Before the Budget: Which Industries Are Winning, and Which are Left Waiting

Authors: Matthew McLean, Shaun van Dijk

The 2026-27 Federal Budget lands on 12 May. Before Treasurer Chalmers delivers his fifth budget announcement, we've put our cards on the table regarding which industries are positioned to benefit from serious government investment, and which will be left waiting.

The government has been explicit about backing industries where Australia has a natural endowment or existing industrial base, and where supply chain resilience and domestic capability have become national priorities. That logic is the thread running through the Budget's investment decisions. We think that understanding which sectors sit inside that frame and which sit outside it is the most useful lens for attempting to forecast what's coming on 12 May.

Winning

Green metals and critical minerals

If there is one industry that has structurally secured government support heading into this Budget, it is this one. The architecture is already in place with the Critical Minerals Production Tax Incentive (a 10% refundable tax offset on eligible processing and refining costs for Australia's 31 critical minerals) legislated and available from 2027. The Hydrogen Production Tax Incentive also offers $2 per kilogram of renewable hydrogen produced for projects reaching final investment decision by 2030.

With this Budget, the first since the May 2025 election, there is no political incentive to pull back and we expect deepening investment and support. For companies doing R&D in this space, or looking to grow and expand, the non-dilutive funding environment is rich.

Artificial intelligence

The National AI Plan, released in December 2025, provides the government with a framework to expand its investment in this space. The Cooperative Research Centres (CRC) Round 28, forecast to open in 2027,is already designated as an AI Accelerator round, with approximately $50 million earmarked for a new AI CRC. The current round of the Cooperative Research Centres Projects (CRC-P) program (which closes on Budget day itself) is offering $20 million exclusively for short-term collaborative projects involving the development of AI systems and technologies.

We expect continued spending to target AI commercialisation and AI adoption in priority industries.

Defence

Defence has shifted from a procurement-dominated sector to one where the government is actively building domestic R&D and manufacturing capability. The 2026 Integrated Investment Program (IIP), released in conjunction with the National Defence Strategy,sets the demand signal. Through the IIP, the Government is investing around $425 billion to deliver accelerated capability via technological innovation. The Defence Industry Development Grants (DIDG) Program includes $170 million allocated through 2028 across four streams including Sovereign Industrial Priorities, Skilling, Exports and Security. 

The Federal Budget is expected to deepen this investment. New rounds of the DIDG are running continuously, and the Budget is likely to signal further expansion of domestic capability programs tied to the submarine program and guided weapons and explosive ordnance priorities. Cybersecurity, autonomous systems, advanced materials and advanced manufacturing in the defence supply chain may be rewarded.

Clean energy technology

The Labor party's re-election majority removes any persisting uncertainty about policy direction in the clean energy space. The Clean Energy Finance Corporation (CEFC) recapitalisation and the Future Made in Australia Innovation Fund allocations established the template in the previous term. The CEFC's total investment capacity has been raised to $32.5 billion. In 2024, it invested more than $4 billion, unlocking roughly $12 billion in private investment. Other signficant funding programs established by the Albanese government includes the Solar Sunshot (a $1 billion program aimed at supporting local manufacturing across the solar supply chain) and Battery Breakthrough Initiative ($523.2 million to support local battery manufacturing capability).

The 2026-27 Budget will extend the Federal Government's support in clean energy technology and innovation, likely heralding new and deepened investment.

Waiting

Health and biotech

The sector has made its case loudly heading into this upcoming Budget. AusBiotech is calling for a National Life Sciences Strategy and recognition under the Future Made in Australia Act. The Association of Australian Medical Research Institutes (AAMRI) is running a national campaign to lift the Medical Research Future Fund (MRFF) spending cap from $650 million to $1 billion. The pre-budget submissions are well-argued and broadly aligned. The problem is that the government hasn't been signalling back.

Where we do see genuine momentum is at the intersection of health and AI like drug discovery, genomics, digital diagnostics, where the government's AI agenda and its health commitments overlap. A company working on AI-assisted clinical decision tools or AI-driven drug discovery is potentially overlapping government funding priority areas.

For established biotech and medtech companies, the R&D Tax Incentive (RDTI) remains the primary mechanism and the Budget is unlikely to change that picture materially.

Agriculture and agtech

Australian agriculture is performing well commercially, but Federal and State governments have reduced agricultural R&D and agtech spending consistently since 2005-06. Pre-budget submissions from the sector are calling for biosecurity investment, freight infrastructure and food security measures.

For agtech companies, the best sources of practical non-dilutive funding are likely better found within the broader innovation and technology commercialisation programs rather than agriculture-specific ones. For example, the Industry Growth Program (IGP) has been one of agtech's better-performing grant mechanisms with nearly a third of Early-Stage Commercialisation grants in this program issued to to agriculture, forestry and fisheries projects.

The bottom line

Green metals, AI, defence and clean energy are the sectors the government is actively backing with new money and new mechanisms heading into the 2026-27 Budget. Health & biotech and agriculture are sectors with strong commercial fundamentals where existing programs including the RDTI, IGP and MRFF remain live opportunities regardless of what the Budget delivers.

We'll be publishing more insights as part of our Before the Budget series, as well as our analysis after the announcements on Budget night. If you want to talk through what the upcoming Federal Budget means for your specific situation before then, get in touch.