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The economic arguments used in the reports

What the Report said..

Victoria chemical industry in fact

The priorities are recognised on page 1 of the December EES which begins with a statement about importance....

"The chemical industry is a vital part of the Victorian Economy........"

.. and later...

Contributes $6,500 million in output and 32,500 jobs.

"....and many products and materials used in general manufacturing would need to be imported . This would result in a decline in the Victorian manufacturing industry, severely effect the Victorian economy and significantly reduce employment throughout the State." Page 2.2.

The firms which use Coode Island directly

	Output is $1640m (3 per cent of Victorian total manufacturing)
	Income is $190m around 2 per cent of manufacturing income
	Employment is 6800 about 2 per cent of all Victorian jobs

The latest figures of industries which use products which will be transported through Point Lillias .......employ 76 000 people (8 per cent of manufacturing employment).......have a turnover of $16.2 billion (10 per cent of manufacturing turnover).

The chemical industry potentially supported by the Point Lillias facility is therefore extremely important part of Victorian and Australian manufacturing, contributing to around 10 per cent of manufacturing turnover. Appendix 14 page 14:44, 5.2

The above descriptions are considered by ACTED to be overstating the importance of the chemical synthesis industry whose products are proposed for the new facility. They are not only unhelpful, they represent an unprofessional use of data. The oversighted structure and relationship of the user industry is vital to consideration of the proposed HCF.

Using Australian Bureau of Statistics (ABS) survey data, by wages and salaries, the total Victorian chemical industry (ie. including paints, pharmaceuticals etc.) represents about 7 per cent of manufacturing and less than 2 per cent of State Gross Product. It employs around 17,000 persons compared with all manufacturing of 296 000. (ie. 5.7 per cent).

ABS 8207.2 Manufacturing in Victoria for the most recent survey of 1991-92, describes the chemical industry by employment, wages and salaries and turnover. Only about one-third of the Victorian chemical industry is involved with the actual synthesis (chemical change) of chemicals. The majority of the industry is involved with formulating (mixing) chemicals to customer requirements.

Whereas the value of manufactured exports from Victoria is typically 60 per cent of imports, for its chemical industry it is only 30 percent. For the synthesis sector, the ratio of exports to imports is declining. Equally, whereas the Victorian manufacturing sector on average exports around 18 per cent of its turnover, the chemical industry exports only around one-half that proportion at just 10 per cent. The chemical synthesis industry is small, declining in significance and underperforming compared to other manufacturing activities in the State.

The recent trend does not suggest a dynamic component of Victoria's chemical industry. This despite the State's endowment in oil and gas as natural feedstocks that could have seeded a world-class petrochemical industry. Indeed in 1979 and 1989, major expansion plans had been announced with polythenes and polypropylenes using raw materials (natural gas) that are more environmentally safe than most of the HCF products.

Less than one-third of the chemical synthesis industry (ie. about one-tenth of the Victorian chemical industry) significantly use the chemicals proposed for the Point Lillias facility. The products become even less significant to the chemical industry when it is considered that these chemicals are part of only one step of the process chain to the final product.

As also observed in Industries Assistance Commission reports, the direct employment and value added to the hazardous products is very small (eg. Report 390, The Chemical and Plastics Industries, Vol 1, page 86). In particular, benzene could be replaced by styrene, (if not polystyrene and related styrene resins - obviating some acrylates and acrylonitrile as being imported), propylene oxide by polyols and if Option C is effected, the VCM by PVC resin. In all cases, the next stage products are significantly safer.

Consequence of operations

The Point Lillias chemicals are directly insignificant to the chemical industry and to the Victorian economy. If the higher costs of their products to users are excluded, they could be shown to make a contribution to the Victorian economy (especially if expanded with the use of multipliers). However, such studies do not consider the cost impact on user industries resulting from higher prices to the local manufacturing industry. Higher prices result from the taxing impact of import tariffs (though now small, approaching 5 per cent) and anti-dumping duties (or the threat there from) that has seen local prices well above open market world levels (eg. IAC reports). Higher prices serve to disadvantage user industries which in the case of the Point Lillias associated chemicals includes plastics processors, foam users, motor car parts and fibreglass resin users. In other words, the economic contribution from the Point Lillias chemicals have to be weighed against user industries.

ACTED has undertaken preliminery analysis which shows the next step of chemicals processed do not represent a net gain to Gross Domestic Product. For Victoria in isolation, it is less clear with sales to other states but at best the activities make a marginal contribution (if any) to Victoria.

Conclusion

The chemicals proposed for Point Lillias are insignificant to the Victorian chemical industry especially when compared with the alternative next step products. The chemicals become even less important to the Victorian economy when the added cost to downstream industries is taken into account.

Any remaining benefit (if any) of supporting the next step activities should be weighed against the environmental costs of the proposed facility.

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