Will WA’s giant gas hub really be good for the economy?

gasThe Western Australian Government together with Woodside is proposing to build the Browse LNG precinct on James Price Point in the Kimberley region of WA. Recently you may have heard a lot about the environmental consequences of doing so – the area is a known whale migration path – but there has been very little discussion about the economic consequences. The state government claims that the precinct will deliver economic benefits but the evidence to support this is virtually non-existent. In fact, a closer reading of the government’s Strategic Social Impact Assessment shows that the development will:

  • Be a net cost to the taxpayers of WA with the government spending more money supporting it than it will collect in state taxes
  • Rely on up to 97 per cent fly-in fly-out (FIFO) workers and employ very few local workers
  • Reduce the Kimberley’s reputation as a world class tourism destination
  • Place additional demand on already stretched community services such as health and police
  • Significantly drive up the cost of living for the vast majority of local residents who will not be employed, directly or indirectly, by the new development.

It is also curious that the WA government has chosen not to undertake a robust economic modelling exercise for a $30-$45 billion project. Such a decision makes it difficult for the government to promote the benefits of the project when it’s not even clear about the size of it.

Going into bat for the state government is the Chamber of Minerals and Energy. It is always amusing when the only defence of an industry paid lobby group is to attack The Australia Institute’s economic credibility instead of debating the points raised in our analysis.

The industry spokesperson chose to re-heat the “multiplier” argument claiming that the 100,000 people employed directly in WA’s resource sector “has a multiplier conservatively estimated at between four and five. Half a million, nearly 600,000 Australians, principally West Australians, are employed in and around the resource sector.” 

No less than the head of the macro-economic group in the Commonwealth Treasury has dismissed this idea, stating:

“In a well-functioning economy like ours, with unemployment close to its lowest sustainable rate, it is not the case that individual industries are creating jobs, they are simply re-distributing them.”

While there is little doubt that the Browse LNG development has the potential to deliver substantial profits to companies such as Woodside, there is also little doubt that the local community will suffer. The government has been quick to dismiss the environmental concerns raised about the project but it might find it harder to ignore the economic consequences when residents start to experience stretched community services and higher prices and local businesses are crowded out as workers seek higher wages.

To read The Australia Institute’s analysis, click here

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