Reserve Bank of Australia (RBA) board member Heather Ridout says a federal government plan to fund a work-boosting program for manufacturers by scrapping business tax concessions could hurt foreign investment.
Ms Ridout said the package, announced at the weekend, was generally sound, but she was concerned about the impact of the tax changes on big companies.
"In the future, if a big manufacturing company is thinking about making a big investment in Australia, they will look at things like this and say `well, we're going to butt against that barrier'," she said during a roundtable discussion on manufacturing.
"We need that kind of investment, so take a really balanced approach to this; it could come and bite us.
"We shouldn't be changing the rules around this and making it harder for big companies to do research and development, because that filters down to small companies."
The plan will give local firms opportunities to bid for contracts on large projects before the work is sent offshore.
The government will also create new manufacturing precincts to help small and medium-size businesses develop new products and skills to break into new markets.
It will be funded by removing special research and development tax concessions for big businesses.
"I've been speaking to CEOs from numerous companies over the last couple of days and there is a renewed sense of confidence in industry because of that package," he said.
Mr Howes said the package was the most substantial industry plan for Australian manufacturing since John Button was the sector minister.