Stating the obvious: Study reveals vulnerability of Australian economy to maritime blockages

For much of Australia’s history, we have enjoyed the free and unhindered access to the global maritime commons, secured initially by the British Empire and the might of the Royal Navy and now secured since the end of the Second World War in part by ourselves, but at a global level by the United States.

This benevolence and security provided Australia with the opportunity to trade with the world, opening up the vast and unrivalled mineral wealth of the nation and unlocking our agricultural promise to the benefit of millions at home and hundreds of millions abroad.

While Australia was far from alone in benefiting from the post-Second World War peace and security, as a nation, Australia has been disproportionally benefited in many ways, buoyed by the voracious appetite of nations across the world, but in particular, right on our doorstep in the Indo-Pacific.

However, the period of hyper-globalisation that came to dominate the global economy during the 1990s and into the 2000s, and eventually ending with the Global Financial Crisis in 2008–09, has brought the chickens home to roost.

This has been further complicated by the rise of the People’s Republic of China as the world’s emerging superpower which has actively and assertively pursued territorial claims throughout the Indo-Pacific, particularly through the western Pacific and maritime Southeast Asia, calling into question the long-term security of the maritime lines of communication which Australia’s economic wealth and prosperity has come to depend upon.

Highlighting this is Australian Strategic Policy Institute Senior Fellow David Uren’s detailed analysis, titled, The trade routes vital to Australia’s economic security, in which he detailed the growing challenges facing Australia’s maritime trade and, by extension, the national economy and our way of life.

Uren established the basis for the analysis, stating, “A recurrent theme in Australia’s defence strategy has been our reliance on and need to defend Australia’s trade routes in a globalised world. The vulnerability of Australia’s limited stockpiles of critical goods and its concentrated sources of supply have driven military capability and planning for decades and remain a justification for strategic investments.”

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This statement drew on the rationale for both the government’s 2023 Defence Strategic Review and supporting Independent Analysis into Navy’s Surface Combatant Fleet which stressed the importance for an increased Australian capacity to control and secure the critical sea lines of communication and maritime that the nation depends upon.

Key findings – some surprises, some known knowns

The attack on global shipping by Houthis in the Red Sea and Horn of Africa following Hamas’ attack on Israel on 7 October has only served to reinforce the importance of long-range, sustained maritime security for many nations across the globe.

Although slowly, Australia is starting to come to that conclusion, with Uren’s analysis identifying a number of key findings pertinent to Australia’s economic and national security, beginning with the recognition that Australia’s access to the critical corridors of maritime trade through the Indonesian archipelago, namely the Malacca, Lombok, and Sunda Straits, respectively, are “of the utmost importance both to Australia and globally”.

Unpacking this further, Uren’s analysis stated, “The entry points to the Indonesian sea lanes are obvious choke-points and are relatively close to the Australian mainland. China is highly dependent on the passage of shipping through those waters, so they could become the focus of a US blockade in any conflict between the two powers.”

In highlighting this point, Uren reaffirmed the economic “mutually assured destruction” or MAD that would ensue as a result of direct kinetic conflict, or even confrontation between the United States and its allies and China. For Australia, this is particularly relevant information, given, “two-thirds of Australia’s maritime exports and 40 per cent of our imports pass through Indonesia’s archipelagic sea lanes”.

It isn’t all bad news though, with major “identified” flashpoints like the South China Sea, often right at the forefront of the attention of many analysts and rightfully so, given China’s increased hostility and antagonism toward the Philippines, Vietnam, and other nations with overlapping claims in the area and their active militarisation of manmade islands in the area being “easily avoided” by commercial shipping, although it does come at a cost.

Uren stated, “The South China Sea, which is often presented as a likely flashpoint for conflict between China and the US, is relatively easily avoided. Ships can travel through the Makassar Strait and to the east of the Philippines”, while the existing corridor along Australia’s east coast, largely already utilised for Australia’s imported manufactured goods transiting from north Asia provides an additional “secure” trade route.

