BlueScope steel workers who accepted pay cuts and job losses to help save the company have set a precedent that other distressed companies may seek to follow.

The Illawarra-based workers agreed to the loss of 500 jobs and salary cuts and are now urging NSW Premier Mike Baird to use local steel on infrastructure projects.

Workplace expert Andrew Stewart, a professor of law at the University of Adelaide, said the agreement between BlueScope steel workers and management was not the first of its kind, pointing to the global financial crisis, during which many workers accepted reductions in hours and pay to keep their jobs. Holden workers accepted a similar deal before the company announced in 2013 that it would close.

"But, of course, it is going to set a major precedent because other manufacturing businesses will be looking at this wondering if they can use similar logic to introduce lower pay or conditions," he said.

"Whether or not you are going to need businesses at the brink of closure, you would think in most cases there is going to be a need for a crisis to have substantial willingness from workers to reduce their conditions.

"We know at the moment wage increases are running at historically low levels. There is general awareness that our economic situation is not great. With few exceptions, workers are accepting wage increases below inflation or cuts.

"I would expect that to continue until we see a major pick-up in confidence and economic growth."

In 2013, Holden workers agreed to changes to their existing enterprise agreement that would have reduced their pay and conditions. The amendments were conditional on Holden's commitment to a new-generation production process.

"Even though the amendments were voted up by workforce and approved by the Fair Work Commission, Holden decided to shut down its car-making operation because the government said it would withdraw financial support. So the amendments never took affect," Professor Stewart said.

"That was a good indication of a workforce accepting something needed to change to keep their jobs. But in the end, it wasn't enough."

Professor Stewart said the Fair Work Act contained provisions for similar agreements to reduce award entitlements as part of an emergency rescue package to keep a business afloat.

"There is plenty of scope for this kind of arrangement to happen," he said.

Qantas was able to negotiate an 18-month wage freeze, but now it is making a profit. Professor Stewart said it will be "hard for them to hold the line against wage increases".

BlueScope managing director Paul O'Malley said the agreement with workers was a "major step" towards achieving its $200 million cost-saving target.

"We still have a lot of work to do in the coming weeks, as steel prices remain under pressure from the global steel glut," he said.

The move came as a new BIS Shrapnel report showed a local procurement policy could help save the struggling industry. Australian steel makers BlueScope and Arrium (formerly One Steel) are under pressure from rising imports, including cheap steel dumped by China.

BIS Shrapnel recommends a policy for 90 per cent local steel content, which it estimates would add an average of $61 million to $80 million a year in extra costs to the public sector and which would "in all probability keep both local steel makers in production".

"This contrasts to the business-as-usual scenario, where further loss of market share (and no local content policy) leads to a cumulative reduction in real GDP of $381 million over the next five years," the report says.

Under a complete shutdown, the national economy would lose production of 5 million tonnes of steel and up to 10,000 jobs.

"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 steel makers shut down."

The Australian Workers Union has used the findings to urge the NSW government to adopt the local procurement policy embraced by the Labor government in Victoria.

South Coast Labor Council secretary Arthur Rorris said the BlueScope workers were not just making a decision about their own jobs.

"They were making a decision about the future of our whole region," he said.

"This is not a regular situation. We are talking about the entire Australian steel industry in crisis and we are also talking about a region that has been doing it tough since the last steel downturn. So we have an enormous amount of responsibility on the shoulders of these steel workers.

"This will only work if those sacrifices are matched by a tough change in policy by federal and state governments to buy Australian steel and to do what the rest of the world has done and stop the illegal dumping of international steel."

Mr Rorris said the unions and workers do not "agree to pay freezes and cuts to jobs lightly".

"But the fact is there simply was no choice," he said.

"I certainly hope that no other group of workers has to make these sorts of decisions and have these unfair pressures and responsibilities in their shoulders as these workers have had."

AWU national secretary Scott McDine said the agreement by workers to accept pay cuts and job losses was "a unique circumstance where we have seen an incredibly collaborative approach which the union has taken with BlueScope".

He said future agreements would be made on a case by case basis and rejected any notion the BlueScope arrangement had set a precedent.

He said it was now up to the NSW Premier to "stop ignoring this problem and introduce a local steel procurement policy urgently".

"Mr Baird's spokesman for the Illawarra, Gareth Ward, has been telling everyone who will listen that there is no need for procurement – that it won't make a difference," Mr McDine said.

"These figures make a mockery of Mr Ward's claims. Here we have BIS Shrapnel figures showing that a local procurement plan would be worth $367 million to BlueScope."

A spokesman for Mr Baird said the government appreciated the importance of the steel industry to the Illawarra community and the NSW economy. The government was also committed to free trade and being globally competitive by reducing regulation, business taxes and red tape.

"As part of those arrangements, local mechanisms to preference local suppliers could have the effect of disadvantaging NSW and Australian steel manufacturers," the spokesman said.

"For projects valued at more than $10 million, the government requires tenderers to show how their tender will support local industry, including local jobs and skill development.

"The government is a very large customer of the Australian steel industry. Its products are used everywhere in our infrastructure and general construction works."