(Reuters) – Australia has won the backing of the United States for development of its critical minerals industry after the two countries reached an agreement to coordinate polices and investment to support the industry’s growth.

Australia supplies around half of the world’s lithium as well as other minerals like rare earths used in batteries for electric cars and defence amid a global push to diversify supply chains away from dominant producer China.

The agreement will also cover clean energy as the country sets itself up to become a major producer of hydrogen and ammonia.

“The climate, critical minerals and clean energy compact is an ambitious agreement,” Australian Prime Minister Anthony Albanese told parliament on Monday.

“It will expand and diversify our clean energy supply. It’ll promote the sustainable supply and processing of critical minerals and support the development of clean hydrogen, battery technologies and other clean energy products.”

The deal also paves the way for Australian suppliers of these minerals, and renewable energy, to be treated as domestic suppliers under the U.S. Defence Production Act.

That is set to boost investment back towards Australian companies, supported by regulation like the landmark U.S. Inflation Reduction Act (IRA) which has reinvigorated global renewable energy supply chains since August.

“This is about creating an enormous opportunity for Australia and I can’t underline how significant this is,” Albanese told press after a Quad leaders’ summit in Hiroshima on Sunday.

Ministers from the U.S. National Security Council and Australia’s Department of Industry will take part in a task force that will develop a plan by the year end to encourage stronger industrial collaboration and speed up development, the two leaders said in statements announcing the deal on Saturday.

The compact will establish climate, clean energy and a shared energy industrial base as a central pillar of the Australia-United States Alliance, they said.

The deal will be “very, very positive,” for Australia which is seeking investment from allies to grow its critical mineral processing industry, as it also builds up green hydrogen for export, mining billionaire Andrew Forrest said.

“This should push Australia over the line,” Forrest told Sydney radio station 2GB. Forrest has stakes in critical minerals processing, solar and wind, is becoming a major hydrogen producer through Fortescue Future Industries.

Australia is set to announce a national strategy for critical minerals processing shortly, the Australian government said last week.