Australia budget to bolster supply chains, domestic industry post-coronavirus and amid China turmoil

Australian treasurer Josh Frydenberg announced a A$107.2 million (US$76.7 million) Supply Chain Resilience Initiative on Tuesday

A$1.3 billion (US$930 million) will also support manufacturing related to mining, food and beverages, medical products, clean energy, defence and space

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Australian Treasurer Josh Frydenberg announced the 2020-21 budget on Tuesday in Canberra. Photo: EPA-EFE

Published: 3:15am, 8 Oct 2020Updated: 3:39am, 8 Oct 2020

Australia’s new budget commits funding to help diversify supply chains and support domestic manufacturing as disruptions stemming from the coronavirus outbreak and continued trade frictions with China have reinforced the need for self-sufficiency.

The Australian government will spend A$107.2 million (US$76.7 million) on a Supply Chain Resilience Initiative that will map out existing vulnerabilities and offer solutions to strengthen them, Canberra announced on Tuesday.

The scheme is paired with a A$1.3 billion (US$930 million) so-called modern manufacturing strategy budget aimed at supporting domestic manufacturing in six key sectors – namely mining resources technology and equipment, food and beverage, medical products, clean energy, defence and space. The funds will also support the commercialisation of new products for export.

During the ongoing six-month-long political row with its largest trading partner, China has hit Australia’s barley sector with a high anti-dumping duty, blocked beef exports from certain abattoirs, and initiated investigations into whether wine is being sold in China at artificially low prices and whether winegrowers are supported by excessive subsidies.

Covid-19 has reinforced the importance of Australia’s sovereign manufacturing capability

Josh Frydenberg

Australia is heavily dependent on China for both imports and exports, with two-way trade between the two countries worth around A$240 billion (US$172 billion), an increase of nearly 60 per cent over the last five years.

While China was not mentioned in the budget, which focused heavily on economic stimulus and job creation as part of the post-pandemic recovery, the need for more resilience of supply chains and diversification away from old markets was a running theme.

“Covid-19 has reinforced the importance of Australia’s sovereign manufacturing capability,” Australian treasurer Josh Frydenberg said in his budget speech.