Australia: MYEFO Shows Urgent Need to Improve Competitiveness

The Mid-Year Economic and Fiscal Outlook (MYEFO) shows that the budget position has deteriorated significantly, the Australian Petroleum Production & Exploration Association (APPEA) said.

A $47 billion deficit is expected this year – this is 3 per cent of gross domestic product (GDP) and $17 billion higher than previously forecast.

Over the next four years, the cumulative deficit will be $68 billion greater than previously projected if nothing is done by the government.

With grim budget deficit forecasts for the next four years, some relief could be provided by oil and gas investment yet to be committed.

There is $180 billion worth of gas investment on the drawing board in Australia. If this proceeds, it could increase national GDP by 1.5 per cent, create about 150,000 jobs across the Australian economy, and deliver tax revenues equal to nearly half the total federal debt.

In his address to the National Press Club, the Treasurer, Joe Hockey, said, “From 2014 until 2016 the fall from mining investment could detract up to 2 per cent from economic growth. It is therefore crucial that we do everything we can to facilitate new mining investments such as the Roy Hill iron ore project in the Pilbara and gas projects across the country.”

The major challenge to the oil and gas industry’s continued growth is maintaining Australia’s international competitiveness in the face of growing global competition. A high-cost local environment and the emergence of new LNG competitors in East Africa, North America and elsewhere will make it much harder to win market share and attract investment.

Australia needs a viable oil and gas industry to contribute to its long-term economic prosperity. It is crucial that policy action is taken in order to improve the industry’s international competitiveness and help secure that future.

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Source: APPEA, December 19, 2013