The Nationals' backbench policy committee says the federal government should "support" a new coal-fired power plant in the Hunter as part of a plan to revive Australian manufacturing.
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The committee's "Manufacturing 2035" document, issued on Tuesday, includes setting up an Office of Regional Manufacturing with headquarters in Newcastle and Gladstone.
It says high energy costs are the main reason Australia's manufacturing output has shrunk 5 per cent in the past decade and suggests new coal-fired power plants are the answer.
"Fifteen years ago, Australia had some of the most affordable energy in the world, but today it has some of the highest electricity prices for business," it says.
"If we cannot turn this around, there will be little hope of increasing investment in Australian manufacturing."
Four of NSW's five coal-fired power plants are scheduled to close by 2035, but the Nationals' plan says the government should support a new plant in the Hunter using the "world's best and cleanest thermal coal".
"It would be better for the environment for more Australian coal to be used to manufacture goods in Australia, instead of ... importing manufactured goods from countries that use lower-quality coals."
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It argues against gas, the centrepiece of Scott Morrison's latest energy plan.
"Australia's known gas resources in our east are too costly to make manufacturing competitive," it says.
"Gas extraction costs are around three to four times those of coal in eastern Australia."
The plan, which the committee plans to take to the joint party room, sets a target of 800,000 new jobs by 2035, after a 300,000 drop in the sector's workforce since 1990.
World Bank data shows manufacturing declining rapidly as a share of gross domestic product in most developed nations over recent decades.
Only Luxembourg (5 per cent), among rich nations, derives a lower share of its economy from manufacturing than Australia (6 per cent).
The Nationals' strategy includes direct government intervention to protect Australian manufacturing from subsidised overseas competition, $5 billion in low-cost loans, better trade promotion and a "Buy Australian Act" covering government procurement.
Setting up regional manufacturing offices in Gladstone and Newcastle "speaks to the value of the regions and their potential to become the backbone of Australia's manufacturing industry".
"The selection of these existing large regional hubs makes practical sense given their existing manufacturing footprint and access to key infrastructure and inputs."
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