The Plastics and Chemicals Industries Association (PACIA) has released a comprehensive analysis report that studies the impact of the unprecedented changes in Australia’s gas market on industry.
Prepared in collaboration with five leading industry associations, the report titled ‘Gas Market Transformations - Economic Consequences for the Manufacturing Sector’ is an independent study undertaken by Deloitte Access Economics, and reveals the implications of forecast Australian domestic gas price increases and supply tightness, and the severe side effects on the Australian economy.
PACIA CEO Samantha Read explains that the analysis covers the impact of rising gas prices on industry and the broader manufacturing sector.
The LNG export growth has impacted the Australian manufacturing sector significantly, with the report predicting a loss of national manufacturing output of approximately $118 billion by 2021 in net present value terms. Job losses for the same period are forecast to be 14,600.
The chemicals and plastics industry will also be severely impacted, with the report forecasting losses of $13.7 billion in manufacturing output and 4,000 jobs by 2021.
According to Ms Read, the projected hit to revenue would be a serious blow to businesses already operating in very challenging business conditions as it would limit investment for future growth and employment.
Natural gas plays a unique role in the chemicals and plastics industry not only as a clean source of energy, but also as an essential and non-substitutable feedstock for manufacturing. Gas is converted into ammonium nitrate for use as crop fertiliser, and into polyethylene to make water pipes, milk bottles and silage wrap.
Given Australia’s abundant gas reserves, there is no reason for Australia’s natural wealth to be spread so unevenly in the economy. She notes that smart reform and increased supply can help Australia support both strong energy exports and a thriving domestic manufacturing sector.
The report reveals the importance of natural gas to the Australian economy. A supply and price shock to the extent forecast from the LNG export boom requires a broad national response. The industry alliance together represents businesses that employ some 950,000 Australian workers and add value to 32 per cent of Australian domestic gas.
PACIA calls on all stakeholders to work constructively together to address the challenges of gas market transformation, for the benefit of all Australians.
The alliance comprises of the Australian Industry Group, the Australian Aluminium Council, the Australian Food and Grocery Council, the Australian Steel Institute, the Energy Users Association of Australia and the Plastics and Chemicals Industries Association.