With the war in Iran, Australia is facing a second major external shock this decade. The lived experience of Covid-19 and the disruptions already evident from the closure of the Strait of Hormuz have highlighted the need for an agenda of sovereign resilience.
This is different from a ‘Future Made in Australia’; it is an agenda that is more foundational than aspirational. It focuses upon base layer capabilities to reduce vulnerabilities we face as a nation, especially in terms of fragile supply-chains, energy dependence and the foreign control of strategic assets.
This is a conceptual shift for Australia. As a free-trading nation for the past 50 years, we have been predisposed to accept the logic of Ricardo and the primacy of the doctrine of comparative advantage. We have relied on the international order to enforce rules and norms that underpinned the prosperity of successive generations of Australians. We assumed – rightly, for the most part – that restrictions on trade would be structurally reduced and that inventories could be managed on a just-in-time basis, negating the utility of strategic reserves.
We also assumed, naively in some cases, that major trading nations would not cheat the system through different forms of trade distortion – such as transfer pricing, intellectual property theft and currency manipulation – along with asymmetric regimes of foreign direct investment. We believed that tariffs would not find their way back into the status quo, with Australia having dismantled its protectionist regimes in the 1970s and 1980s, particularly across manufacturing and agricultural sectors, with the effects reified by the float of the dollar in 1983.
On the capital side of the ledger, the ongoing rise of the superannuation sector has clearly enhanced sovereign resilience. Australia is trending toward becoming a net creditor nation for the first time in terms of our international investment position, with our liabilities to the world having halved as a percent of GDP over the past decade.
Yet despite this accumulated wealth, local managers of national savings have been reluctant to invest in Australian projects, even those with strategic value to the nation. The allure of offshore diversification, as agitated by foreign-owned asset consultants and market-weighted benchmark providers, has driven this trend, as have cultural inhibitions against investing at home.
Now, as we end the second half of the decade, Australia is facing hard choices, including around the energy transition, regulatory design and the appropriate role of foreign investors. While everyday Australians displayed commendable solidarity throughout the pandemic, there is now less tolerance toward supply-chain vulnerabilities, and a clamouring for greater sovereign resilience. An Overton window has opened to more actively incentivise large-scale, Australian investments in energy, minerals and enabling infrastructure.
At Tivan Limited, the company I lead as executive chairman, we are seeing this shift in real-time, specifically across Australia’s northern frontier. While we are a critical minerals company, the impetus we are seeing from the Iran war has the potential to re-rate a broad array of projects that have otherwise been stranded. Tivan is also the major holder of minerals concessions in Timor-Leste, where a similar logic applies.
The logic is straightforward and has two principal aspects. First, a durable market segmentation between the east and west is becoming embedded because of US-China fracturing, especially evident in critical minerals. Second, a structural risk premium may now emerge on exports from the Gulf, including across an extensive array of energy, fertiliser and chemical products.
Combined, these two influences will make northern and even central Australia more competitive and more compelling as an investment destination over the next decade, especially in terms of security of supply. Security is no longer optional for offtakers. Indeed, the next wave of demand for Australian exports of critical feedstocks will likely be strongly amplified by China’s ongoing codification and activation of export controls through its annual catalogue of dual-use items and technologies.
The opportunity is vast and unique. Northern Australia has it all: onshore energy (most notably petroleum and solar), rare earths, critical minerals (including manganese, copper, fluorite, tungsten, graphite, magnesium, vanadium and mineral sands) and fertilisers (principally phosphate and potash).
This is not a new perspective. For more than a century, the north has captured the imagination of nation-builders: from the creation of the Northern Territory by the Commonwealth in 1910; to the Northern Australia Development Committee after World War II; to the Ord River Scheme of the 1970s; through to the modern era of the 2015 ‘Our North, Our Future’ White Paper and the creation of the Northern Australia Infrastructure Facility, aspirations for the north have been ever-present.
More recently, the impetus has come from the 2024 National Defence Strategy and Integrated Investment Program. Both highlight the critical importance of Australia’s northern reaches in establishing credible deterrence, force projection and operational sustainment.
Notwithstanding these initiatives, and often because of them, there remain a myriad of challenges around cultural heritage, coexistence with native title and the legitimate expectations of Aboriginal Australians with regards to respect of their ancestral lands. There are also material complications, with key infrastructure items and several would-be strategic projects having ceded controlling stakes to Chinese government-related entities.
Yet there has never been a more opportune moment for the north, with global dynamics providing strong and durable tailwinds. The appropriate role for the government is to fully deploy existing tools – such as the Critical Minerals Productive Tax Incentive, the Critical Minerals Strategic Reserve and the Critical Minerals Facility – for timely effect, and to advance common-use infrastructure with renewed vigour.
More assertively, the federal government may need to intervene to remove the presence of malevolent foreign actors from controlling strategic projects across the north. In some instances, decisive intervention is required to restore functional sovereignty and to level the playing field for local participants.
At a more general level, there is now an opportunity to create strong incentives for Australian savings to be recycled into commercially viable projects, and for enterprising Australians to work together earnestly and inclusively across cultural divides. Dedication, resolve, tenacity and determination will be required to develop the north, and to thereby strengthen the resilience of a restless nation.
