Australia’s $15 billion National Reconstruction Fund will now be permitted to back green projects that operate at a loss, under newly relaxed rules unveiled by the government changes the Liberal Party argues will worsen inflationary pressures.
The fund, created in 2023, has been slow to deploy capital into clean‑energy and emissions‑reduction initiatives. Major investors have long warned that the government’s reluctance to support higher‑risk ventures has stalled more than $100 billion in potential private investment waiting on clearer signals from Canberra.
Industry Minister Tim Ayres, who has already shifted the fund’s direction once, announced a more aggressive strategy aimed at accelerating Australia’s industrial transition. Under the revised rules, the fund will no longer be required to deliver returns 2 to 3 per cent above the cost of borrowing for emissions‑cutting projects. Instead, a new $5 billion green sub‑fund will allow returns up to 1 per cent below the cost of borrowing effectively sanctioning investments that lose money.
Ayres, alongside Climate Change Minister Chris Bowen, said the change will enable the fund to shoulder more risk than commercial lenders and help heavy industry adopt technologies needed to slash emissions while drawing in private capital.
The shift comes amid mounting pressure on Australian manufacturing, driven by China’s extensive industrial subsidies, soaring domestic energy prices, and escalating global trade tensions. These forces have already pushed the government toward more direct intervention in key sectors, including occasional bailouts.
Officials describe the new approach as a “vote of confidence” in the fund’s ability to make strategic investment decisions, stressing that the revised return benchmark is a minimum, not a cap. Ayres said supporting heavy industry through the energy transition requires “leadership, planning and an appetite for risk.”
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