8 August 2012

Value-adding by gas

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

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 (“No time to step on gas sector”, 6/8). We can, and should, have both.

Reservation policies 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 huge benefit returned to the economy and labour market by choosing to reserve a tiny amount of our abundant gas to support industry.

High vaule-added manufacturing returns about $20 for every dollar spent extracting gas, dwarfing the return of about $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.

It’s foolish not to maximize that advantage by building a thriving export industry, but it is equally foolish to only rely on exports and not capitalize on our competitive advantage in other ways. That’s what the US has chosen to do with its gas resources, a key to the manufacturing-led recovery of the US economy.

The essential argument isn’t about protectionism but about how we best exploit our competitive advantages, such as energy, to support industries that are internationally competitive for the benefit of the Australian people who own the resource.