Production Tax Credit for value-add processing of Australia’s critical minerals
28.02.2024 - 03:30
Our report ‘Production Tax Credit for value-add processing of Australia’s critical minerals’, commissioned by the Association of Mining and Exploration Companies (AMEC), explores how targeted production tax credit for value-add processing of critical minerals can improve Australia’s competitiveness and help our domestic critical mineral sectors reach their potential. Our report finds that introducing a production tax credit for lithium, nickel, vanadium and rare earth metals can make Australia cost-competitive and create opportunities in the downstream processing of critical minerals. Australia’s critical minerals are central to the global energy transition, however global competition has put Australia at a cost disadvantage in downstream processing of critical minerals. Introducing a production tax credit of 10 per cent in Australia would help to equalise production costs with global competitors. While the production tax credit will increase fiscal costs over the forward estimates and medium-term, it will add $2.4 billion of economic activity and support 4,220 ongoing jobs.
Australia needs a targeted policy response to improve its competitiveness in critical minerals while adding $2.b billion to the economy and supporting 4,220 ongoing jobs.
Australia’s critical minerals are central to the global energy transition, however we are missing out on opportunities to refine our raw materials.
Australia’s critical minerals are central to the global energy transition; however, we are missing out on opportunities to refine our raw materials. Across lithium, nickel, vanadium and rare-earth metals, Australia has significant reserves and extraction potential, however we currently perform only limited processing, despite enjoying a natural advantage from proximity to raw materials and significant forecast global demand.
This is occurring against a backdrop of a global policy trend introducing policies to secure important industries, which have increased 46 times over the last 12 years. In critical minerals in particular, competitor countries such as the US, Canada and China have all introduced significant new initiatives to secure their sovereign capabilities.
A production tax credit for critical minerals can improve Australia’s competitiveness in the downstream processing of raw materials.
The IRA has left Australia at a significant disadvantage to the US for downstream processing of critical minerals. Using proprietary industry data from ten firms in Australia’s critical minerals industry, we have determined that Australia’s production is on average 10 per cent more expensive than in the US when it comes to refining critical minerals and producing battery active materials. This has been caused first and foremost by the US’ PTC which provides for a 10 per cent production subsidy both for critical minerals and active materials.
Downstream processing of critical minerals could add $2.4 billion and 4,220 jobs to Australia’s economy by 2035.
Eliminating the cost differential will lead to an additional $2.4b of economic activity, which is concentrated in mineral refining. This could result in an additional 4,220 jobs in the industry on an ongoing basis. The construction required to develop the plants required to refine minerals and produce active materials will create an additional 1,800 construction jobs at peak construction activity.
Read our latest posts
Unlocking a Virtuous Cycle: Overcoming Barriers to AI in Australian Energy Systems
Mandala's latest research, developed in partnership with Microsoft, examines the barriers to transformative AI adoption in Australia's electricity system. The research finds that AI is one of the few tools able to unlock capacity and efficiency from the existing grid without waiting on new transmission and generation capacity, yet adoption today remains incremental. Three soft barriers, a lack of shared strategy, weak investment incentives and siloed data, are constraining Australia's ability to capture this potential. Overcoming them will require joint action from government, the technology industry and energy utilities to prove AI's value, align policy settings and fund pilots through to deployment.
8 Jul, 2026
Demonstrating the local benefits of AI infrastructure in Wisconsin
Mandala's latest research, prepared for Microsoft, examines the economic impact of hyperscale data center investment on Wisconsin's communities, businesses, and workforce. The research finds that committed data center projects will channel $16.5 billion to local suppliers, support more than 9,000 jobs during construction, and generate lasting economic activity across every county in the state, thereby extending Wisconsin's long tradition of industrial leadership into the AI era.
1 Jul, 2026
The essential infrastructure: How Australian banks power the economy
Mandala's latest research, prepared for the Australian Banking Association, examines the often-hidden role Australian banks play in supporting households, businesses and the broader economy. The research finds that banks are deeply embedded in the financial lives of Australians - as lenders, as community investors, through the jobs they generate and increasingly as assets owned by Australians themselves through shares and superannuation. From financing homes and small businesses to supporting regional communities through hardship and disaster, the report builds a picture of a sector whose success is broadly shared across the Australian population.
17 Jun, 2026
The threat of climate change to the US insurance industry
This joint report by the Coalition for an Insurable Future and Mandala Partners examines how climate change is undermining the stability of the US home insurance market. Homeowners insurance premiums have risen 38% since 2021, outpacing both inflation and wage growth, while 1 in 7 owner-occupied homes are now uninsured. Climate risk could push national premiums 35–107% higher by 2050, leave an additional 1.5–2.5 million households without cover by 2035, and cost the broader economy $1 trillion. The aggregate cost could rise to over $3 trillion by 2050. A preliminary assessment of state-level policy responses across California, Florida, Louisiana, New York and Colorado finds that effectiveness is mixed, and that the burden of costs falls primarily on homeowners, insurers and taxpayers, rather than on the sources of the underlying climate risk.
10 Jun, 2026