The Albanese Labor government, in collaboration with its Queensland counterpart, has recently announced a decision to invest nearly a billion dollars in PsiQuantum, an American quantum computing company based in Silicon Valley. While some of PsiQuantum’s founders are Australian, and Australia boasts some of the world’s leading quantum researchers and early-stage companies, this decision raises numerous red flags and concerns about the government’s approach to investing in emerging technologies.
First and foremost, it is crucial to emphasize that PsiQuantum is not an Australian company, but rather an American one. The majority of the company’s ownership lies with American technology investors, who stand to benefit significantly from this substantial investment. In contrast, it remains uncertain whether the Australian taxpayer will reap any tangible benefits from this decision.
By investing such a staggering sum in a single company, Labor is essentially positioning itself as the most risk-loving venture capitalist in history. Venture capital investors typically spread their investments across multiple companies and technologies, and only after conducting extensive due diligence. However, Labor has chosen to place an enormous bet on not only one specific technology (quantum computing), but also one particular pathway to commercialize that technology (photonic qubits), and one specific company pursuing that path (PsiQuantum).
While photonic qubits may indeed prove to be the winning technology in the race to develop quantum computing, there are numerous other contenders, such as silicon-based systems, superconducting qubits, ion trap technology, neutral atoms, and diamond-based systems. Moreover, it is not even certain that quantum computing will ever prove to be commercially viable. Although Australia is home to world-leading research and outstanding companies working to bring quantum computing from the lab to the market, no one – not even the most knowledgeable quantum experts – can say with certainty which technology will ultimately succeed.
Given this level of uncertainty, the prudent approach would be for governments to spread their investments across a diverse range of researchers and companies, rather than placing all their eggs in one basket. PsiQuantum itself acknowledges that current quantum computers are “many orders of magnitude away from the size of system needed for fault-tolerance,” casting doubt on Labor’s claim that this investment will lead to Australian manufacturing in the near future. It is simply not possible to begin manufacturing a product that does not yet work.
The decision-making process that led to this investment also raises serious questions. It appears to have originated from meetings between Industry and Science Minister Ed Husic and PsiQuantum in late 2022 and early 2023. While Minister Husic may have been impressed by what he saw, the subsequent process of getting from those meetings to the final decision has been far from transparent or rigorous.
It has come to light that PsiQuantum retained a Labor-aligned lobbying firm co-founded by Richard Marles’ former chief of staff, Lidija Ivanovski. Furthermore, PsiQuantum was reportedly briefing investors months ago about being in advanced discussions with the Australian federal and state governments. The expression of interest process that followed involved only a small number of companies, required them to sign non-disclosure agreements, and left some feeling that the specifications had been tailored to favor PsiQuantum.
This sequence of events paints a picture of a government that has become enamored with a particular company and has directed the Department of Industry to find a way to fund them, potentially through a sham process designed to justify a decision that had already been made.
Questions also remain about the commercial terms of this deal and whether the Australian taxpayer is getting a fair return on their investment. PsiQuantum had previously raised over $US660 million across four funding rounds from more than 20 investors. The Australian taxpayer is now contributing almost the same amount in a single transaction. However, details about the government’s equity stake, the valuation of shares, the breakdown between grants and loans, and the terms of any loans have not been disclosed. Taxpayers deserve to know much more about how their money is being spent and what safeguards are in place to protect their interests.
Labor’s claim that this spending will create 400 jobs also warrants scrutiny. At $2.35 million per job, this is an exceptionally expensive subsidy, and there is no guarantee that these jobs will materialize or be sustained over the long term.
While investing in emerging technologies like quantum computing is undoubtedly important for Australia’s future, the decision to invest such a large sum in a single American company raises serious concerns about the government’s approach. The lack of transparency, the apparent favoritism, and the concentration of risk in one company and technology suggest that Labor has allowed its enthusiasm to cloud its judgment and bypass normal processes of good governance. As a result, the Australian taxpayer has been exposed to substantial and unnecessary risk. It is incumbent upon the government to provide a more detailed justification for this decision and to put in place robust safeguards to ensure that public funds are being spent wisely and in the best interests of the nation.
