Use energy resources at home: Liveris

17 Oct 2012, 7:18 pm   -   Source: AAP
An US adviser says Australia should be exporting finished products rather than raw materials. (AAP)

An US adviser says Australia should be exporting finished products rather than raw materials. (AAP)

The head of US manufacturing giant Dow Chemical says Australia should be exporting the finished product, rather than just the raw materials.

A top US business adviser has warned that Australia should be using its energy sources to build up its manufacturing sector rather than just exporting the raw materials.

Australian-born president, chairman and CEO of US manufacturing giant Dow Chemical Andrew Liveris believes that while Australia has put in an "incredible" performance in the past decade, this has masked serious weaknesses in the economy.

"I believe that mask is truly starting to slip," Mr Liveris told the National Press Club in Canberra on Wednesday.

Mr Liveris, who is also co-chair of President Barack Obama's Advanced Manufacturing Partnership, said the economy had been allowed to become "unbalanced" through its reliance on a booming resources sector, which has been supported by policies from both sides of politics.

In contrast, a large number of manufacturers have "passed the tipping point", either scaling back or closing altogether.

"The manufacturing sector has been the canary in the coal mines," he said.

He said since the 2008-2009 global financial crisis, 100,0000 manufacturing jobs had been lost, primarily due to a lack of competitive domestic energy and power, despite being a country that has both in surplus.

That is because Australia tends to export the base raw material, including vast amounts of natural gas overseas.

"With this gas, Australia's fuelled the manufacturing needs of other countries and created thousands and millions of jobs overseas all to the detriment of the domestic manufacturing sector," he said.

"I believe that Australia should have a balanced economy with manufacturing, not on the sidelines, but part of its centre."

He said it should be Australia exporting the finished product, rather than the base product.

This advice came as a report by the Australian Industry Group (Ai Group) and the Plastics and Chemicals Industries Association (PACIA) found that an insufficient gas supply may constrain the domestic economy.

It says each petajoule of gas shifted away from industrial use towards exports means giving up $255 million in lost industrial output for a $12 million gain in export output.

"That is, for every dollar gained $21 is lost," the report says.

It says a secure local gas supply is fundamentally important to a number of industries, yet gas exports are predicted to rise from two million tonnes in 2015 to up to 24 million tonnes in 2023.

"This is a major issue for Australia's national interest, it's a major issue related to job security going forward, it's a major issue related to the development of new advanced manufacturing and value add industries within Australia," Ai Group chief executive Innes Willox told ABC radio.

Westpac chief economist Bill Evans believes that recent interest rate cuts by the Reserve Bank of Australia (RBA) have been aimed at stimulating non-mining sectors to complement the growth mix when mining slows.

He said the minutes of the RBA's October board meeting released on Tuesday supported an expectation for a further rate reduction in November.

"Ongoing concerns with global risks, recognition that the labour market is softening, and emphasis on the slowdown in mining investment all point to a board which believes there is more work to be done," Mr Evans said.

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