The International Monetary Fund (IMF) has warned that Australia’s $22 billion electric vehicle (EV) subsidy program under the “Future Made in Australia” plan could harm economic efficiency. It said that unchecked incentives might distort markets, weaken productivity, and raise consumer prices.
The report highlights the risk of wasteful spending and fiscal pressure tied to large-scale industrial policies. Similar subsidy schemes in China and the EU have sometimes slowed growth instead of stimulating it. The IMF urges the Australian government to design more targeted and transparent measures.
Economists argue that subsidies should focus on areas with genuine market gaps. They recommend sunset clauses and strong oversight to prevent misuse of public funds. The IMF also calls for better evaluation frameworks to measure results.
Several local critics share these concerns. Energy investor Trevor St Baker believes EV adoption will increase naturally as fuel prices drop, reducing the need for heavy subsidies. Automakers Honda and Toyota have warned that penalties and incentives could inflate car prices, hurting buyers.
Despite criticism, the Climate Change Authority still aims for 50% battery-electric vehicle (BEV) sales by 2035, though BEVs currently make up only 8.1% of new sales this year. The government argues that subsidies can help accelerate the green transition and strengthen domestic manufacturing.
The IMF acknowledges the value of clean energy goals but stresses fiscal discipline. It advises Australia to balance climate ambitions with efficiency and accountability.
As policymakers review the plan, the debate over industrial support is set to intensify. The report is expected to shape future adjustments to the “Future Made in Australia” framework.
