Speaking at a recent event, Treasurer Josh Frydenberg said that while Australia is better placed than most to withstand pressures from Russia, “there will be costs borne by Australians”.
With the prospect of even stronger sanctions and prolonged measures, the Treasurer said safeguarding supply chains will come with a cost.
“The message to Russia and others is clear, there will be swift and significant economic costs imposed on those countries that choose to violate our fundamental international rules and norms,” Mr Frydenberg said.
“But we must not be naive about the costs these necessary actions will also impose on the West.”
These costs, he said, will flow initially in the form of higher commodity prices and in turn higher inflation.
“For liberal and free nations, this is a price that we must be willing to pay for the right to live free of fear and coercion,” Frydenberg added.
He recognised an immediate need to strengthen and realign critical supply chains as the world moves into this era of heightened geopolitical risk.
“As part of globalisation, businesses sought to specialise and drive down costs; moving towards ‘just in time’ delivery, often from single suppliers.
“Now, whether around the cabinet table or the boardroom table, these strategies are being recalibrated, starting with critical sectors including essential medical supplies, telecommunications equipment, energy and critical minerals,” the Treasurer said.
“This crisis is a wake-up call for business. Just in time, is moving to just in case.”
This decoupling, however, will have “profound implications” for business as well as governments.
“This is not to say that a country like Australia must be self-sufficient in every area,” the Treasurer noted.
“That is neither practical nor economic.
“However, governments and businesses must price in this new risk and seek out reliable and trusted partners to build more diversified and robust supply chains.”
Touching on recent instances of Chinese economic coercion, Mr Frydenberg said, “while these acts put the world on notice, Russia’s act of outright aggression is ushering in a new economic era”.
“It is redefining globalisation as we know it.
“National security and economic security are now intrinsically linked.
“This is the main game.”
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
