In one of the few unambiguously positive announcements for the aviation sector in the 2025-26 Federal Budget, the Australian Government has committed to a policy package designed to accelerate the development and uptake of Sustainable Aviation Fuel (SAF) domestically.
The package includes a low-carbon liquid fuel demand-side measure to be developed in consultation with industry – alongside confirmation of the Cleaner Fuels Program, which will support local SAF production using Australian feedstocks.
Sydney Airport CEO Scott Charlton welcomed the announcement as a landmark moment.
“SAF is a once-in-a-generation opportunity to revitalise Australian sovereign capability and reduce our reliance on imported liquid fuels,” he said. “SAF can be made in Australia, using Australian feedstocks, helping create and sustain Australian jobs.”
Why the dual commitment matters
Charlton said the combination of a demand-side measure and the Cleaner Fuels Program was the policy design the sector had been advocating for – addressing both the supply of Australian-produced SAF and the market mechanisms needed to drive uptake.
“The commitment to a SAF demand-side measure alongside the Cleaner Fuels Program represents significant and meaningful progress toward building an Australian SAF industry, enhancing our long-term fuel security and resilience,” he said.
He stressed that the policy design process would be critical, and called for close collaboration between government and industry to ensure Australia develops a framework that is both effective and globally competitive.
Strong public support behind the push
The government’s move comes with significant public backing. Research undertaken by Sydney Airport in March 2026 found 72 per cent of Australians support the development of a domestic SAF industry, with just six per cent opposed. Charlton used the budget announcement to call for cross-party support, describing Australian SAF capability as critical not just for aviation decarbonisation but for national fuel security.
“We encourage all parties in the Parliament to get behind the development of an Australian SAF industry as a critical enabler of Australia’s long-term fuel security and resilience, while creating significant economic opportunities for regional and agricultural communities,” he said.
Improving fuel sovereignty
The AAA has welcomed efforts to improve Australia’s fuel sovereignty, including the $14.8 billion fuel security and price relief package, part of which will help expand jet fuel stocks.
This also involves consultation on demand-side measures to support a domestic Sustainable Aviation Fuel (SAF) industry.
“Australia has the natural resources, renewable energy potential and aviation demand to become a regional SAF leader, but achieving that outcome will require sustained policy certainty, infrastructure investment and internationally aligned accounting frameworks,” AAA Chief Executive Simon Westaway said.
The establishment of the Aviation Consumer Protection Authority will also progress with $38.1 million in funding announced to set up the independent framework.
“We welcome this funding to ensure the authority begins to deliver better outcomes for passengers, while the structure will allow for the development of a funding framework that is practical and reasonable for airports,” he said.
The AAA has welcomed $4.5 million funding in the Budget to extend the Australian Competition and Consumer Commission’s (ACCC) Domestic Airline Monitoring program, which was due to expire in December.
Westaway said the Federal Government’s decision to extend the report was timely, particularly as volatile jet fuel prices and global supply disruptions due to the Middle East conflict continue to place pressure on domestic aviation.
“This extension of the ACCC Domestic Airline Monitoring report is a smart move and helps support a transparent, efficient and competitive aviation system in Australia,” Westaway said.
“The report helps identify emerging risks, cost pressures and areas where competition and consumer outcomes can be improved.”
Relief for regional airports
The AAA acknowledges previous Federal Government support and regulatory relief for smaller airports, including assistance for those impacted by Rex Airlines’ voluntary administration, but noted no new major funding announcements in this Budget.
“Regional airports connect communities to health care, education, employment, tourism and freight, but many continue to operate under significant financial pressure while maintaining essential infrastructure,” Westaway said.
“One-off assistance and regulatory relief are welcome, but they cannot replace the need for a long-term funding framework that helps regional and remote airports maintain safe, reliable and affordable aviation services.
“The Budget contains welcome steps, but there is still more to do to support regional and remote airports, improve border efficiency and strengthen airline competition across Australian aviation.”
What comes next
Sydney Airport has confirmed it intends to participate actively in the policy design process alongside government and industry partners. The detail of how the demand-side measure is structured will be closely watched _ particularly how blending mandates or incentives are calibrated to drive commercial SAF uptake without adding prohibitive cost to airlines already under pressure.
For an industry that spent much of budget night reacting to the PMC hike, the SAF announcement offers a rare moment of genuine optimism – and a sign that the Government is at least thinking about aviation’s long-term future, even if its short-term decisions have landed badly with operators.
