals and metals needed to support a global green transition. In addition to launching a national strategy and providing billions in funding for the sector, the government recently established a tax incentives law for critical minerals that is expected to attract greater investment in the sector.
The demand for critical minerals is expected to increase dramatically over the coming decades as countries worldwide use them to power a global green transition. Common uses for critical minerals include the manufacturing of batteries, electronics, microchips, and solar photovoltaics. Australia is home to some of the largest recoverable critical mineral deposits on earth, including high-quality cobalt, lithium, manganese, rare earth elements, tungsten, and vanadium.
In December 2023, the Australian government launched the Critical Minerals Strategy 2023–2030, which provides a framework to develop critical minerals production, processing, and supply chains in Australia. It is expected to support job creation and boost economic growth. It encourages collaboration across communities, industry, investors, the research and innovation sector, states and territories, and international partners. The strategy focuses on six key areas: developing strategically important projects, attracting investment and building international partnerships, First Nations engagement and benefit sharing, promoting Australia as a world leader in ESG performance, unlocking investment in enabling infrastructure and services and growing a skilled workforce.
In 2021, the government established the Critical Minerals Facility, with $1.3 billion in funding to address the funding gap in the country’s critical minerals sector. It has since added a further $1.3 billion to the scheme. The facility provides financing for projects that align with the government’s Critical Minerals Strategy.
In February, the Australian parliament passed laws that provide production tax breaks for critical minerals and renewable hydrogen to support national energy transition plans and help decrease reliance on China for its supply. The law offers $4.4 billion in tax incentives of 10 percent for the processing and refining costs for 31 critical minerals from 2028 to 2040 for up to 10 years per project. The Resources Minister Madeleine King stated, “By processing more of these minerals here in Australia, we will create jobs and diversify global supply chains.”
Australia currently has a Labour government, led by Prime Minister Anthony Albanese. However, the opposition Liberal-National Coalition is vying for power in the May general election, and it has a very different stance on energy. The Coalition told the gas industry in April that it planned to give gas the same status as a critical minerals if it came into power, which would provide the industry with access to $3.6 billion in export finance.
Susan McDonald, a Queensland senator, stated that the party will ensure that natural gas “remains a critical part of the Australian economy for decades”. She added, “I can announce today that to boost investment, a Coalition government will elevate gas to the same status as a critical mineral… This will ensure gas projects are able to apply for funding from the $4 billion (US $3.6 billion) critical minerals facility.” McDonald went on to say, “This will ensure gas projects, so critical to our national and international security, are able to access specialised teams within the department of resources to support their projects.” In March, the opposition leader Peter Dutton promised to create an east coast gas reservation scheme, aimed at reducing energy prices.
By contrast, Albanese aims to continue supporting a transition away from oil, gas, and coal if re-elected, particularly in the wake of the recent Trump tariffs. He plans to increase critical mineral mining and processing activities to boost Australia’s trade appeal with the U.S., as the North American giant attempts to reduce dependency on China for its critical minerals and green energy components. The PM is expected to unveil plans on how he will accelerate the expansion of the industry in the coming weeks.
U.S. President Donald Trump recently announced sweeping tariffs on imports from countries worldwide, with 25 percent on steel and aluminium and 10 percent on most Australian goods, except for pharmaceuticals and some critical minerals. Trump has been back and forth on his tariffs, introducing them and then later pausing them for extended periods. World leaders have responded to the threat of tariffs by diversifying their trade partners and attempting to ensure the future of their trade security in a range of ways. For Albanese, this means making Australia a critical minerals hub.
Australia’s Labour government has supported the development of the country’s critical minerals industry, with significant sectoral growth expected over the coming decades. However, this expansion could depend heavily on whether Albanese wins the May election or if the Liberal–National Coalition takes power, putting more of an emphasis on natural gas development.
By Felicity Bradstock for Oilprice.com
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