Rising LNG prices more significant than carbon tax for manufacturing sector

A report commissioned by manufacturing companies shows more than 14,000 manufacturing jobs could be lost nationally by 2021, if gas prices continue to rise and exports increase.

The report projects significant negative impacts on Australia’s manufacturing sector and adverse effects extending to the mining, transport and agriculture sectors. These are significantly larger than the output impacts of the now repealed carbon tax.

The impacts are the result of higher gas prices as liquefied natural gas (LNG) exports ramp up on the East Coast, tripling domestic gas prices to export parity levels.

The report, Gas Market Transformations - Economic Consequences for the Manufacturing Sector, anticipates that under current policies and realistic gas price forecasts:

• Australia’s manufacturing output will contract by $118 billion over the next seven years;
• 14,600 manufacturing jobs will be lost;
• The mining sector will contract by $34 billion and the agriculture sector by $4.5 billion;
• Queensland, New South Wales and Victoria will suffer serious declines in manufacturing.

Australian Industry Group Chief Executive Innes Willox said it was a paradox that bringing Australia’s abundant gas supplies to market could have such a damaging effect on the manufacturing sector.

“Gas exports should be pure good news for Australia. However, the strong benefits for investment and export earnings come with serious side effects for domestic manufacturing: tight supply and surging prices. Without reform, our rich energy reserves will no longer contribute to Australia’s competitiveness.

“We need both a growing LNG export industry and a diverse industry base with a strong manufacturing sector. We need action on two fronts - get more gas flowing, by replacing blanket bans on gas production with strong but workable regulation; and reform the market that gas is sold in to boost competition and transparency,” Willox said.