A new report warns the riches promised by exporting Australian gas may have a devastating impact on local industries, particularly manufacturing.

A coalition of half-a-dozen industry groups commissioned the report by Deloitte Access Economics.

The report says domestic gas prices are rapidly rising as the market links in with international prices.

It warns that, if the rise goes unchecked, the manufacturing sector alone will contract by as much as $118 billion by 2021, with nearly 15,000 jobs lost.

The report also finds that mining might contract by $34 billion and agriculture by $4.5 billion.

Brian Green, the chairman of the Energy Users Association which represents firms from BlueScope Steel and BHP Billiton to Woolworths, says policy makers must listen.

“If this goes ahead, there will be losses. They are avoidable,” he argued.

He says two-tiered pricing and expanding gas production would allow Australia to benefit from gas exports without crippling industry.

“One of the things we’d like to see is a distinction being made between gas being supplied for the export market and gas that is being supplied for the domestic market,” he said.

“When we say domestic market we mean industry, although obviously it also has a flow-on effect right through to household gas bills.”

The head of the Australian Food and Grocery Council Gary Dawson says his food producing members have little ability to pass on higher costs, such as gas price rises.

“If a food processing plant shuts down there is a direct flow on effect to farmers supplying that plant when they lose their key customer,” he noted.

The Australian Industry Group, which represents a wide range of manufacturers and other businesses, is urging for some states to drop widespread limits on coal seam gas extraction to boost supplies.

“We need action on two fronts – get more gas flowing, by replacing blanket bans on gas production with strong but workable regulation; and reform the market that gas is sold in to boost competition and transparency,” the Ai Group’s chief executive Innes Willox argued in the report.