The Fence
News and Views

Ai Group report on Australia’s supply chain vulnerabilities

The national employer association Ai Group has released a report that seeks to explore current business experience associated with supply chain pressures (particularly as they relate to sea freight), and connected impacts in other areas of policy with the aim of identifying possible constructive solutions and pathways forward.

Ai Group Chief Executive Innes Willox said: “The COVID-19 pandemic has exposed deep weaknesses in the operations of global and domestic supply chains and laid bare many Australian vulnerabilities as an island nation with 98% of trade and most jobs connected to or reliant on sea freight in some way.

“Supply chain chaos has been created by a combination of factors including the increase in global demand for goods; lengthy lockdowns and infections of workers; a global shipping container shortage; reduction in shipping services and port skipping; Australian industrial action; and rising costs. This situation is projected to only moderately ease by 2023 and beyond.

“These pressures can undermine our economic recovery from the pandemic and ultimately dampen economic growth.

“Supply chain problems should be assessed by how essential the goods are to the wellbeing of Australians and how critical they are to the production of an essential good or service whether for domestic consumption or for export.

“There is increasing concern about geostrategic tensions, trade conflicts and their associated unknowns. This creates real risks for businesses reliant on distant suppliers and generates an incentive to change the way they do business, and to avoid over-dependency on particular countries or regions (especially those where trade or diplomatic tensions exist).

“We asked businesses whether their ability to source inputs in 2021 had changed compared to 2020 and almost two-thirds (65%) reported that sourcing their usual inputs was much more difficult in 2021 than in 2020.

“Given the disruptions in 2021, just over half (52%) of Australian businesses expected their ability to source inputs would continue to be disrupted in 2022, with 17% feeling more optimistic about sourcing supplies in 2022. 27% expected no change to their ability to source inputs in 2022 compared to 2021, but it is unclear whether this is a cause for optimism, or an indication businesses are expecting the same problems and pressures to continue.

Other primary factors impacting businesses in October 2021 included: activity restrictions (24% of businesses), increased demand (27% of businesses), COVID-19 (8% of businesses) and input cost increases (8% of businesses).

“While we may not be able to control the global factors negatively impacting supply chains, we should not shy away from looking inward and improving our own domestic performance and efficiencies.

“The recently announced Productivity Commission inquiry into Australia’s Maritime Logistics System is a positive development that will further identify the impacts that go beyond the productivity on our wharves, the reliability of our supply chains and the high prices faced by businesses and households.

“Hopefully, determined actions will follow the report’s recommendations next year,” Mr Willox said.

A copy of the full report is available here.

Responses to this survey were received from the CEOs of 346 private-sector businesses across Australia in October 2021. Together, these businesses employed 119,827 people (378 people in each business on average) and had an aggregate annual turnover of around $74 billion in 2021.

All Australian states and all major non-farm private-sector industries are represented in the survey

Source: Ai Group

Most Popular

Newsletter Signup

The Fence
To Top