Rebuilding Australia's sovereign industry capability

Similar to many Western democracies, Australia has embraced free trade for decades, leading to a gradual outsourcing of its manufacturing industry to China. In the late 1970s, manufacturing represented nearly 20% of Australia's GDP, but it has since dwindled to less than 6%. Consequently, Australia depends on other countries for the majority of its pharmaceuticals, heavy machinery, automobiles, aircraft, technology, chemicals, and defence materiel, including ammunition. Simulations from the early 2020s indicated that a blockade of Australia's sea lanes could lead to a shortage of water treatment chemicals and most fertiliser products. With only two oil refineries and the bulk of its oil reserves located in the USA, Australia's situation is precarious.

To address this issue, the Australian federal government needs to intervene in the country's imperfect markets, taking cues from nations like the Republic of Korea, where the government and industry collaborate to enhance sovereign capabilities. Australia should foster private sector investment in essential industries through co-investment, interest-free and government-guaranteed loans, tax incentives, and the reintroduction of green-fields workplace relations arrangements. Establishing "opportunity zones" near ports, such as Geelong, Toowoomba, Newcastle, Wollongong, Rockingham, Osborne, Townsville, and Katherine, should be prioritised to attract private enterprises and workforces outside the major capital cities.

Failing to tackle this problem presents a grave danger to the country, and it is imperative to swiftly put into effect a bipartisan strategy to counter this alarming trend.

Moreover, the reliance on other countries for critical industries not only poses economic risks but also raises national security concerns for Australia. The vulnerability exposed by the dependence on imports for essential goods highlights the urgent need for a strategic shift in the country's economic policies. By fostering domestic production and investing in key sectors, Australia can reduce its susceptibility to external disruptions and safeguard its sovereignty.

Furthermore, the proposed measures to attract private sector investment and stimulate growth in strategic locations across the country are crucial for diversifying the economy and creating employment opportunities outside major urban centres. By encouraging businesses to establish operations in designated zones, the government can spur innovation, enhance competitiveness, and build a more resilient industrial base.