Smart sovereignty is the key to Australia’s future

| March 8, 2021

Speaking at last year’s virtual GAP Summit on National Resilience, Mr Innes Willox AM, Chief Executive of the Australian Industry Group, acknowledged New South Wales as the ‘gold standard’ in handling the economic impact of COVID-19 measures and consulting with industry partners.

NSW has taken business concerns on board in balancing health and economic impacts in the national interest. Shuttering Australia’s economy in March or April 2020 would have had dire economic consequences, but limited lockdowns have left the nation in a better place than most of its peers, and recovery is now underway. Victoria has been hardest hit, but manufacturing, construction and the services sector are now starting to grow once again.

The initial outbreak in China began to affect supply chains in February 2020, with businesses unable to source parts and equipment. Shortages in items such as window frames affected house construction, and staples such as nuts, bolts and packing material were soon in short supply.

The need for greater self-sufficiency and economic sovereignty was soon discussed, and the continuing international shutdowns have forced domestic firms to find alternative suppliers and become more self-sufficient.

With the support of JobKeeper, business has proved its resilience and ability to adapt, not least in making PPE and ventilators. COVID-19 highlighted both Australia’s economic strengths and shortcomings, and the experience underlines the need to add value along supply chains. The country can take advantage of natural resources such as rare earths and hydrogen production, for example, as well as traditional staples.

Australia must address the economic weaknesses COVID-19 exposed in a coherent and consistent manner, although the global recovery from COVID-19 will take some time, with peaks and troughs along the way, and Chinese restrictions on Australian imports are another complicating factor.

Resilience and strong governance are the keys to a more certain future, but other factors need addressing. Access to skills and a better understanding of how the workforce operates are certainly required, alongside more flexible workplace relations.

Many businesses completed four years’ worth of transformative work within four weeks to survive the pandemic restrictions, but the race to embrace the new technology of Industry 4.0 is also accelerating. Businesses are looking at automation, robotics and digitisation, and workers with the requisite skills remain in short supply.

While international supply chains of some components and materials remain uncertain, new industries are being developed in Australia, including the medical technology field. Access to investment as well as materials remains a problem, however, and new ways to access funding can increase risks to business, highlighting again the importance of good governance.

Navigating sudden changes in government policy proved a problem for many firms, with different states imposing border closures or regional restrictions on which businesses could open. Consumer confidence has also declined, although this is beginning to recover as restrictions are eased.

Mental health problems have manifested in the workplace, as people dealt with separation from their friends and families, uncertainties about their jobs and caring for children learning from home. Businesses have also had to manage employees working remotely in far more flexible ways than before.

Internal border closures which complicated the movement of people and goods are ending, but the closure of international borders is still costing businesses investment, buying and networking opportunities.

Strong governance and relationships with regulators and government have helped business navigate these complex challenges, but the ability of business to pivot quickly in the domestic sphere does not reduce the importance of international trade in the future. Australia cannot manufacture everything it needs, and strong international, as well as domestic, partnerships will always be necessary.

Businesses back ‘smart sovereignty’, in which we do better with what we have and add value to supply chains but maintain strong trading relationships abroad. As Henry Ford noted, “Coming together is a beginning, staying together as a process, but working together is a success.”

Australians must work together to recover from COVID-19, although relations between business, government and unions will never be perfect. Competitive federalism is re-emerging, and underlying tensions within the federation may surface as the virus recedes. Despite these problems, and the potential for another wave of infections and the lag before vaccines become widely available, Australia is well placed to recover if a common effort is maintained.

This is an edited summary of Mr Innes Willox’s keynote address presented at the ‘A Vision for Australia 2020’: GAP Virtual Summit on National Resilience.’