Manufacturing in Australia is in terminal decline

Australian manufacturing is facing a terminal decline, driven primarily by soaring energy costs that have escalated dramatically over the past three years. Key industries, including fertilisers, plastics, mining explosives, and glass manufacturing, have either shut down or are on the verge of collapse. The impact is severe, with the nation becoming increasingly reliant on imports for essential materials.

In 2023, a major fertiliser company closed its Australian operations due to prohibitively high energy costs. This was followed by the shutdown of the country’s last major plastics producer in 2024, leaving Australia completely dependent on imported polymers. Most recently, the nation’s only architectural glass manufacturer ceased operations after 169 years, citing excessive energy prices and the dumping of cheaper imports from overseas markets.

The latest insolvency data from ASIC reveals that almost 1,390 manufacturers have become insolvent since 2022-23. Despite government pledges to rebuild the manufacturing sector, the trend continues downward. The federal government has announced multi-billion-dollar programs to support local manufacturing, including subsidies for green iron and steel production. However, these initiatives face significant challenges as energy costs remain a major barrier to industrial viability.

Recent analysis warns that Australia’s green energy transition could further drive-up real wholesale power prices by 5%-15% by 2035, while retail energy bills could surge by 20%-35%. Since renewable energy sources are intermittent, significantly more capacity must be installed to match the output of traditional dispatchable fossil fuel generation. Gas-fired power is expected to play a crucial role in bridging the gap, yet gas prices continue to rise.

With nearly three-quarters of East Coast gas exported, primarily to China, domestic shortages are driving prices higher. The opening of LNG import terminals in multiple states will further exacerbate costs, both for gas and electricity. Rather than directing billions towards selective subsidies, the federal government should reconsider the aggressive renewables rollout and implement a firm gas reservation policy with cost-plus pricing regulations.

Australia has ample energy resources, yet its power costs remain among the highest in the world. Policy failures and an unwavering commitment to net-zero emissions are undermining the nation’s industrial base. Without urgent intervention, Australia risks becoming a country where manufacturing is only viable through government subsidies, while energy affordability declines for households and businesses alike.