Opportunity knocking: Rising from the ashes of COVID-19

Australia is unlike virtually every other developed nation, it has enjoyed a record near three decades of economic prosperity and stability, buoyed by the immense mineral and resource wealth of the landmass and the benevolence of the post-Second World War political, economic and strategic order. 

However, all good things must come to an end, as the perfect storm of both devastating bushfires locally, and now the global recession triggered by the outbreak of the coronavirus has shattered any pretense Australia had to being an 'advanced economy' and 'developed country'. 

We are, however, not in this alone, many nations throughout the 'developed' world have found themselves similarly isolated and exposed, despite the promise of cheap, 'reliable' access to trade as a result of the post-Cold War global supply chains, which have seen industries and economies hollowed out and sensitive, nationally critical manufacturing sent offshore. 

Nowhere is this more evident then in the cannibalism emerging among the European Union member states, as larger nations like Germany and France 'requisition' resources and key supplies including masks, respirators and medical supplies, while also providing limited, hands-off approach to providing direct support to the likes of pandemic ravaged Italy and Spain.

Despite these examples, the spirit of international co-operation remains somewhat alight, as hosts of scientists around the world rush to find a cure or vaccine to save lives and some nations actively provide support in a limited capacity. 

As national government and populations struggle to contain the outbreak and minimise the impact to their respective economies and standards of living for the public, it raises the question, was our access to cheap goods worth trading our national security and economic prosperity?

This is something many political commentators, both locally and around the world, have expanded on in recent weeks, particularly following the blatant misinformation and disregard for global health the Chinese government has inflicted upon the world. 

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In fact, Chris Ulhmann in a piece for The Sydney Morning Herald titled, 'It's certain COVID-19 will change everything but this needs to change most of all', articulates Australia's growing need to re-establish certain supply chains, while minimising its concerning dependence upon the economic might and prosperity of a totalitarian regime in President Xi Jinping's communist China. 

Ulhmann encapsulates this in identifying the core lessons for both the Australian government in public in the aftermath of this, stating: "But it’s a fair bet that the bulk of the population has got some key messages: that this threat came from China, that its totalitarian regime’s first reaction was to lie and that Australia is far too reliant on an unreliable nation."

This galvanising of the Australian public presents an opportunity for the nation's political leaders to chart a path forward in the aftermath and get the public reinvested in the nation's future in the aftermath of the pandemic and the ensuing economic devastation. 

Ulhmann identifies this potential to a degree by identifying the potential outcome if we don't embrace the opportunity, stating: "The crushing recession spawned by the deliberate radical shutdown of our economy by our governments is just beginning. Because the rest of the world is applying the same medicine this could evolve into a second Great Depression that will take many more lives than the disease; through war, civil disorder, murder, suicide, domestic violence and lives shortened by poverty and despair.

"This virus offered us no good choices, only the bad and the worse. What matters now is the choices we make about our future because only one thing is certain, everything changes from here."

Ulhmann expands on this, stating: "The government has used its balance sheet to put the economy on life support. It will have to do much more. No strategically important business can be allowed to fail and new industries must be built here and stay here. At the top of the list must be medical equipment and pharmaceuticals."

No point shifting from China only to replace it with even more dubious suppliers 

Ulhmann's assessment is partially correct, identifying that "no strategically important business can be allowed to fail and new industries must be built here and stay here", where he comes unstuck is advocating for the broadening of our supply chains to focus on other developing economies like India, Indonesia, Bangladesh and the like.

"We should deliberately diversify our suppliers away from China. Every dollar spent building capacity in countries like Indonesia, Malaysia, Vietnam, Bangladesh and India is a dollar well spent. Their progress is our progress," Ulhmann states. 

This is only part of the solution. Helping these nations to economically develop is in Australia's best interests and should be pursued, as the Australian government is actively pursuing and has been doing, however swapping these nations in for China only serves to repeat the same mistake as doubling down on China as we have done since the late-1980s. 

So let us learn from our mistakes, rather than repeating them. In this instance it means ensuring that while small, cheap, easily replaceable consumer goods, which these developing nations use as their 'bread and butter' go-to for economic development should remain just that, leveraging Australia's raw resources, energy and agricultural capacity to support their economic development. 

What this does mean is that the larger, more complex industries of national significance and strategic importance must be developed and adequately nurtured by successive Australian governments, leveraging public policy initiatives devoid of ideological bias and bent, combined with the growing public support to secure Australia's national security and resilience. 

Time for a National Strategic Industries Act

In mid-2019, Defence Connect presented the broad strokes for the development and introduction of a National Strategic Industries Act to be developed and introduced to the public debate. 

Certain industries, including heavy manufacturing like steel production, shipbuilding, auto-manufacturing, aerospace and chemical engineering, pharmaceutical and medical industry, resource and energy exploitation and agricultural output, serve core components of any strategic industry development policy.

Meanwhile, the growing complexity of the regional and global strategic paradigm supports the necessity for a cohesive industry development strategy. 

Recognising the opportunities and potential challenges facing Australia – how does the nation respond to the rapidly evolving regional environment, while also identifying and supporting the development of critical national strategic industries in an increasingly competitive era?

Australia as a nation, like many Western contemporaries, has been an economy and nation traditionally dependent on heavy industries – capitalising upon the continent's wealth of natural resources including coal, iron ore, copper, zinc, rare earth elements and manufacturing, particularly in the years following the end of the Second World War. 

