Leslie Massey
Australia's self-sufficiency has been a topic of discussion, especially in the wake of the COVID-19 pandemic and the Russia-Ukraine war, which disrupted global supply chains and raised questions about the country's resilience in the face of external shocks. While some argue that Australia has the resources to be self-sufficient, particularly in food production, others point out challenges and limitations, including an ageing population, the cost of local production, and the current focus on profitable farming rather than self-sufficiency. The country's vulnerability in certain areas, such as diesel fuel supply, and its heavy reliance on exports and imports, further complicate the path towards self-sufficiency.
| Characteristics | Values |
|---|---|
| Self-sufficient in food | No, but it has the potential to be. Australia grows enough food for 50 million people and can expand to 75 million without much difficulty. |
| Self-sufficient in fuel | No, it has only a few weeks' supply of diesel. |
| Self-sufficient in natural resources | Yes, it has phosphorous and natural gas. |
| Self-sufficient in manufacturing | No, but there are moves to increase funding for manufacturing industries and encourage homemade supply. |
| Self-sufficient in medicine | No, but the largest flu vaccine manufacturing plant in the southern hemisphere is being built in Melbourne. |
| Self-sufficient in foreign investment | No, but some argue that it should be more self-sufficient in this area. |
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What You'll Learn
Australia's ageing population
To address the challenges posed by the ageing population, Australia has implemented policy reforms to improve labour force participation and productivity. The country's participation rate for those of traditional working age has improved in recent years, and the projected participation rates for older workers are also encouraging. However, the decline in labour utilisation remains significant, and Australia's productivity gap with the US persists due to geographical constraints.
The ageing population has also led to increased demand for health and aged care services, which could further increase costs. While ageing is estimated to reduce revenue by $20 billion in 2028-29, broader factors such as population and income growth are expected to result in a net increase in revenue of $166 billion in the same period. Similarly, while ageing is projected to add $16 billion to Commonwealth spending, other factors are expected to result in a total increase of $119 billion.
The Intergenerational Reports (IGR1 and IGR2) released in 2002 and 2017, respectively, examined the impact of Australia's ageing population on the economic and fiscal outlook over 40 years. Despite progress in addressing the demographic fiscal challenge, it is important to recognise that the challenges of ageing are not behind us. Ageing will cause per capita growth to slow, and the overall share of government in the economy will rise. Population ageing is a global challenge, with old-age dependency ratios projected to double or triple for several countries by 2050.
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Local manufacturing
Australia has the potential to be self-sufficient in terms of food, as it currently grows enough to feed 50 million people and could expand to 75 million without much difficulty. However, the country's goal is currently to farm for profit, which is different from the goal of self-sufficiency. Additionally, the country's ageing population and reliance on foreign investment present challenges to self-sufficiency.
To promote self-sufficiency, there are moves at the federal government level to increase funding for manufacturing industries and encourage local production. For example, the government is investing $1 billion in the construction of the largest flu vaccine manufacturing plant in the southern hemisphere, located in Melbourne. This investment aims to secure Australia's stockpile of critical vaccines and antivenoms.
Australian companies can also contribute to self-sufficiency by supporting local manufacturing businesses, such as White Industries, a national supplier of metal castings and components.
Furthermore, Australia has the resources to be self-sufficient in other areas, such as energy. However, the country has closed refineries and now has only a few months' supply of petroleum, making it vulnerable to overseas supply chain disruptions.
Overall, while Australia has the potential to be self-sufficient in certain areas, it is currently not fully self-sufficient, and there are economic and political challenges to achieving this goal.
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Energy supply
Australia's energy system is currently undergoing significant changes, driven by economic, engineering, and environmental factors. The country has traditionally relied on non-renewable fossil fuels, such as coal, oil, and natural gas, for its energy needs. In 2021, coal and gas accounted for around 70% of electricity generation. However, there is a growing shift towards renewable energy sources, such as solar power and wind power, due to the increasing impacts of climate change.
