COVID-19 has frozen supply chains, depleting medical stocks and risking the lives of millions of health workers and patients around the world. 

It also shows a critical fault in how Australia gets lifesaving supplies — and incidentally gave the mining magnate Twiggy Forrest a chance to use his influence in China to import 10 million coronavirus testing kits. 

Australia’s over-reliance on China to supply medical equipment and the model which underpins international supply chains is exposed. 

“Most [Australian medical manufacturing] comes from China,” says Monash University lecturer of international business and economics, Dr Giovanni Di Lieto. “[And] because China was the first country to face the crisis it put a hole in our supplies.”

Many multinational businesses run on a model called just-in-time (JIT) manufacturing. Made famous by Toyota, JIT relies on getting raw materials only when needed to produce something. This means warehouses stock only the bare minimum and source their stock from cheap international suppliers. 

It’s the favoured system for big global companies because it keeps production costs low, but when supply chains are disrupted production halts and those companies lose millions of dollars. 

“JIT was a false economy,” says Di Lieto. “Even an economically solid country like Australia is spending hundreds of billions of dollars. It will take generations to repay because we relied too much on JIT supply chains.”

The economic fallout is bad enough, but China’s medical device market is worth US$96.3 billion, nearly a quarter of the global market. 

With China’s manufacturing industry running ghost crews under COVID-19 and its government stockpiling what equipment is made, the cracks are showing from our over-reliance on global supply. 

“In hindsight, JIT was based on blind faith on global markets,” says Di Lieto. “The received wisdom was that high globalisation knew better. Now we know it’s not the case, but if I had said that six months ago I would have been burnt at the stake by economists.”

Just over a decade ago, we had devastating evidence that should have shaken this blind faith. The 2007-08 global financial crisis was a harsh lesson for countries too economically dependent. 

As the US toppled under the weight of economic shortsightedness and risk-taking, it took the rest of the world with it. Global supply chains faltered, throwing countries into billions of dollars of debt, gutting industries and destroying lives.

Australia was able to weather this crisis, largely because of its trade links to China. Now global supply chains are once again crippled and Australia is no longer buoyed by Chinese investment. 

Instead the government is relaxing quarantine measures early, endangering Australians to a second outbreak based on tracing software with privacy issues and an untested promise of decreasing infection rates. 

Australia needs to ensure it can source essential products such as medical supplies within its own borders. It cannot afford to return to business-as-usual at the end of the pandemic.

“Supply chains have to become shorter and more regional,” says Di Lieto. “Countries will have to rely on fewer suppliers in a more concentrated geographical area.” 

There’s evidence we will learn our lesson. Before the pandemic, countries were already moving to more resilient supply chains. The brutal US-China trade war and the threat of trade decoupling between the two has taught other countries to be less reliant on the superpowers. 

The COVID-19 pandemic has hit fast-forward on this process, encouraging governments to rely less on multinational companies spinning tales of endless economic growth. Instead they are becoming more inward-looking and, hopefully, wiser. 

The Australian government is repurposing local industries, such as textiles and fashion brands, to help meet personal protective equipment shortages. 

“The new normal for industrial manufacturing is to have higher stocks and be more independent from major shocks,” says Di Lieto. “The next crisis will be worse. This is the wake-up call we should have heeded 12 years ago.”

If we don’t heed this lesson now we will pay for it later. As natural habitats decrease, forcing wild animals into human spaces and increasing our exposure, zoonotic diseases such as COVID-19 will become more common. 

Influenza pandemics remain a key threat for the world, and antibiotic-resistant bacteria are predicted to kill 10 million people a year by 2050 and will increase the risk of bacterial pandemics.

These threats pale before the single greatest disruption we have ever faced: the climate crisis.  

This isn’t reasonless fear-mongering. This is a call for governments to rely less on laissez-faire economics and make sure Australia can produce its own vital goods during crises.

Australia can’t continue to have a naïve economy that assumes things will never change and there will never be another crisis.