Report reveals unintended LNG export consequences

SETTING aside some of Australia's booming gas production for domestic use is again on the agenda, after a report revealed some of the unintended consequences of LNG exports.

Backed by manufacturing groups, the Australian Industry Group and the Plastics and Chemicals Industries Association, the report was released on Wednesday by private researchers at National Economics.

While gas was a minor part of the electricity supply generally, it was a major supplier to the manufacturing and industrial sector.

The report found that for every $1 of benefit gained from exports (of LNG), $24 of benefits was lost in contraction of the gas-dependent industries.

While Prime Minister Julia Gillard ruled out the reservation of gas exports for domestic industry or electricity production, the report lends weight to the industry's calls for such reservation among other changes.

The report showed the increased export of gas could lead to rising domestic costs, especially on the east coast, and that current Commonwealth policy settings favoured exports over domestic sales.

Similar views were promoted by various industry leaders earlier this year, including AIG chief executive Innes Willox.

Mr Willox was part of a group of industry leaders who sit on the PM's Manufacturing Taskforce, which released a report in August outlining what should be done to grow the troubled sector in Australia.

An appendix to the taskforce's report outlined the risks of not setting aside some of Australia's gas production, but the issue failed to gain traction with the Federal Government.

Mr Willox said the industry group's concerns about the "potential unintended consequences" of the gas boom, led to the commissioning of the report.

"Where there has been debate at all, it has centred on the shortcomings of possible responses such as gas reservation, rather than on the nature of the problem itself," he said.

"There are no easy solutions, and indeed obvious practical economic difficulties, but all ideas should be on the table."



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