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Gas Market Transformations - Economic Consequences for the Manufacturing Sector

The first comprehensive analysis of the impact of higher gas prices on the Australian economy forecasts major impacts to the Australian manufacturing and food production.

In alliance with five leading industry associations, PACIA released the first comprehensive analysis into the impact on industry of the unprecedented changes in Australia’s gas market.

The detailed quantitative analysis was undertaken by Deloitte Access Economics on behalf of the alliance, which represents the bulk of Australia’s manufacturing sector and employs 950,000 workers. It reveals the implications of forecast Australian domestic gas price increases and supply tightness, and the severe side effects on the Australian economy.


The study brings to light major impacts on the Australian manufacturing sector from LNG export growth, forecasting 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 is significantly impacted with forecast losses of $13.7 billion in manufacturing output and 4,000 jobs by 2021.

The rising gas prices and losses to the manufacturing sector will also impact other sectors of the Australian economy, including non-gas mining and agriculture, which will contract by approximately $34 billion and $4.5 billion respectively.

Despite benefiting from LNG gas exports, Queensland’s economy will suffer the most severe decline in non-gas sectors, with a $60 billion contraction in manufacturing output and a $22 billion contraction in mining output in net present value terms by 2021. New South Wales and Victoria see serious declines in manufacturing, accumulating to around $24 billion and $23 billion respectively in net present value terms by 2021.

In general, transformations occurring on the east and west coast gas markets will have the most adverse consequences for manufacturing businesses that:

  • Use gas most intensively, and therefore incur significant increases in input costs
  • Are substantially trade-exposed, or face other market imperfections, which limit their ability to pass on increased input costs
  • Have technologies, such as feedstock production, dedicated to gas and are unable to switch to other sources

The Report analyses the overall manufacturing sector impacts, as well as providing insight into the individual industries. Case studies presented provide real life evidence of the negative consequences that are already beginning to be felt by various manufacturing businesses. They also note some of the strategies being used to adapt to new market conditions.

Natural gas plays a unique role in the Australian chemistry industry not only as a clean source of energy, but also as an essential and non-substitutable feedstock for chemicals and plastics manufacturing. Indeed the ‘PACIA Strategic Industry Roadmap’ identifies ‘access to natural gas for feedstock and energy’ as a fundamental need that requires urgent action.

This study and its new information and forecasting, is the cornerstone of a coordinated industry approach to better understand the impacts of the unprecedented changes occurring in the domestic gas market. This will be crucial for business planning and the policy settings required for a vibrant and sustainable Australian chemicals and plastics industry.

The alliance comprises: 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.

This project was part funded by the Consumer Advocacy Panel ( as part of its grants process for consumer advocacy projects and research projects for the benefit of consumers of electricity and natural gas. The views expressed in this document do not necessarily reflect the views of the Consumer Advocacy Panel or the Australian Energy Market Commission.

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