AUSTRALIA: MARITIME POLICY REFORM
AUS’: THE REFORM DEBATE A new report from Australia’s Productivity Commission adds fuel to the fire of proposed maritime sector reforms – the battle lines are being drawn. Mike Mundy reviews the pros and cons
8 There are pros and cons on both sides of the reform argument but is the strong hand of government an appropriate vehicle to bring about meaningful reforms?
There is an interesting article that has recently been posted on the website of Shipping Australia, the industry representative body, the focus of which is vulnerabilities in supply chains. It is written by economist Catherine de Fontenay of the University of Melbourne and provides insight into the report which she co-authored on behalf of the Productivity Commission aimed at identifying significant vulnerabilities in the supply chain and, importantly, ways of dealing with them. The origins of the report go back to Treasurer Josh Frydenberg who initiated the Productivity Commission’s work in this area following the impact of COVID-19 which, particularly when it first hit, exposed supply chain vulnerabilities. There is a common perception that Australia is potentially more open to supply chain problems due to the extended distances over which most import and exports– containerised and others – move. The Productivity Commission’s report, formally entitled Vulnerable Supply Chains and released on 13 August 2021, does not, however, identify this as a major factor. The research undertaken was empirical – fact driven – and basically sees the main impediment to the effective performance of supply chains as due to “market concentration” related to supply, which it says creates vulnerability. The approach taken to examining the cause of such problems, which basically first raised their head in conjunction with the supply of products such as sanitiser and masks, was to undertake “a broad scan of data,” a macro look. Catherine de Fontenay explains: “Our approach was to first identify the
products that were vulnerable to supply chain disruptions and then to identify which of them were used in essential industries.” She elaborates: “Australia imported 5862 different products from 223 countries in 2016-17. The biggest suppliers were China and the United States. Combined, they accounted for just over one third of the value of goods imported. We found that 1327 of the 5862 products – one in five – came from concentrated import markets” The most concentrated commodities were chemicals, iron and steel, and equipment. Other products such as seafood and some types of clothing were also identified as concentrated. The next step was to consider how markets were likely to respond to a disruption of supply or spike in demand. It was concluded that “…shortages trigger a period of uncertainty during which existing contracts and personal relationships help determine who gets goods first. “But fairly soon after, who gets what is determined by the prices buyers are willing to pay.” Hence the conclusion arrived at was that: “…a product is vulnerable if much of the world supply is concentrated in one country; if that country experiences a natural disaster or other shock, the remaining world supply is very limited, and prices will be astronomical.” The report determines that China is the main supplier of vulnerable products to Australia, approximately two thirds of the goods identified as such. Yet many of the imports
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SEPTEMBER 2021 | 33
