SIGN UP for our newsletter ✉️ :

Get the latest stories delivered straight to you

Labor's manufacturing fund hangs in balance

Labor's signature reconstruction fund runs the risk of being blocked in the upper house, with the Albanese government yet to secure the crucial votes it needs.

The $15 billion National Reconstruction Fund will provide finance for projects in key areas such as technology, transport and renewables to boost manufacturing in Australia.

Greens leader Adam Bandt said on Thursday an amendment to the legislation had been agreed to, which would prevent future governments from using the fund to invest in coal and gas projects, or log native forests.

Industry Minister Ed Husic said having the bill clear the lower house was a "good day" and remained confident it could clear the Senate.

"I'm proud of the support," he told parliament.

"This is something that is absolutely worth fighting for ... in the end, you had the bulk of this chamber say Australian manufacturing is worth backing."

But the decision to exclude logging from any funding has angered Tasmanian senators Jacqui Lambie and Tammy Tyrrell, who are both crossbenchers.

"Giving in to the Greens' demands is a smack in the face to Tasmanians," Senator Tyrrell said.

"The prime minister needs to come out and explain this about face."

Despite support from the Greens, the government will still need the backing of at least two crossbench senators for the bill to pass.

Independent senator Lidia Thorpe, who quit the Greens, said she was still in negotiations with the government over the bill.

"There is no free, prior and informed consent for any new coal and gas projects and I question the consent from Traditional Owners on existing coal and gas projects," she told AAP.

"Destruction of country goes hand in hand with the destruction of our people."

The government had argued in the past the fund was not being set up to back coal and gas projects, but now it will be explicitly set out in the legislation.

The deal will create a class of "prohibited investments" within the legislation including financing the extraction of coal and gas, the construction of gas pipelines and the logging of native forests.

Mr Bandt said the amendment would ensure the election promise "does not turn into a slush fund for new coal and gas".

During a press conference, Mr Husic maintained the fund was never about coal and gas projects, but to invest in manufacturing capability.

He said the government was keen to work with the crossbench, and Labor was happy to provide them with the reassurance they wanted.

The coalition has vowed to abolish the fund if they win government at the next election.

Deputy Liberal leader Sussan Ley described the legislation as "bad" and said gas was critical for the transition to clean energy.

"We will fight Labor's recklessness all the way to the Senate, then to the election, and beyond," she said.

Australian Forest Products Association chief executive Joel Fitzgibbon said the deal was a "shameful victory for politics over sensible policy".

"Australian industry and Australian jobs should never be used as a Senate bargaining-chip," the former Labor minister said.