NAB chair urges Australia to prepare for future supply shocks
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The news: The chair of National Australia Bank, Philip Chronican, has urged Australia to reinforce its supply chain and diversify its export markets in order to prepare for a “new economic era”.
What they said: In a broad-ranging address to the Australian Governance Summit in Sydney on Wednesday, Chronican said in a volatile geopolitical world, Australia needed to focus on building its resilience to global shocks.
“Closely linked to this is supply chain resilience. The pandemic and rising geopolitical tensions showed how exposed economies can be when critical inputs or logistics are highly concentrated offshore, particularly where we might be dependent on counterparties with competing strategic visions,” Chronican said.
“Countries that adapt earlier will be better placed to compete. Those that do not, risk seeing traditional export markets erode over time without new markets to leverage.”
His warning comes Australia grapples with its limited oil stockpiles as the Iran conflict causes global disruption and threatens to shut down trade through the Strait of Hormuz.
But Chronican emphasised Australia needed to think long-term rather than simply react to near term challenges, urging the country to reduce its dependence on China to strengthen its economic resilience.
“China remains critically important for Australia. At the same time, China’s economic transition, policy settings and geopolitical position introduce greater uncertainty for us,” he said.
Citing NAB-commissioned Deloitte Research, Chronican warned that unless Australia builds new competitive export markets it could forgo $270 billion in exports by 2050 as global demand shifts.
“Diversifying means broadening the range of what we export, moving further up the value chain, and positioning Australia to supply what the global economy will demand in years ahead, not just what it has relied on in the past,” he said.
Amid Australia’s many policy challenges — including energy, climate, AI, social cohesion, and housing — Chronican urged the federal government to tackle the long-overdue issue of tax reform and consider all options.
“The system we design today will shape the opportunities available to future generations. It must be much simpler and far more durable, not layering complexity or overloading it with too many objectives. There should be no sacred taxes within this consideration,” Chronican said.
Drawing parallels to the introduction of the GST, Chronican acknowledged reform wasn’t easy and required tradeoffs but argued “delay carries its own costs, and those costs compound over time”.
He added that much needed policy change had “yet to materialise” from the federal government’s productivity roundtables last year but could not wait any longer.
“With the federal government signalling action in this year’s budget, it is imperative to generate practical, actionable reforms that move beyond debate and lift productivity outcomes,” he said.
“Without sustained productivity growth, it becomes increasingly difficult to lift living standards, fund essential services or manage the fiscal pressures of an ageing population.”
The context: It comes one day after CBA chair Paul O’Malley issued a warning of his own, arguing big tech companies in the US threatened the Australian way of life by extracting economic value without making an equivalent contribution.
The source: Australian Governance Summit