Australia is one of the world's largest exporters of coal and liquefied natural gas (LNG), contributing significantly to its economic prosperity. In 2021, Australia was the fifth-largest producer of hard coal globally, and coal represented 64% of its domestic energy production. However, despite its vast gas supplies, Australia has started importing LNG to meet domestic demands in certain states.
The country also has an abundance of renewable energy sources, including solar, wind, hydro, geothermal, wave, and tidal resources. In 2022, renewable energy accounted for 39.4% of Australia's total electricity supply, with this number expected to more than double by 2030. The government has set a target of 82% renewable energy generation by 2030 and is investing in initiatives like the National Electricity Market (NEM) to achieve its emission reduction goals.
While Australia has a unique position in the global energy landscape due to its rich natural resources, it is also reliant on imports for critical energy products. This reliance on imports, particularly refined petroleum products and crude oil, is a key concern in the energy independence discussion. Australia holds a baseline stock of 27-32 days' worth of fuel, falling short of the International Energy Agency's requirement of 90 days of net oil imports.
To summarize, Australia's energy supply is currently dominated by non-renewable fossil fuels, with coal playing a significant role. However, the country is actively transitioning towards renewable energy sources, aiming to reduce emissions and increase energy independence. The abundance of renewable resources and ongoing investments in infrastructure and technology are driving this shift.
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Food production
Australia is a leader in food self-sufficiency, ranking among the most food-secure nations in the world. It exports around 70% of its agricultural output while still keeping its citizens well-fed. Even in years of severe drought, Australia produces more than enough food for its inhabitants. The country prioritises its own food needs, and during lower production years, exports decrease while consumption remains the same.
Australia's food security is further evidenced by the fact that during the COVID-19 pandemic, concerns over food security only caused a slight inconvenience for some consumers, with potential disruptions to imports unlikely to impact overall food security. Australia imports just over 10% of domestically consumed food and beverages, mainly processed products and small amounts of out-of-season fresh produce, to meet consumer preferences for taste and variety.
However, it is important to note that Australia's farming practices have not always been sustainable, and issues such as soil impoverishment and environmental degradation have been raised. Nevertheless, Australia has been working to implement solutions to these issues, such as using satellites to monitor crop and pasture health and employing field soil sensors to optimise water usage.
In terms of specific food groups, Australia is a major exporter of meat, with beef farming being one of the most environmentally demanding and destructive forms of agriculture. The country also exports large amounts of Australian-made meat overseas.
Overall, while Australia faces some challenges in terms of sustainable food production, it is currently largely self-sufficient in terms of food and is actively working to address any issues that arise.
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Foreign investment
There are two main ways in which foreign residents or companies can invest in the Australian economy: portfolio investment and foreign direct investment (FDI). Portfolio investment refers to the purchase of securities (such as stocks or bonds) or equity and debt transactions that do not offer operational control to the investor. Common examples include the purchase of property, shares in Australian companies, or government bonds by foreign superannuation or pension funds. FDI, on the other hand, involves an individual or entity from outside Australia establishing a new business or acquiring at least 10% of an Australian enterprise, thus gaining some control over its operations.
Australia welcomes foreign investment and has policies in place to encourage it, recognising the many benefits it brings. The Australian government reviews foreign investment proposals on a case-by-case basis through the Treasury to ensure they align with the country's national interest. Australia attracts the 15th-highest amount of direct foreign inward investment globally, with the United States and the United Kingdom being the biggest investors, followed by Belgium, Japan, and Hong Kong.
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Frequently asked questions
Australia is not a fully self-sufficient country. However, it has the resources to be more self-sufficient, and there are moves at the federal government level to increase funding to manufacturing industries and encourage homemade supply.
Australia's ageing population, reliance on foreign imports, and the high cost of local manufacturing are some of the factors preventing the country from being self-sufficient.
Australia can increase funding to local manufacturing industries, secure critical supplies like vaccines and antivenoms, and focus on developing local food production to become more self-sufficient.
