Productivity Commission: Australia’s supply chains ‘generally resilient’ in response to COVID-19

By Shannon Jenkins

Monday August 16, 2021

The Productivity Commission has identified supply chains that are vulnerable to disruption and imports of goods that might be vulnerable.
The Productivity Commission has identified supply chains that are vulnerable to disruption and imports of goods that might be vulnerable. (phaisarnwong2517/Adobe)

Most of Australia’s essential supply chains have proven resilient despite the disruption caused by COVID-19 and unexpected trade restrictions, the Productivity Commission has found.

In its new report, the commission has identified supply chains that are vulnerable to disruption and imports of goods that might be vulnerable. It has also set out ways governments can manage supply chain risks.

It noted that the potential vulnerabilities in Australia’s supply chains were highlighted by the pandemic.

“The onset of COVID-19 saw immediate impacts on logistics and transport,” the commission said.

“A global surge in demand and panic buying of some essential goods, notably personal protective equipment, with export restrictions placed on such products by some governments, added a degree of urgency to the unfolding situation.”

The report found one in 20 Australian imports — 292 products worth about $20 billion — are identified as originating from concentrated sources of global supply and may be vulnerable. Two thirds of these vulnerable imports came from China.

However, many of these vulnerable imports, such as festive decorations, toys, swimwear, and sparkling wine, ‘are clearly not essential or critical to the wellbeing of Australians’.

Some of the more concerning vulnerable imports include personal protective equipment and chemicals such as sodium carbonate, which is used in the treatment of water, the commission noted.


Read more: Protectionist trade policies won’t benefit Australia, ABARES says


In regard to Australia’s exports, the commission found few exports are primarily directed to one country, and most have alternative markets to which they could pivot.

“Among Australia’s main exports, data analysis identifies only iron ore as vulnerable. Including iron ore, vulnerable exports account for around 25% of the value of goods exports. Excluding iron ore, only around 1.5% is considered vulnerable,” the report said.

“Even for an export as valuable as iron ore, identification as vulnerable using the framework developed here has no immediate implication for public policy.”

Government agencies and firms are generally best placed to manage their own supply chain risks, according to the commission. Commissioner Catherine de Fontenay said the best response would not involve using policy levers to encourage more Australian production, except in rare circumstances.

“Other available risk management tools include stockpiling, alternative contract design and diversification,” she said.

PC special adviser Jonathan Coppel noted that governments also have the responsibility to provide an environment that facilitates firms’ risk management.

“This includes providing an open trading environment, ensuring regulation doesn’t impede risk management and providing information to help firms manage their risks,” he said.

“The main case for government intervention is in those few instances where the community as a whole is more sensitive to risk than an individual business.”


Read more: Australia’s medicine supply chain is vulnerable


 

About the author
0 Comments
Inline Feedbacks
View all comments
The Mandarin Premium

Insights & analysis that matter to you

Subscribe for only $5 a week

Get Premium Today