Albanese defends PsiQuantum investment ahead of budget

Good morning. Here's what happened overnight and what you need to know today.

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1.

Budget bulletin: Ahead of tomorrow’s budget, Capital Brief sat down with Prime Minister Anthony Albanese for an exclusive interview to detail his flagship Future Made in Australia policy, providing new context into the government’s $1 billion investment into US startup PsiQuantum. Albanese justified the PsiQuantum funding, which has received significant outcry from rival startups, explaining that a breakthrough in quantum computing could have serious national security consequences for the development of AI and cyber security. While acknowledging concerns around "picking winners," the PM stressed the need for Australia to stay competitive and diversify its industries, especially given global shifts in economic and security dynamics. Albanese also explained that the Future Made in Australia policy isn’t about “crowding out private capital," but giving the government a role in facilitating private sector activity. He added that the government's $1 billion spend on solar manufacturing in Australia was motivated by concerns about China's dominance of the solar panel market. This shift to adopt a more interventionist stance in the economy by the government is being driven by a "convergence" of economics, climate policy and security. You can read the full transcript of Capital Brief’s interview with Albanese here. (Capital Brief)

2.

Inflation domination: Inflation is also poised to dominate budget coverage this week, with Treasurer Jim Chalmers ready to seize on updated Treasury forecasts that the government’s cost of living policies are working. The Treasury is forecasting that headline inflation could return to the target band of 2-3% by the end of 2024, earlier than the 2025 timeframe it forecast at MYEFO. In conversation with Capital Brief ahead of Tuesday’s budget, Chalmers argued that he is confident that spending decisions will both tackle inflation and offer cost-of-living relief. “I won't be slashing and burning in the budget while the economy is slowing and people are hurting, but I will be very focused on inflation. I'm confident that the budget will be part of the solution and not part of the problem.” (Capital Brief)

3.

Rafah offensive: UK Foreign Secretary David Cameron told the BBC on Sunday that a UK ban on selling arms to Israel would only strengthen Hamas. Cameron added that while he would not support a major ground offensive in the Gazan city of Rafah, the UK would not follow the US’ decision to stop some arms sales to Israel over concerns of their potential use in the civilian-dense city. The news comes as Israeli forces pushed deeper into the southern Gazan city on Sunday, expanding an evacuation order for Rafah despite widespread calls to abandon the incursion across the international community. The Israeli Defence Force also continued fighting Hamas in northern areas of Gaza over the weekend, where Hamas militants have regrouped. On Sunday, UN Secretary-General Antonio Guterres repeated his calls for an immediate ceasefire in the war, the return of hostages and an “immediate surge in humanitarian aid.” (BBC)(Associated Press)(The Times of Israel)

4.

French allure: Amazon, Pfizer and AstraZeneca announced plans to channel billions in investment into France ahead of the country’s ‘Choose France’ business summit this week. Pfizer has pledged to invest €500 million ($814 million) to build out its research and development work in the country, while AstraZeneca will deploy €360 million for its site in Dunkirk in the country’s north. Amazon has promised to inject €1.2 billion. The ‘Choose France’ summit which drew in €13 billion in foreign investment in France last year, is a key focus for President Emmanual Macron (who is hosting the event) as the country faces a significant budget deficit and lethargic growth (0.2%) in the first quarter. Earlier on Sunday, French Finance Minister Bruno Le Maire also announced that US bank Morgan Stanley plans to add 100 jobs in its Paris office, known as its new ‘European Campus’, German aviation firm Lilium will invest €400 million in a factory in France, and Switzerland’s KL1 will commit €300 million for a nickel refining site. Le Maire told reporters: "Europe needs money. If not, it will continue to lose out in terms of productivity to the United States and China." (Reuters)

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Solidifying semiconductors: South Korea is readying plans to inject over USD7.3 billion into the country’s semiconductor industry. In a meeting with local manufacturers on Friday, deputy Prime Minister and Finance Minister Choi Sang-mok said that the government is weighing bolstering the country’s critical industry, through policy financing from the state-own Korea Development Bank or a joint fund using public, private and policy financing. Korea is currently the world’s largest producer of memory chips and in January unveiled plans to spend over USD470 billion to build the globe's biggest chipmaking cluster near Seoul. The US is also pushing for allied nations like Korea to help curb the flow of chipmaking goods to China in efforts to limit its semiconductor production. (Bloomberg)

6.

Gas hold-up: APA Queensland has delayed signing-off on its South West Queensland Pipeline expansion which was due to start construction in H2 2024, stating that regulatory uncertainty tied to the government’s investigation into the pipeline sector means it cannot approve the spending. APA’s plans included expanding the capacity of the pipeline by 25% through stage three and four processes, The Australian reports, which would direct more gas toward NSW and Victoria. Speaking at the Macquarie Australia Conference late last week, APA CEO Adam Watson explained that the company has paused investment in stage three of the east coast grid, which had been viewed as a critical update to avoid impending gas shortfalls in Australia’s southern states in the next two years. APA is delaying sign-off on stage three and four as the Australian Energy Regulator (AER) is now weighing plans to convert the expansion to a “scheme pipeline” which would subject the project to full price regulation. Watson said that APA shareholders have bluntly asked: “How do you do that when you don’t know what return we’re going to get now on stage three or stage four?” (The Australian)

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Pricey collapse: Grant Thornton is poised to rake in £46 million for managing the administration of Greensill Capital, making it one of the most expensive insolvency processes the UK has seen in recent years. The accounting firm upped its estimated costs last month, with a Companies House filing showing that it expects to charge an additional £8.5 million in fees in the year to March 2025, bringing the total bill for the administration to £45.6 million over four years. The dramatic undoing of Australian businessman Lex Greensill’s supply chain finance firm in 2021 sparked a political firestorm in the UK, when it came to light that former UK PM David Cameron had lobbied minsters to give Greensill greater access to Covid-19 lending schemes. (Financial Times)

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Cranky customer: Lufthansa CEO Carsten Sophr has blasted Boeing in an interview with Switzerland's Neue Zuercher Zeitung newspaper, outlining the extent to which Boeing’s headaches and holdups have impacted the airline. Carsten said that delivery delays for aircraft orders are “extremely annoying” and have cost the firm a great deal of money. He added that everyone has an interest in Boeing being able to “build great aircraft more reliably again soon” and that buying aircraft from Chinese manufacturers was unlikely. Boeing has been facing significant hurdles since January this year, when a cabin-door blew out of a 737-Max 9 jet, triggering a series of probes into the planemaker’s quality and safety control record. (Reuters)