Andrew McKellar interview with Ashleigh Gillon, NewsDay Sky News

Event: Andrew McKellar interview with Ashleigh Gillon, NewsDay Sky News.

Speakers: Andrew McKellar, chief executive Australian Chamber of Commerce and Industry, Ashleigh Gillon, host NewsDay Sky News.

Date: 15 March 2022.

Topics: ACCI-Westpac Industrial Trends Survey, post-pandemic economic recovery, labour and material shortages, Russian sanctions, trade relationship with China, diversification of supply chains.

E&OE 

Ashleigh Gillon, host NewsDay Sky News: Australian manufacturers are facing the worst material shortages in almost 50 years, and it is likely to get worse as the Russian invasion of Ukraine disrupts global supply chains. Let’s bring in now, Andrew McKellar, the CEO of the Australian Chamber of Commerce and Industry. Andrew, always appreciate your time. Firstly, just take us through which sectors are struggling the most right now with these major supply chain disruptions so far, and where you are expecting to see further pain in the coming weeks and months.

Andrew McKellar, chief executive Australian Chamber of Commerce and Industry: Yes, hello Ash.  Indeed, we’ve released our latest ACCI-Westpac Survey of Industrial Trends today, looking at the March quarter. What that shows is broadly in terms of activity and output levels, the economy is continuing to perform surprisingly strongly, there’s good signs of resilience. But as you say, there are two clear pressure points that the economy continues to struggle with.  One of those is material shortages, and the other one is the difficulties in finding labour. I think in terms of material shortages, really it’s across a wide range of sectors, but if you point to areas like construction and so on, then these are particular areas where there are significant difficulties at the moment. We’re also seeing obviously rising commodity prices internationally, pressure on energy prices and that’s going to feed through into input prices across industry.

Ashleigh: What is your answer to the fuel price surge that we are seeing across the country, around the world? Will you be urging Josh Frydenberg to do more on this front, in the budget?

Andrew: I think it’s going to be very difficult to counter something which is a global phenomenon. Really in terms of what we can do on those pressure points in the supply chain, we do have to look at diversifying our sources of supply. So we have to look at growing new markets. For many years, we’ve had a reliance on particular economies like China, that’s proving more and more difficult. There’s a lot of work going into diversify sources of supply, so for example, at the moment Australia is fast tracking negotiating a new agreement with India.  Steps like that are important, but they don’t provide overnight solutions. We’ve got to look at diversifying our sources of energy, continuing to invest in renewables, trying to diversify away from a reliance on some of those commodities which are going to be susceptible to price increases at a time like this.

Ashleigh: And diversification also really important in view of the China situation. We are witnessing a strengthening in the China-Russia alignment, do you expect that could spell real trouble for the Australian economy?

Andrew: For sure, there are absolutely risks there. We’ve had a very deep economic relationship and reliance on China, both as a customer for many of our raw materials, but also then as a supplier of finished products to Australia. We have to start to look at how we diversify our economic strength away from that sort of reliance. And that’s something that’s well underway, but it will take time to broaden those relationships and build up new trading partnerships with other emerging economies.

Ashleigh: Just looking at the domestic front, how is demand improving at the moment, as we do see those restrictions really starting to ease in earnest across the country?

Andrew: Look, what we’re seeing are signs of resilience with the manufacturing sector in terms of output, activity, and expectations for the future. Obviously it went through some difficult times towards the end of last year. It has bounced back from the Delta wave, certainly Omicron hit us particularly in the early part of this year. But in fact, what we are seeing is there are signs that the economy is moving on from that. The impact of restrictions associated with that period, hasn’t been as severe as was first feared, so there is a sense of optimism. It had some impact, but clearly going forward now, we do see there are some significant risks in the international economy, the conflict that’s occurring in Ukraine, the impact of global sanctions and uncertainty are factors that are there. But of course Australian business is absolutely understanding of those circumstances, and we fully support the measures that Western Governments are putting in place to counteract the impact of that very unjustified action that is occurring in Ukraine at the moment. The Australian Government is part of that and Australian business is fully behind those actions that have been taken to try and offset that impact and to discourage the Russians from continuing that fully unjustified aggression that’s occurring at the moment.

Ashleigh: Andrew McKellar, I appreciate your time.

Andrew:  Thank you very much.