7 August 2012

Gas debate about national interest, not protectionism

Letter to The Australian: Dick Warburton, Executive Chairman, Manufacturing Australia


In his editorial yesterday David Byers suggests that Australia must make an either/or decision between having a thriving gas export market and ensuring affordable gas supply for Australian manufacturers and households.        
In fact we can, and should, have both.        
Reservation policies, such as those proposed by Manufacturing Australia, Incitec Pivot Limited and others, don't threaten the viability of Australia's gas exports. The volume of gas required by domestic manufacturers is too small for that.        
What isn't small is the massive benefit returned to the broader Australian economy and labour market by choosing to reserve a tiny amount of our abundant gas to support Australian industry.        
High value-­added manufacturing, such as is done by Incitec Pivot, returns around $20 for every dollar spent extracting gas, dwarfing the return of around $3 achieved when we place gas in giant refrigerators and send it overseas for others to value-­add. Downstream processing creates stable, rewarding jobs in many industries. Those jobs, once lost to international competitors, we won't get back.        
Australia has a natural competitive advantage over most of the world in our abundant natural resources. Of course it's foolish not to maximise that advantage by building a thriving export industry, but it is equally foolish to only rely on exports and not capitalise on our competitive advantage in other ways. That's what the United States has chosen to do with it's abundant gas resources, and it has been key to the manufacturing-­led recovery of the US economy.        
Where Mr Byers missed the point is that the essential argument isn’t about protectionism but about how we best exploit Australia’s competitive advantages, such as energy, to support industries which are internationally competitive for the benefit of the Australian people who “own” the resource.        
What’s best for Australia in the long term is both an LNG export industry and downstream processing supporting industries creating jobs, supporting communities and contributing taxes to Governments.