The Federal Government’s 2026-27 Budget has drawn a mixed response from industry, research and engineering groups, with stakeholders broadly welcoming continued support for manufacturing, research and innovation while raising concerns about energy costs, skills shortages and the pace of reform.
The Budget, announced by Treasurer Jim Chalmers in Parliament House, Canberra, reinforced the government’s “Future Made in Australia” agenda, alongside measures linked to research and development, productivity and sovereign capability.
GME backs domestic manufacturing focus
Australian manufacturer GME said the Budget’s ongoing support for domestic industry sent a positive signal to local producers.
“The 2026 Federal Budget’s continued support for the Future Made in Australia agenda sends an important signal for local industry, with a clear emphasis on strengthening domestic production and national capability,” GME chief executive Stephen Millar said.
“That focus on building resilient supply chains, backing Australian manufacturing and supporting investment in productive capacity is exactly the kind of policy direction that helps underpin long-term industry confidence.”
Millar said the measures reinforced “the value of Australian-owned manufacturing and the role local producers play in supporting a stronger, more self-reliant economy”.
RSM Australia calls for more action on costs and skills
However, accounting and advisory firm RSM Australia said the Budget largely extended existing manufacturing programs rather than introducing major new support measures.
RSM Australia manufacturing national leader Louis Quintal said manufacturers were still facing pressure from energy costs, supply chain instability and labour shortages.
“We were hopeful that this year’s budget would address Australia’s persistent supply chain issues, first made apparent during the pandemic and now evident again with the ongoing conflict in the Middle East,” Quintal said.
“While the decisions to increase fuel and gas reserves help, they don’t provide a clear path to lower industrial costs in the face of rising energy costs which are placing manufacturers under significant pressure.”
Quintal also said the sector needed stronger support for workforce development and technology adoption.
“We had hoped to see incentives to reduce the ongoing skills shortages through either incentivised training or skilled migration,” he said.
“At the same time, there is also little in the way of automation and digitisation to offset ongoing labour shortages.”
Robotics and AI seen as critical productivity infrastructure
Artificial intelligence and robotics also featured prominently in commentary on the Budget’s productivity focus.
Monash Robotics director Professor Dana Kulic said robotics and AI were increasingly being viewed internationally as essential economic infrastructure.
“Productivity has become a focus of this Federal Budget, yet despite Australia’s National Robotics Strategy recognising robotics and AI as critical to economic growth, they are still not being treated as core economic infrastructure,” Professor Kulic said.
She said Australia risked falling behind internationally if investment and policy settings did not keep pace with other countries.
“Internationally, robotics is seen as a strategic capability underpinning productivity gains across sectors like manufacturing, healthcare, agriculture and infrastructure,” she said.
SMEs face barriers to robotics adoption
Professor Kulic said one of the major barriers to adoption in Australia was the dominance of SMEs, which often lacked the expertise and capital needed to implement robotic systems.
“If productivity is the goal, policy needs to support approaches that lower the barriers to adoption for companies, making robotic systems easier to integrate, adapt, manage and use without requiring specialised robotics expertise,” she said.
R&D tax incentive reforms welcomed
Research and development reforms announced in the Budget were welcomed by several organisations, particularly changes to the Research and Development Tax Incentive (RDTI).
RSM Australia partner Simon Harcombe described the expansion of the refundable R&D tax offset threshold as “a great outcome” for medium-sized companies investing heavily in growth and innovation.
“The 4.5% increase in the refundable and non-refundable R&D tax offset rates is also a significant positive for all program claimants,” Harcombe said.
Concerns remain about SME compliance burden
He said the changes could reduce compliance burdens and encourage greater R&D investment, although he cautioned that smaller firms would still face regulatory scrutiny.
“Regardless of any statutory changes announced, SMEs making RDTI claims will continue to face scrutiny from the regulators, which could reduce the overall positive economic impact of the changes made,” he said.
CRA welcomes CRC Program support
Industry-research collaboration body Cooperative Research Australia welcomed the Government’s support for the CRC Program and reforms linked to innovation policy.
CRA chief executive Jane O’Dwyer said the Budget represented “a clear signal that the Government is committed to the role of cooperative research in lifting Australia’s productivity and sovereign capability”.
RDTI reforms seen as overdue
O’Dwyer said reforms to the RDTI and venture capital settings could help attract more research investment into Australia.
“The Research and Development Tax Incentive reforms are substantial and critical – and well overdue,” she said.
“It will potentially attract larger companies to undertake R&D in Australia and keep some of our most important R&D companies investing here.”
Concerns over grant program cuts
At the same time, CRA criticised cuts to several grant programs, including the Australian Economic Accelerator and Industry Growth Program.
ATSE welcomes research funding
Science and engineering academy Australian Academy of Technological Sciences and Engineering (ATSE) also welcomed additional funding for research agencies including CSIRO, while expressing concern over reductions to some innovation initiatives.
ATSE chief executive Professor Kylie Walker said research investment was critical to building a productive economy.
“Investment in research and development is one of the most important things a government can do to build a healthier and more prosperous country,” Professor Walker said.
“We are heartened to see the Government taking concrete, tangible steps to start to implement the Ambitious Australia report’s recommendations, such as reforming the R&D tax incentive to encourage innovation and collaboration with research bodies.”
Engineers Australia highlights workforce pressures
Engineering sector representatives also linked the Budget’s productivity measures to future workforce needs.
Engineers Australia chief engineer Katherine Richards said engineers would be central to delivering the Government’s housing, infrastructure and advanced manufacturing ambitions.
“Engineering capability sits at the heart of Australia’s productivity, resilience and future prosperity,” Richards said.
“From advanced manufacturing and clean energy to defence, the industries shaping the nation’s future will be built on engineering expertise.”
Engineers Australia said around 70,000 engineers were expected to retire over the next decade, with an additional 150,000 engineers needed nationally during the same period.
Australian Energy Producers backs framework
The Budget’s energy-related measures also attracted support from the resources sector.
Australian Energy Producers said revised Budget forecasts showed strong returns from the oil and gas industry through higher tax and royalty receipts.
Australian Energy Producers chief executive Samantha McCulloch said the revised estimates demonstrated that existing tax settings were “already working as intended”.
“The Budget confirms Australia’s existing tax and royalty framework is delivering significant returns to the community while supporting reliable energy at home and energy security across our region,” McCulloch said.
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