Andrew McKellar interview with Madeleine Morris, ABC News Breakfast

15 Mar 2022 |

Event: Andrew McKellar interview with Madeleine Morris, ABC News Breakfast.

Speakers: Andrew McKellar, chief executive Australian Chamber of Commerce and Industry, Madeleine Morris, co-host ABC News Breakfast.

Date: 15 March 2022.

Topics: ACCI-Westpac Industrial Trends Survey, labour and material shortages, diversification of supply chains, Federal Budget, Russian sanctions, increasing input costs squeezing business margins, VET funding, workforce participation, skilled migration.

E&OE 

Madeleine Morris, co-host ABC News Breakfast: Let’s take you back home because Australia is facing its worst material shortages in almost 50 years, leaving businesses in the lurch amid global supply chain issues. That’s according to a new survey released today by the Australian Chamber of Commerce and Industry. To get more details, we’re joined by the chamber’s chief executive, Andrew McKellar. Andrew, good morning.

Andrew McKellar, chief executive Australian Chamber of Commerce and Industry: Yes, good morning.

Madeleine: We have heard a lot about these supply chain issues. We’ve seen it in the shops, we’ve heard particularly about building supply issues. What sort of industries is this affecting?

Andrew: It’s quite widespread but as you say, what we are seeing is one of the most severe shortages of materials in just under 50 years. It takes us back to the 1974 oil shock, so it’s a really long time since we’ve seen something quite like this. It’s combined as well with a shortage of labour. It’s proving very difficult for many industries to get the sorts of employees that they need and that they want. Skilled positions are very hard to fill at the moment so these are two pressure points that the Australian economy is facing at the moment. Otherwise, we are seeing signs that the economy is continuing to grow through the March quarter, so I think that’s a positive indication.

Madeleine: I’ll come back to the labour issue but just onto the material shortage, of course, there was COVID, really basic things like ports being understaffed, being difficult to get ships through, source countries not manufacturing. Now, we’re being warned that the issues in Ukraine, the war in Ukraine, is going to have an effect. What is that?

Andrew: Oh, look, absolutely. All of those things that you mentioned, that the impacts of the pandemic have been a fundamental source of this. Yes, the efficiency of our infrastructure, ports, the need to diversify our trading base, all of those things are underlying this.  But of course, the situation will not be made better by what’s happening in Europe at the moment with the war in Ukraine. Clearly, that’s having an impact. But I think from business’ point of view, of course, this is a small price to pay. We fully accept that it is necessary to take strong action against the Russian invasion. It’s completely unwarranted. It’s having a disastrous humanitarian effect and I think Australian business says we fully support the measure that Western governments, the Australian Government are taking to apply sanctions in that context and to put all the pressure that we can to stop what’s occurring, which is a complete humanitarian tragedy.

Madeleine: We know, we feel at the shops when we go to the grocery store, when we go to the petrol pump, that inflation is a very big issue, rising costs of living. What else can consumers expect in the coming months as these supply shortages continue to bite?

Andrew: For sure, the issue here, and we’re seeing it at the moment, input prices are rising quite steeply. We’re seeing energy commodity prices rising so that’s impacting on business. There is a limited capacity to pass that through fully into consumer prices, and obviously, business doesn’t want to do that. At the same time, we are also going to see some upward pressure on wages. So business margins are really being squeezed at the moment. We’re seeing that in our survey, that profitability is going down. The risk here is what we don’t want to see is wages and prices pushing up against each other and that, in turn, leading to a risk of higher interest rates because I think that would be a disastrous cycle for the Australian economy to get into.

Madeleine: And just in really practical terms, what can be done here? I know that we’re trying to diversify supply chains, but those things take time. We’re seeing China being struck again with some shutdowns and some of its big supply issues. Labour, we are still seeing a long time for that foreign labour to come back to Australia, even though borders are now open. Do you have any solutions here, Andrew?

Andrew: Well, I think in the budget, what we are really looking to see is a strong investment in skills, so we need to continue to promote stronger vocational education and training, giving Australians the opportunity to get into things like apprenticeships, that needs to continue. We need to look at ways of encouraging greater participation, so helping with childcare, making sure that older Australians, senior Australians can stay in the workforce if they want to, providing more flexibility there. And of course, increasing the intake of skilled migrants. As the borders are now open, we’ve got to get that back on track. So, I think those are the essential messages that we would be looking for as we move towards the budget at the end of this month.

Madeleine: Yep. Just two weeks to go until that budget and plenty still to consider there for the Government as they’re putting that together. Andrew McKellar from the Australian Chamber of Commerce and Industry, thanks for joining us this morning.

Andrew: Thank you.

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