Manufacturing sector facing gas crisis
Australia could be facing a gas supply crisis if the Federal Government fails to intervene and ensure competitively price gas supply, according to the latest report released by Manufacturing Australia.
The analysis concluded that almost 200,000 Australian jobs and $28 billion in economic value could be wiped out if the impending gas crisis escalates.
A gas supply crisis is about to hit Australia’s East Coast because gas currently devoted to domestic manufacturing is being diverted to export, leaving Australians to pay one of the world’s highest gas prices despite having one of the world’s largest supplies, the report finds.
Natural gas is essential to many manufacturing industries, making up 15-40% of the cost base of common products like fertiliser, alumina, cement, bricks and roof tiles.
Manufacturing Australia's report predicts that, without intervention, the shortage of supply and unprecedented price shock could result in the loss of 12% of manufacturing value add and 9% of manufacturing jobs.
Releasing the report Manufacturing Australia Chairman Sue Morphet said that if Australian manufacturing was to be competitive and sustainable over the long term we need to review and rethink the way that the sector is supported.
“Rather than asking what the cost of intervention is, governments should be asking what is the cost to the nation of doing nothing,” Ms. Morphet said.
"It is not good enough for poor planning and bad policy to turn one of Australia's greatest strategic assets - our abundant energy resources - into a liability. No other gas-rich country lets this happen. Why should we let it happen in Australia?”
“The simple fact is that the economic benefit of supporting Australian manufacturers through gas market intervention dwarfs the loss to the multinational gas industry by $25-$28 billion per year,” Ms. Morphet said.
Ms. Morphet said there were several options available to Governments to strike a balance between exports and domestic value adding to gas. These include introducing a National Interest Test for export such as in Canada, ‘use it or lose it’ provisions, reserving a small percentage of gas for domestic market use such as in Western Australia or other arrangements such as royalty arrangements or tax incentives.