Flexible framework for readiness and response required from National Cabinet

“The crisis in the Middle East and its impact on fuel and industrial supply chains demand a response that is national, staged and fit for purpose,” said Innes Willox, Chief Executive of the national employer association, Australian Industry Group. 

“National, because every part of the Australian economy is affected, and coordination will serve us better than division. Staged, because the crisis demands different actions as it evolves and intensifies. And, being fit for purpose is critical because solutions have got to be implementable and scalable.

“Rising fuel prices are just the start. Global supply chains for many products — fuels, fertilisers, plastics, industrial commodities and more — will be affected in the weeks ahead. Industry already reports many more shortages just over the horizon.

“Tomorrow’s National Cabinet can’t hope to solve all these problems immediately. But, it must establish frameworks for action defined by common purpose, clear communication and collective decision-making. All options to moderate fuel costs, impact on demand and increase supply need to be on the table.

“So far, the Federal Government has taken some sensible steps, including new fuel security powers, but businesses and consumers rightly expect more critical decisions that will provide greater transparency and predictability will also be announced. 

"Suggested measures to reduce transport use — including  promoting public transport and encouraging flexible work arrangements — will not be a silver bullet. We must also ensure we protect continuity in business and social services, to avoid the profound and damaging social dislocations that we saw during the height of the Covid pandemic.  

“The first requirement is preparation to moderate fuel demand. While we have no overall shortages yet, the impact of interrupted supply chains will flow through many parts of our economy. We don’t know the depth or duration of the crisis, but we need to be ready for many contingencies.

“Fuel rationing would be a serious step, but one we need to be ready to deploy. Rules and systems should be up to date and easy to follow. Businesses and households may need to make difficult choices and need confidence that reliable and clear systems are in place.

“National Cabinet should outline a process to guide business and households in appropriate behavioural changes, guided by price signals in the first instance with rationing as a backstop.

“We also need a roadmap to step out responses if and when the crisis broadens. What is happening with fuel and transport is likely to spread to many products and parts of the economy. Government must work closely with industry to monitor in real time and respond before gaps emerge.

“Depending on the depth and duration of the crisis, financial support for highly impacted sectors may eventually be required. However, careful balances must be struck: every part of our economy and society will be exposed, and finite fiscal resources should be directed where they are needed most.

“Emergency powers must be signalled and sequenced: premature or heavy-handed intervention could constrain industry decision-making, while delays or prevarication could undermine public confidence. Clear information, stable settings and room for industry to move are as important as any regulatory lever.

“Australia should take well-considered steps to reduce our future risk and build security. We have been too slow in learning the pandemic’s lessons on the need to strengthen our economic security and resilience. Moving quickly to build a larger national fuel reserve once this crisis is over should be a priority.

“More broadly, adopting electrification and renewable fuels where they make sense can cut our underlying exposure to energy disruptions overseas. So can diversification of our fossil energy supply chains. With electricity evermore central to our economy, we need to treat deployment of new electricity generation, transmission and storage as a national security priority, not just a matter of balancing local stakeholder concerns.

“Given that National Cabinet may tomorrow also discuss measures around Australia’s apprenticeship system, this crisis is a salient reminder that Australia's local skills pipeline is crucial in strengthening our sovereign capability: we can’t reboot our economy without developing our skills base.

“Commencements of apprentices and trainees have declined for some time, and the headwinds for businesses in employing apprentices and trainees are only increasing. A strong focus must be placed on ensuring employers have confidence to continue employing apprentices and trainees and existing apprentices can complete their training through a nationally coordinated approach.

“We cannot control our international context and do not know how it will develop, but National Cabinet must now put in place a flexible framework for readiness and response to whatever comes next,” Mr Willox said.