Natural gas development could turbocharge Victoria
December 3rd, 2014
A few facts about the state of the Victorian economy underscore the challenge faced by the incoming Labor Government – and its need to embrace responsible resource development.
- The Federal Budget is under extreme pressure because of rising costs and falling commodity prices and therefore export income and company tax receipts. This pressure will fall heavily on the most populous states — NSW and Victoria.
- The positive budget position left by the outgoing Coalition Government in Victoria will be tested by the slow-growth macro-economic position (reduced distributions from the Commonwealth) plus Victoria’s manufacturing decline and the increased cost of services including health and emergency services.
- Production output in Victoria has not grown significantly in the past five years . The construction industry stalled in 2014, and growth will likely fall to zero if the Government meets its election promise to tear up the East West link road contracts.
- The situation in regional Victoria is worse than the city – unemployment (particularly among youth) is higher and trending upwards.
Look north to Queensland and the picture is starkly different. Next year, Queensland will be the fastest growing State, at about 5.5% — more than double the national average. The main reason for the contrast is natural gas. And in the Queensland case, the regional picture is better than the city, in the areas where gas development has been allowed to proceed.
Natural gas drawn from coal seams deep underground in southern Queensland will flow to boost the economics of local production as a low-cost energy source, and carry on to export markets in Asia, having been converted to liquid natural gas (LNG) at the $60 billion plants nearing completion at Gladstone.
As the Prime Minister has noted, Australia will soon start to reap big benefits from this development. Queenslanders already have – especially those around Gladstone, Roma, Chinchilla, and nearby towns, where economic activity is booming, unemployment has plummeted, farmers are better off and land values have jumped. Before the gas boom, the area was struggling with high unemployment and the consequent drain of young people away to Brisbane and bigger regional centres.
The Queensland experience, partly emulated in WA, is a smaller example of what has occurred in the USA, where the shale oil/gas revolution has revitalised the economy, dramatically reduced energy costs and allowed the President to make strong claims about greenhouse gas reduction. Yes, the move to natural gas has helped the USA achieve what has been applauded by Governments and environmentalists in Australia and overseas.
Victoria, NSW, WA and SA have great opportunity to responsibly develop their own considerable gas resources to get their own share of this economic and environmental phenomenon. WA and SA are forging ahead. NSW is creeping forward and Victoria is stuck on the line.
The consequences of failing to grasp the opportunity are severe: Millions of consumers and industrial users face price rises. According to unions and Manufacturing Australia, tens of thousands of jobs will be lost. Businesses will close. Production will move offshore. And it will probably never come back.
The NSW Chief Scientist has put the risk issue beyond doubt – the industry can manage the risks, which are mostly low level. With appropriate safeguards (already incorporated in regulation in all States), it can safely proceed without endangering agriculture or environment.
As the industry co-exists with agriculture in Queensland, NSW, SA and WA, it should in Victoria – to the benefit of farmers, consumers and workers.