Australian Manufacturing Industry Urges State Curb on Gas Prices

Jan 12, 2014 8:00 am ET

Jan. 13 (Bloomberg) -- The Australian manufacturers have urged the government to curb rising natural-gas prices that threaten to reduce the nation’s gross domestic product by as much as A$13 billion ($11.7 billion) a year.

While a boom in gas production from shale in the U.S. has cut prices for American manufacturers, buyers in Australia are being charged more than twice as much as they paid over the past decade as more of the fuel is exported to Asia, Wood Mackenzie Ltd., an energy research company, said this month.

“We want to see a manufacturing resurgence in Australia like we’re seeing in the U.S.,” Ben Eade, named yesterday as executive director of industry group Manufacturing Australia, said in an interview. “We have huge gas resources, and if we target them properly there is no reason we can’t do that here.”

Producers building more than $60 billion of liquefied natural gas export projects on Australia’s east coast have said that government intervention would deter investment and hurt the economy. Letting producers tap more reserves, including coal- seam gas in New South Wales state, would ease shortages, the government said in a report last month.

Manufacturers need a “bridge” to help adjust to a surge in prices before new supplies can be brought on, according to Eade, whose industry group represents Australia’s largest manufacturers.

GDP Threat

“LNG exports will be great for the Australian economy, however, the impact of the short-term shift could be devastating for manufacturing in Australia,” he said by telephone. “We’re talking about a transition that according to our research could potentially wipe out A$13 billion a year in GDP.”

Manufacturing companies in Australia have been hurt by a strong Australian dollar, high labor and energy costs and unnecessary regulation, according to Eade. General Motors Co. in December joined Ford Motor Co. in deciding to stop making cars in Australia as the high local currency and lower tariffs drive out manufacturers.

The manufacturing industry group’s members include Incitec Pivot Ltd., Australia’s biggest fertilizer maker, and BlueScope Steel Ltd., the nation’s largest steelmaker.

--Editors: John McCluskey, Jim McDonald