A $2 billion taxpayer-funded subsidy has been announced for Rio Tinto’s Queensland aluminium smelter, as the Albanese government doubles down on its commitment to save local manufacturing with another bailout.
The rescue package marks the government’s fourth intervention to prop up a struggling metals processor as Australian manufacturers struggle to compete internationally due to high operating costs.
The federal and Queensland governments will each invest $1 billion over 10 years to support the Boyne aluminium smelter, located in Gladstone, which Rio Tinto says delivers 1000 jobs at the site and an additional 2000 indirect jobs.
“This is a good day for Queensland jobs, a good day for Australian industry, and a step toward an economy where no one is held back and no one is left behind,” said Industry Minister Tim Ayres, who announced the deal in Gladstone on Wednesday morning.
In return for the funding, Rio will underwrite around $7 billion of investment in clean energy for the Queensland electricity grid.
“This investment is needed now more than ever to safeguard Queensland’s sovereign manufacturing capabilities, and to build national resilience and international competitiveness,” said Queensland Manufacturing Minister Dale Last.
The Albanese government last year contributed to bailouts of Glencore’s Queensland copper smelter and refinery in October, Nyrstar’s smelters in Port Pirie and Hobart in August, and the collapsed Whyalla steelworks in February.
Prime Minister Anthony Albanese said this week that the world order is being disrupted and decades of free trade and economic growth since WWII are over.
Ayres will speak at the National Press Club on Wednesday, where he will say that “rules are in flux” and governments must respond.
He told this masthead on Wednesday that the funding for the Boyne smelter was an extension of that thinking, under the government’s Future Made in Australia policy.
“It’s the biggest pro-manufacturing package in Australian history, and I think I can say without contradiction that this investment in Queensland is the biggest investment in Queensland industrial capability,” Ayres said.
The public funds will be delivered under a production credit, earned by Rio Tinto for manufacture of aluminium and running for 10 years from 2030.
Ayres said the deal represented good value for taxpayers’ money.
“This is an absolute slam dunk in economic terms. It’s an investment in economic resilience and future industrial capability.”
Prime Minister Anthony Albanese said in December the government was close to securing a deal, which would also be worth billions of dollars, to secure the future of its NSW aluminium smelter, which also employs 1000 and is located at Tomago near Newcastle.
Tomago Aluminium’s owners, including Rio Tinto, had warned its future is threatened by a doubling of energy costs when the current electricity contract expires in 2028.
The government is currently negotiating with NSW over its component of the funding.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.