Iran war exposes overlooked gaps in Australia's manufacturing and sovereign capability

The ongoing conflict in Iran has not only underscored the fragility of global supply chains but also revealed critical gaps in Australia's manufacturing sector, particularly concerning essential supplies needed during crises. While fuel and fertilizer disruptions are prominent, access to vital manufacturing chemicals, plastics for food packaging, and yarn for clothing is also diminishing.

Policies aimed at bolstering sovereign capability have largely prioritized defense and energy sectors. However, concerns are rising that these policies overlook other critical supplies necessary to sustain these very sectors. Manufacturers are proactively developing their own strategies in response to this policy gap. Geelong-based textile manufacturer LoomTex, for example, has seen increased demand for localized products due to the conflict, though CEO Samantha Van Zyl notes the added complexity and volatility in sourcing raw materials.

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It's triggered this activation of demand and opportunity for localisation. But at the same time, you're doing it with an extra layer of complexity that didn't exist six months ago.

Van Zyl highlighted the extreme price volatility, stating that quotes for yarn from spinning mills, once valid for 30 days, are now only honored for three hours. This instability threatens to slow down the development of innovative solutions to enhance sovereign capability. The Australian Fashion Council (AFC) emphasizes that sovereign capability extends beyond defense, encompassing resilience and the ability to supply essential goods domestically when global supply chains falter, a lesson reinforced by the COVID-19 pandemic.

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Sovereign capability is really about resilience and the ability to supply essential goods that we need here in Australia when global supply chains fail.