The federal government will expand its manufacturing cash splash for Australian industry in critical supply chains in response to rising geopolitical tensions.
But Australia must also look to trusted partners abroad to manage supply chain risks, the Prime Minister will say in a major speech to industry on Tuesday.
The government's supply chains support will expand to include telecommunications equipment, plastics and personal protective equipment, in addition to recent federal grants for manufacturing of medicines, agricultural production chemicals, water treatment chemicals and semiconductors.
Scott Morrison will reveal on Tuesday the government's new seven priority product categories for national interest manufacturing in a speech to the AFR Business Summit, and outline the justification for government intervention in supply chains battered by COVID, trade coercion and now the crisis in Ukraine.
"A strong private sector continues to be our first line of defense," Mr Morrison is expected to say. "However, there have been examples of where government action is necessary to find a solution."
The Prime Minister will highlight the example of AdBlue. A shortage of the diesel additive last Christmas had the potential to shut down Australia's trucking network after fertilisers prices in China skyrocketed and the country suspended exports of a key ingredient of the additive.
"We can't just be thinking about 'just in time' supply. We also need to think about a 'just in case' model, which supports greater diversification and larger inventories of key goods," he is expected to say.
He will push for Australian industry to solve supply chain problems with trusted partners and work with the government "to ensure early identification and timely responses" to the kinds of shortages and challenges that the country faced during the pandemic.
"That is the world we are living in now - and we all know that supply chain disruptions are lower when we plan and prepare for them."
How to buffer supply chains for further disruptions has been an increasingly prominent issue for governments on the global stage and forums like the G20, APEC, the G7 plus and the Quad - the latter in particular has been mapping the risks to critical technologies like semiconductors, which are primarily manufactured in Taiwan.
The government has also managing supply chain risks a feature of its collaboration with the UK on a joint project to improve public sector approaches.
The government has already committed $445 million in funding to boost manufacturing capability in Australia, which has focused on six areas of advanced, high-value manufacturing including space, defence, food and beverages, recycling and clean energy, resources and medical products.
The $107 million federal Supply Chain Resilience Initiative has funded its first round of grants. Round two applications closed last month. The government has not revealed when round three grants will be available, or which of the new priority categories of telecommunications equipment, plastics and personal protective equipment will be eligible.