“The major alternative route to the Indonesian sea lanes is to the east of Papua New Guinea (PNG). This is the major route for trade from the east coast of Australia with North Asia – particularly Australia’s imports of manufactured goods. In the event of any disruption to sea traffic through Indonesian waters, a significant share of global shipping with Asia would be diverted around the south of Australia, going north to the east of PNG,” Uren articulated.

In responding to the uncertainty presented by the strategic environment in the Indo-Pacific, particularly through the aforementioned sea lines of communication, Uren identified a number of recommendations that should serve to mitigate at least some of the risks associated with our geographic position and dependence on the security of the global maritime commons.

Uren’s first recommendation is the funding of the Bureau of Infrastructure and Transport Research Economics (BITRE) to update their 2007 study of trade routes in order to support and enhance the Defence response via “a firm empirical base from which Defence can make assessments of how best to secure Australia’s trade routes”.

As part of supporting this, the study, Uren believes, should also include “the identification of the nationality of the ships carrying Australia’s trade and the security of container shipping supply, particularly in the context of a crisis. In the event of a major international conflict, there would be a role for government in chartering the necessary shipping to meet essential needs”.

This feeds into the Albanese government’s election commitment to build an Australian-flagged “strategic fleet” which is still to get off the ground and builds on the second recommendation, which calls for consideration for “how and in what circumstances the government should or would support maritime war-risk insurance. The government should review the experience of other countries and potentially codify its intent to underwrite war-risk insurance for strategically important maritime shipping”.

Following this, Uren called for a detailed Australian analysis into the impact of conflict on our trading partners should our maritime trade be impacted directly, stating, “Commission a study to identify the consequences of disruption to Australia’s shipping lanes for our trading partners, recognising the need for a sharper understanding of the strategic importance of Australia’s exports to its key trading partners.”

Building on this, it equally becomes important for Australia to understand just how fit for purpose the existing “war powers” specifically are, those articulated in the Defence Act 1903, and the provisions for requisitioning critical commercial assets (e.g. merchant shipping) to support a war effort, with Uren stating the need to examine the “requisitioning commercial assets are fit for purpose in the 21st century and consider alternative contracting options. Defence could provide initial advice. Any review should encompass consideration of the workforce and personnel requirements to give effect to the powers under the act”.

Uren’s final recommendation comes as no shock to anyone, that Australia must continue its support for the post-war, international rules-based order upon which the wealth of much of the developed and now developing world has been built. How we do that, however, is more verbal, rather than practical, at least at first glance.

Are we doing enough?

Might seem like a bit of a redundant question, but it does, indeed, have to be asked. Most importantly, this needs to be asked because, as Uren so eloquently described, “Australia has become the premier global supplier of minerals and energy; however, our manufacturing industry has contracted. Australia has become much more dependent on imports of consumer goods, industrial equipment, chemicals and basic materials. Both imports and exports are a much larger share of the Australian economy than they were in the 1980s and 1990s. As a result, defending trade routes has become a much higher priority.”

If we don’t secure our interests and take them seriously, how can we expect anyone else to take it seriously for us?

Successive governments have, in recent years, begun to move the dial – the signing of the trilateral AUKUS agreement which will deliver nuclear-powered, conventionally-armed submarines for the Royal Australian Navy is a prime example of this.

As is the Albanese government’s surface fleet review, which has, like the 1997 Defence White Paper before it made the case for an expanded surface combatant fleet, with ambitious plans to expand the Royal Australian Navy’s major surface combatant fleet to at least 16 “crewed” major surface combatants and up to six large “optionally crewed surface vessels”, bringing the major surface combatant force to 22.

Whether that is delivered and whether it is the right division of labour is a question equally worth asking, particularly as our regional neighbours continue to rapidly expand their own naval capabilities and will continue to do so, resulting in significantly powerful capability by 2043.