Buying Australian steel would end up substantially cheaper for governments than the cost of doing nothing, an influential report has found.
The report on the benefits of a government steel procurement policy was carried out by the well-regarded BIS Shrapnel and was commissioned by the Australian Workers Union.
The report found that losing steelmaking production in Australia would see the loss of up to 10,000 jobs and $10 billion annually from the GDP.
“In addition, the severe regional impacts in Wollongong/Illawarra and Whyalla would probably necessitate substantial extra government expenditure on large bailout packages for these affected regions,” the report states.
“The bottom line is that the small extra cost to government from a local procurement policy is far less than the cost of inaction, which could ultimately lead to severe costs to jobs and the economy if one or both steelmakers shut down.”
The BIS Shrapnel report puts forward a minimum of 85 to 90 per cent Australian steel use in all government products.
At the 90 per cent usage figure, BIS Shrapnel estimated the extra cost would increase government spending by around $61-$80 million a year – or 0.2 per cent of total construction costs for public projects.
This “will prove a substantial net benefit to the economy, after accounting for only marginally higher public construction costs”.
The 90 per cent procurement figure would see usage of Australian steel in government projects climb to 1514 kilotonnes – more than half of BlueScope’s total output – in just three years.
The report also noted Port Kembla needed to run at, or close to its 250 kilotonne capacity to be viable.