However, the post-war economic transformation of many regional nations, including Japan, Korea and China, and the cohesive, long-term, nation-building policies implemented by these nations has enabled these countries to emerge as economic powerhouses, driven by an incredibly competitive manufacturing capability – limiting the competitiveness of Australian industry, particularly manufacturing. 

Recognising this incredibly competitive global industry and the drive towards free trade agreements with nations who continue to implement protectionist policies buried in legislation, Australia needs to approach the development of nationally significant heavy industries in a radically different way, recognising the failures of the past and the limitations of Australia's past incarnations of heavy industry. 

Identifying these industries is the first step in building a cohesive, long-term plan as part of a broader National Strategic Industries Act – using the legislative power of government to counter-balance industry development policies of allied, yet still competitor nations like South Korea.

Such policies leverage the industrial development policies of export-oriented industrialisation (EOI) to develop its economy into a major economic and modern, advanced manufacturing powerhouse. 

Game, set, match 

The outbreak of the coronavirus and the ensuing political, economic turmoil has revealed albeit reluctantly the willingness of the Australian government to directly intervene and support the nation's vulnerable economy, even if only for a short period of time. 

So, why not leverage the policy apparatus to rebalance the scales and establish a fair environment for Australian industry to compete within? 

Despite Australia's widely recognised position as providing a world leading research and development capacity – supported by both private and public sector research and development programs driven by organisations like the CSIRO.

Traditional areas of high wage costs and low productivity in Australia's manufacturing industry exemplified in the failure of Australia's domestic car industry and in the series of cost overruns and delivery delays on both the Collins and Hobart Class programs have characterised Australia's reputation as a manufacturing economy. 

Enter Industry 4.0 – the combination of additive manufacturing, automated manufacturing and data sharing, with a coherent National Strategic Industry development policy can compensate and in some cases overcome the traditional hindrances faced by the Australian economy.

Further supporting this with public-private collaboration essential to ensuring the long-term sustainability and success of Australia's defence industrial base and broader manufacturing economy.

While industry largely provides the technological expertise, government policy provides the certainty for investment – particularly when supported by elements of Australia's innovation and science agenda combined with grant allocation and targeted, contractual tax incentives (signed between the Commonwealth and the company as a memorandum of understanding).

In order to maximise the domestic benefits any such policy should equally be linked to a combination of long-term, local job creation, foreign contract success, local industry content, and research and development programs, which are critical components that can be used to empower and enhance the overall competitiveness.

Despite the nation's virtually unrivalled wealth of natural resources and agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual, yet complementary public policy strategies to support a more robust Australian role in the region. 

This is done through a range of government-driven incentives for industry, including corporate tax incentives, employment incentives and payroll tax incentives.

Establishing and implementing a cohesive, innovative and long-term vision for Australia's sovereign industry capability can also serve as the basis for developing, and in some cases redeveloping, a robust, advanced manufacturing economy taking advantage of Australia's unrivalled resource wealth – supporting the broader national security and interests in the Indo-Pacific. 

Finally, as part of developing a broader National Security Strategy, the introduction of a National Strategic Industry Act that designates and through the machinery of public policy supports and sustains the development and competitiveness of industries deemed 'critical to national security' to avoid the failures of the past, which has resulted in costly project delays, price increases and capability gaps.    

In order to maximise the nation’s position, prosperity and security, is it time to introduce a role of a Minister for National Security or special envoy role to support the Prime Minister and respective ministers, both within the traditional confines of "national security" or "national resilience" like Defence and Foreign Affairs, to include infrastructure, energy, industry, health, agriculture and the like?   

Your thoughts

Up until now, contemporary Australia has been far removed from the harsh realities of conflict and global disruption, with many generations never enduring the reality of rationing for food, energy, medical supplies or luxury goods, and even fewer within modern Australia understanding the socio-political and economic impact such rationing would have on the now world-leading Australian standard of living. 

This is something Ulhmann identifies and expands upon, while leaving poignant questions for pondering, "We need to take a long cold look at the world and recognise that the Chinese Communist Party is a strategic threat and that, in a crisis, the US will look to its own interests first and they might not align with ours.

"The pandemic has shown us that when a crisis hits we are alone. So we need to be able to tend to our needs and defend our interests, alone. We have to become hard-headed and a hard target. That will be very expensive. But it will be worth the cost and it might also be something Australians are now willing to buy." 

Australia’s position and responsibilities in the Indo-Pacific region will depend on the nation’s ability to sustain itself economically, strategically and politically.

Despite the nation’s virtually unrivalled wealth of natural resources, agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual yet complementary public policy strategies to support a more robust Australian role in the region.

Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia.

However, as events continue to unfold throughout the region and China continues to throw its economic, political and strategic weight around, can Australia afford to remain a secondary power or does it need to embrace a larger, more independent role in an era of increasing great power competition?

Further complicating the nation’s calculations is the declining diversity of the national economy, the ever-present challenge of climate change impacting droughts, bushfires and floods, Australia’s energy and industry security and the infrastructure needed to ensure true national resilience. 

Let us know your thoughts and ideas about the development of a holistic national security strategy and the role of a minister for national security and resilience to co-ordinate the nation’s response to mounting pressure from nation-state and asymmetric challenges in the comments section below, or get in touch with This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..