What I told Parliament: the case for an industry-led national audit of sovereign capability

In July 2026 the Parliamentary Joint Committee on Defence opened an inquiry into Australia’s national civil preparedness and resilience, on a referral from the Deputy Prime Minister and Minister for Defence. Press coverage described it as the first parliamentary examination of civil defence preparedness since the Second World War. The Committee is asking how the civil economy would operate and interact with the Defence Force in a contingency, where the strengths and gaps in our preparedness lie and how essential goods and services would be kept available during a crisis or conflict.

Those are the questions I have been writing about all year, so on 1 September I lodged a submission. The Committee has now published it as Submission 16. This post sets out what I recommended and why.

The gap the Committee needs to close

The Productivity Commission’s 2021 study of vulnerable supply chains found that most of Australia’s supply chains are reasonably robust. That is reassuring for everyday goods. It is no comfort for the narrow set of strategic exceptions an adversary would target, and those exceptions are already reasonably well identified:

• Fuel: Australia has not met the International Energy Agency’s 90-day stockholding standard since 2012. In March this year we found ourselves holding roughly 30 days of diesel, and even after the 2026 Australian Fuel Security and Resilience Package the onshore target sits at around 50 days.

• Water treatment chemicals: indicative shortages within 4-6 weeks of a major regional disruption.

• Pharmaceuticals and their precursors: indicative collapse of supply within 6-8 weeks.

• Munitions and precision missiles: CSIS wargaming of a regional conflict found allied stocks of long-range anti-ship missiles exhausted within the first week of fighting.

A peacetime test of commercial efficiency is not a wartime test of national survival, and the second can fail even when the first passes. Closing the gap between the two has never been attempted in a single, authoritative, whole-of-government exercise. That is what I asked the Committee to recommend.

Recommendation 1: commission a formal national audit

Government should formally commission a National Audit of Australia’s Sovereign Industrial Capacity and Resilience. It should build on the work already done by the Office of Supply Chain Resilience, the Productivity Commission and allied wargaming, then go further, giving whole-of-government visibility of where the genuine strategic gaps sit.

The audit should run as a formal inquiry with the standing to compel information. It would call for submissions from industry, unions, peak bodies, defence primes, critical infrastructure operators and the states, with modelling and risk assessment from Defence, Home Affairs, Treasury, Industry, DFAT and the CSIRO. Sector by sector and good by good, it would map stockpiles, import dependencies, domestic production capacity, supply chain chokepoints, workforce and skills gaps, infrastructure constraints and time to failure under realistic crisis scenarios.

Recommendation 2: put industry in the chair and National Cabinet behind it

Australia has no shortage of reviews. They are tabled, welcomed and shelved. Governance is what decides whether this one is different, so my submission was specific about it.

The audit should be led by an independent steering committee constituted as a sub-committee of National Cabinet. The states own or regulate much of the infrastructure and hold much of the workforce and planning data the audit needs, and a National Cabinet structure gives the work a chance of surviving beyond a single electoral cycle. It also signals that sovereign resilience is a national project and the responsibility of no single portfolio.

The chair should be a captain of industry with substantial advanced manufacturing experience, able to command the confidence of both industry and government and to drive the audit with commercial rigour and delivery discipline. Alongside the chair I proposed a senior executive from a major defence manufacturer with a large Australian footprint, a senior scientist from Defence science and technology or the CSIRO, a senior executive from a national logistics organisation, a senior career military logistician and the Chief of the Defence Force or a nominated representative. That mix is there to test feasibility, which a panel that only catalogues risk cannot do.

Recommendation 3: test the remedies as well as the diagnosis

The audit’s terms of reference should require the steering committee to assess the feasibility, cost and sequencing of a defined set of measures:

• a co-investment fund that shares the risk of building domestic production of critical goods, from pharmaceutical precursors and water treatment chemicals to fuel refining, munitions and advanced manufacturing

• targeted tax incentives such as accelerated depreciation, investment allowances and R&D credits, each tested against transparent cost-benefit criteria

• Strategic Sovereign Industry Zones in regional centres with existing industrial capacity, such as Newcastle, Townsville, Whyalla, Geelong, Gladstone, Rockingham and Launceston

• long-term procurement contracts from Defence and other agencies

• skills and workforce development through TAFE and university partnerships

• a dedicated Department or Ministry of Sovereign Industry, to give the work continuity beyond a single parliamentary term

As a procurement professional I would single out long-term contracts. Manufacturers will not commit capital to a plant without multi-year demand certainty, and government is often the only customer able to provide it. Framed this way, the audit returns a tested, costed and staged plan that government, industry and the states can begin implementing on the day it reports, rather than a map of vulnerabilities and a further round of recommendations for future consideration.

Why the market will not close the gap on its own

In textbook conditions, competitive markets allocate resources efficiently and government should mostly stand back. Australia’s strategic industries face monopolistic or state-subsidised foreign suppliers, the risk of economic coercion and security constraints that price signals do not capture. Lipsey and Lancaster’s theory of the second best (1956) tells us that in a distorted system, piecemeal reform at the margins can leave us further from the efficient outcome than deliberate action.

That is an argument for targeted intervention in a narrow set of sectors, tested against transparent cost-benefit analysis. It is no licence for subsidy across the economy. The audit is the mechanism that keeps the targeting disciplined.

A national project, not a partisan one

The vulnerabilities a properly conducted audit will find do not belong to one side of politics, and neither should the response. Conducted openly, the audit can also invite Australians into the conversation about their own preparedness, and give them something tangible to see: new jobs, revitalised regional centres and clear accountability for progress.

Have your say

At the time of writing the Committee is still accepting submissions. If you work in an industry that keeps Australia running, from fuel and chemicals to logistics, health and manufacturing, your evidence is exactly what the Committee needs. You can read the terms of reference and published submissions on the Parliament of Australia website.

Resilience cannot be assumed. It must be measured, mapped and built.

Read my full submission: Submission 16, PJCD inquiry into Australia’s national civil preparedness and resilience. The argument draws on my articles “A national audit for a stronger Australia” (Defence Connect, June 2026) and “First find Australia’s economic vulnerabilities, then vigorously fix them” (The Strategist, ASPI, July 2026) and my RUSI NSW briefing (29 September 2026). For the full blueprint, see From audit to action.

Sources: Parliament of Australia, PJCD inquiry into Australia’s national civil preparedness and resilience (2026); Productivity Commission, Vulnerable Supply Chains (2021); Department of Industry, Science and Resources, Office of Supply Chain Resilience; International Energy Agency, 90-day oil stockholding obligation; DCCEEW, Australian Fuel Security and Resilience Package (2026); Cancian, Cancian and Heginbotham, The First Battle of the Next War, CSIS (2023); Lipsey and Lancaster, “The General Theory of Second Best” (1956).