Aggressive geoeconomic interference by Beijing will soon devastate Australia's smelting and metal refining regions unless the Federal Government acts decisively, according to a new report by the McKell Institute.
The report finds that China is now spending more on industrial subsidisation than on defence, and that this distortion in the global market is putting the Australian refined metals sector under unsustainable pressure.
The report finds some 73,000 jobs in the regions reliant on refining and smelting are at risk, and that in some cases, up to 11 per cent of entire towns may be forced to leave upon the closure of key facilities.
It finds whole towns like Port Pirie in South Australia may be hollowed out of working age residents, should the smelters fail, risking these communities' long-term survival.
Among the report's recommendations to the Commonwealth Government:
- Australian Government to start moving to acquiring equity stakes in businesses to which they provide significant financial support
- An urgent review of the anti-dumping framework
- Strengthen domestic procurement requirements in major government projects
- Tweak the mandate of the National Reconstruction Fund so it can help support, with financing partners, Australia's smelting and refining sector.
- Mandate that a proportion of raw materials extracted from Australia must be refined in Australia
- The urgent establishment of an East Coast Gas Reservation policy, to ensure local industry has ample affordable supply of domestically produced gas.
"We know that China is almost certainly spending more on industrial subsidisation than it is on defence," said McKell Institute chief executive Ed Cavanough.
"In the short-term, China's geoeconomic strategy is designed to onshore as much global heavy industrial capacity as possible. In the longer-term the strategic goal is limiting the viability of critical manufacturing in competitor economies, including Australia. This would create a huge long-term economic advantage for China, and hobble Australia's industrial capacity.
"Other nations have seen this and are responding strongly. Economies that wish to withstand future global economic shocks will need to be able to refine and process metals. If Australia loses those capabilities, we leave ourselves massively exposed.
"Currently, the government is playing industrial whack-a-mole – working with individual refiners to preserve individual plants as they come under threat. This approach is not sustainable over the longer term.
"If the Commonwealth government is serious about preserving Australia's capacity to manufacture metals – as it should be – then we need decisive structural action now.
"China is very clear about what it is doing, we need to be equally clear-sighted."
Mr Cavanough noted South Australia was particularly vulnerable.
"Our analysis shows that if the Port Pirie smelter were to close, the town's population could drop by around 2,000 people – that's 11 per cent – in the first year alone," Mr Cavanough said.
"These would be the town's most economically productive residents leaving with their families. South Australia simply cannot afford to lose industrial anchors such as the Port Pirie smelter — anchors that have sustained regional communities for generations."
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Full report is here: https://mckellinstitute.org.au/research/reports/securing-sovereign-capacity/
