Will the Federal Budget reveal the Government’s long-term plan for supply chains?

Our economy – like many others around the world – is still experiencing supply chain pressures, and with a potential global recession looming, there are some steps the Government could take to ensure Australia’s economic strength over the long term.

Following the last Federal Budget, we explored the consequences of COVID-19 and the war in Ukraine on supply chains both locally and across the globe, and while we have seen some of the highest traffic areas manage to push goods through ports, we are still experiencing significant delays in Australia.

Until 2020, Australia was successfully operating under a distribution model instead of a manufacturing model. However, the onset of COVID-19 saw many reasons to support greater sovereign manufacturing. Australia has access to a wealth of high demand natural resources and minerals, yet they are exported overseas for further manufacturing and imported back to us as finished goods rather than manufacturing the finished product locally.

We have the resources to produce clean energy minerals including lithium, copper and nickel as well as the ability to manufacture the finished products such as wind turbines and batteries – particularly for charging electric vehicles – but the upfront capital costs stand in the way. In March, Labor’s Budget Reply acknowledged that Australia is unmatched when it comes to its renewable potential. Now is the time for Government investment into manufacturing to alleviate these high costs and ensure Australia’s global competitiveness in this sector.

Australia needs a strong innovation and R&D led agenda to maintain our current economic standing and develop new competitive industries to drive productivity into the future.

We know Australia cannot compete in manufacturing on a mass market scale; we just want to create a fair and even playing field. There is an opportunity for Australia to develop leading technologies in manufacturing which addresses its long-standing high-cost labour issues. Australia has the ability to manufacture high quality niche goods, and further investment into sovereign manufacturing and renewable energies will improve Australia’s independence and help grow our economy out of deficit.

By competing strategically in the manufacturing sector, we’ll see real and tangible benefits across our economy including:

• Reduced carbon emissions as goods will be manufactured domestically
• Growing ethical workforce practices and reduced modern slavery in developing countries
• Create opportunities for innovative smaller businesses to participate
• Boost workforce training places and increase skilled employment to help ease pressure on the minimum wage
• Diversify the concentration of where we’re sourcing the goods to avoid the congestion in the supply chain
• Create new export markets which will in turn make our supply chains a bit stronger

To increase domestic capacity and encourage investment in manufacturing capabilities, perhaps it is time the Government reviewed the nature of its trade policies. Similar to the USA, and our Asian and European trading partners, Australia could look to apply additional tariffs or quotas on goods where we have existing manufacturing capabilities or industry sectors where we can create manufacturing capabilities. Furthermore, the Government could increase incentives to allow for more value-add manufacturing using Australia’s minerals and natural resources.

It will be interesting to see what policies the Government will put in place from a trade perspective to grow the capability of sovereign manufacturing and encourage investment into the sector. Offering tangible and value add incentives for investors to get behind will be good for business, workers, taxpayers, and ultimately the Budget bottom line.