Building industrial resilience

Australia stands at a crossroads where ambition, fiscal restraint and strategic necessity intersect. The Future Made in Australia agenda, once a rallying cry for sovereign capability and clean-energy transformation, is now the test case for whether we can build genuine national resilience without repeating the waste and distortion of past subsidy cycles. To succeed, Canberra must shift its focus from chasing announcements to engineering durable capability.

The 2026–27 federal budget will be the crucible for this test. Globally, industry policy spending has exploded: the United States’ Inflation Reduction Act has already mobilised US$369 billion (about $567 billion) in tax credits across power, industry and transport, while the European Union’s 025 Clean Industrial Deal and new state-aid rules give members wider levers to back clean-tech manufacturing, rather than a fixed euro envelope.

Closer to home, Japan and Korea have each earmarked more than US$200 billion (about $300 billion) for semiconductor and battery competitiveness. Against that tide, Australia’s Future Made in Australia fund, at roughly $22 billion over a decade, looks modest. Yet here, every dollar must work harder because ‘value for money’ is being redefined to mean not just fiscal prudence but sovereignty gained per taxpayer dollar spent.

Industry policy is back, but the stakes and the terrain have changed. Manufacturing’s share of Australian GDP has declined from between 13 and 14 percent in 1990 to between 5 and 6 percent today, and the nation imports around 90 percent of its refined critical minerals and battery components.

Meanwhile, the International Energy Agency projects global demand for lithium and rare earths will grow sixfold by 2040, magnifying both opportunity and exposure. Australia cannot match the fiscal firepower of the US or China, but it can outthink them by designing policies that leverage its comparative advantages, geographic proximity to the Indo-Pacific, and trust capital among partners seeking secure and transparent supply chains.

That requires discipline and design, not desperation. The risk today is that Future Made in Australia will become an open chequebook, a patchwork of subsidies responding to the loudest corporate voices or the most politically convenient regions. The nation’s history is littered with the remains of such ‘innovation led’ interventions: from 2008 to 2018, annual assistance typically ran in the low-to-mid-teens of billions, yet few sectors became globally competitive. A modern industry policy must do better. It must reward endurance, not entry.

That begins with redefining what sovereignty looks like in the 2020s. Resilience is not about producing everything at home; it is about ensuring that what we do make and process adds strategic weight and withstands global shocks.

For Australia, that means prioritising capabilities that convert raw advantage into national strength, critical minerals, green-energy systems, defence manufacturing and logistics infrastructure in northern Australia. The north already generates more than $45 billion in exports annually, yet less than 15 percent of its output is value-added domestically.

Every additional processing step captured onshore compounds economic resilience and regional employment multipliers, particularly in Darwin, Townsville and Karratha, where defence spending represents a sizeable chunk of local GDP.

In this context, the national resilience pivot is not just an economic issue but a strategic one. Building midstream capability in rare earths and battery materials, for instance, is about more than jobs or exports; it’s about denying coercive leverage to others and ensuring allied forces can source, sustain, and scale in crisis.

A network of northern-based processing hubs, connected by modern transport corridors and renewable energy zones, would embed resilience into both supply chains and deterrence posture. However, such investments require coordination among federal, state and private capital.

Here lies the second fault line: governance. If Future Made in Australia is to succeed, it must evolve beyond a brand into a disciplined investment framework. This means applying clear, transparent metrics for sovereignty dividends, which are the quantifiable returns in resilience, capability and regional value creation.

It also requires independent oversight to prevent subsidy capture, where well-connected firms monopolise incentives while delivering little enduring capacity. Without such guardrails, the program risks devolving into a fiscal black hole under the banner of national security.

A credible industry strategy must also align alliance economics with national benefit. Foreign investment remains critical, as partners such as Japan, Korea and the US collectively account for more than 60 percent of Australia’s critical minerals offtake. But Canberra must ensure these projects lock in Australian participation across the value chain. Co-processing, joint certification, and shared research and development can create mutual benefit while maintaining domestic skill and asset retention.

The final test is cultural. For too long, Australian industry policy has oscillated between two extremes: uncritical market faith and over-engineered state intervention. The Future Made in Australia agenda must chart a third path: strategic capitalism, where the government acts as an enabler and investor, not as an operator or benefactor.

That requires reshaping bureaucratic culture from one of program delivery to one of enterprise building. Economists from Treasury and the Department of Foreign Affairs and Trade must think like investors; Defence and industry must think like systems integrators; and northern stakeholders must be treated not as grant recipients, but as partners in the national project.

Australia’s resilience won’t be measured in policy papers or budget headlines, but in whether our ports, refineries, and supply chains can continue to operate when the next geopolitical shock strikes. Every dollar spent under Future Made in Australia must move the dial toward that outcome: greater autonomy, deeper partnerships and longer-term economic endurance.

If we get this right, Australia can position itself as the Indo-Pacific’s trusted producer, a nation that builds, refines and exports value with integrity and foresight. But if we fall into the trap of subsidy theatre, we risk eroding both fiscal credibility and strategic momentum. The choice, as ever, lies not in ambition but in execution. The Future Made in Australia agenda must evolve, fast, from stimulus to strategy, from politics to policy and from announcements to action.

This article was published by The Strategist.