Australia can power its way out of COVID-19 recession

The Federal Government commitment of $1.5 billion to revitalise Australian manufacturing through the COVID-19 recovery is welcome and timely.

One of the positive consequences of the pandemic is a fundamental rethink of global supply chains.

Where businesses once valued price above all else, the world is starting to value certainty of delivery and quality even more highly.

That is a significant opportunity for a nation like Australia where quality has been at the heart of the brand for decades.

To be competitive, Australian industries must be fully supported by a globally competitive transport and logistics sector. This demands smarter investment in policy, infrastructure, and technology.

Today the supply chain industry brings in $103 billion annually — but its size and success often disguise significant lost opportunity.

The absence of toilet paper from supermarket shelves early in the COVID-19 crisis galvanised government action to reduce impediments to the movement of freight.

Governments worked with industry to keep freight moving despite the supply chain being identified as an obvious vector for the disease.

Sweeping policy advances included universal agreement that all freight be considered essential, the prioritisation of freight movement with ‘waive through’ at borders, the suspension of curfews nationwide, and ultimately the national agreement on a freight movement protocol.

The urgency and attention that delivered for Australian communities throughout the crisis must now be maintained and accelerated to help Australia trade out of a deep recession.

Australia is on the cusp of a bumper grain harvest with the wettest winter since 2016 expected to see national grain production increase 60 per cent and wheat production rise by 91 per cent.

This at a time when the winter crop across much of Europe has been hit by drought and frost — causing a year-on-year fall of 10 per cent. France, the largest grain exporter in the EU, is reporting a 25 per cent decrease in wheat compared to the 2019 harvest.

These figures should be cause for celebration among Australian farmers and exporters as they cash in on demand in the Asia-Pacific. But Australia’s last bumper grain season offers a warning.

In the 2016-17 season farmers had major problems getting grain from Victoria’s Mallee and the Wimmera to the ports of Geelong, Portland and Melbourne.

More broadly, Deloitte analysts suggest Australia’s advantages could be undermined by inadequate infrastructure.

Transport (including receival charges, rail freight and port charges) is the largest single cost in the domestic grain supply chain. Australian rail freight remains hamstrung by infrastructure limitations when compared with rivals such as Canada.

The infrastructure and policy limitations are perpetuated by a lack of foresight and cooperative endeavour across industry and governments with the agricultural industry absent from most serious supply chain conversations.

Supply chain challenges are also noteworthy in mining with key iron ore and coal deposits at risk of supply chain failure. Australia’s largest export, iron ore, worth $100 billion in annual export value, remains significantly exposed to cyclone-linked flooding.

Tropical Cyclone Damien struck the Pilbara region back in February cutting six million tonnes from Rio Tinto’s projected 2020 output. The Queensland coal network faces similar vulnerabilities.

The Bureau of Meteorology is predicting increased potential for cyclones and flooding in the next six months.

Governments and the private sector need to work together to ensure resilience in these supply chains in support of central planks of today’s economy.

Much is already underway. There has been significant progress on the mighty 1700km Inland Rail project linking the ports of Melbourne and Brisbane via country New South Wales, on track for delivery by 2025.

Inland Rail is designed for highly efficient double-stacked trains up to 1.8km in length, each of which will carry the same volume of freight as 110 B-double trucks. But there is a snag.

While the rail connections to the intermodals outside Melbourne and Brisbane are easily managed, the final kilometres to the ports are yet to be finalised. As governments look to post-pandemic recovery, these last pieces of the puzzle must be priorities.

The advances in major infrastructure investment are being matched by increasing uptake of technology.

These last six months have been tough for all Australians, but disruptions to supply chains are presenting Australia with global opportunity.

Australia’s exports are in high demand and there is important recognition of, and investment in, a resurgent Australian manufacturing industry just when the world is looking for certainty of delivery and quality ahead of price.

We need to bank the policy advances made during the pandemic and bank on infrastructure and technology advances to quite literally deliver a brighter future for all Australians.

Kirk Coningham
CEO, ALC

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