The 2026 Iran war has revealed the costs of Australia being a fuel importer. Given Australia imports approximately 90 per cent of its refined fuels, up from 11 per cent in 2002, it is particularly vulnerable to global shocks.
This is just one striking example of how Australia has lost its sovereign capability. Sovereign capability refers to a nation’s self-sufficiency in key sectors, such as energy, food, industry, and defence, and reflects the reality that global, or even regional, supply chain stability cannot always be guaranteed.
In an era of increasing uncertainty, it is vital that Australia becomes a country that can rely on itself, or more specifically, able to supply itself with critical products and assets. However, there are different approaches to building sovereign capability. Many of these take the form of industry assistance, but such interventions are time consuming and expensive, and can devolve into crony capitalism, featherbedding, and white elephant projects. There may be a case for direct interventions, but the more immediate focus needs to be on those measures which would improve the prospects for all industries that support sovereign capability.
At a state level, the actions of the Queensland government to fast-track the development of new oil fields, and the Minns government in New South Wales to extend the life of the Eraring power station, are at least in part a recognition of the need for sovereign capability. However, the federal government has fallen behind, making decisions that only address immediate and short-term concerns in response to the fuel crisis, rather than implementing the long-term structural solutions that would safeguard Australia from similar shocks in the future.
Improving sovereign capability requires a significant rethink in a range of policy areas. This rethink must centre on cutting regulation that imposes excessive costs on, and deters investment in, primary industries and manufacturing. There should also be corrective intervention in markets that have been fundamentally broken by decades of reckless intervention, such as direct or indirect support for baseload power generation and supply.
This note outlines five policies the federal government could implement to improve sovereign capability.
- Dump net zero
- Reform ‘Future Made in Australia’
- Cancel activist lawfare
- Scrap the Safeguard Mechanism
- Cut approvals red tape
