HOW AUSTRALIA PLANS TO MAKE ITSELF CRITICAL / GEOPOLITICAL FUTURES

How Australia Plans to Make Itself Critical

Canberra wants to reduce China’s dominance in critical minerals.

By: Allison Fedirka

With minimal fanfare, Australia is preparing to assume a greater leadership role in the Indo-Pacific region. 

Its plans are laid out in various national strategies and policies, including most recently its critical minerals strategy. 

The document, which covers the rest of the decade, reveals Canberra’s intention to capitalize on its wealth of critical minerals, undermine China in the competition to secure said minerals and grow its influence in regional alliances. 

It is the economic strategy that will help fund Australia’s rise as a regional leader and power player in the Indo-Pacific.

Defense Strategy

An early sign of the ambitions of Prime Minister Anthony Albanese’s government came two months ago when it released its Defense Strategic Review. 

Responding to rising security concerns about China’s presence in the Indo-Pacific, the updated defense plan called for the most comprehensive overhaul of the Australian military in decades. 

It strives to improve Australia’s ability to project power outside its borders, including its long-range strike and deterrence capacity. 

The review also prioritized the development of naval capabilities and air support over ground forces.

As part of this new strategy, Australia will acquire nuclear-powered submarines from the United States. 

These submarines will greatly enhance the long-range lethality of the Australian navy. 

Additionally, to dominate its maritime approaches and deter aggression, the country will boost its missile range from bases along its northern coast to more than 500 kilometers (310 miles) from just 30 kilometers currently. 

Further upgrades to the naval forces include the introduction of uncrewed platforms, such as submarine drones and the MQ-28 Ghost Bat combat aircraft (which is still under development), as well as the decision to equip its F-35 fighters with an anti-ship long-range strike capacity. 

Northern naval bases will be upgraded to serve as major logistics centers for the armed forces. 

They should also be able to serve the U.S. and British navies.

Most interesting, Australia wants to become more self-reliant and autonomous in its defense. 

It wants to develop the new long-range missiles domestically. 

Plans to develop homegrown nuclear-powered submarines in the future will require extensive U.S. support, but Australia intends to build its own maintenance facilities for the new boats.

Minerals Strategy

A comprehensive national security strategy cannot neglect resource competition. 

And when it comes to resources critical to security in the 21st century, Australia possesses immense advantages. 

After China, Australia is arguably the next most significant player in critical minerals mining and technology, which makes it a vital partner for Western powers. 

Critical minerals are essential for electric vehicles, wind turbines, semiconductors and batteries. 

By the end of 2022, Australia had 81 major critical minerals projects in the pipeline, valued at between $30 billion and $42 billion. 

Its potential is much higher: Canberra estimates that as much as 80 percent of its territory has not been fully explored for critical minerals.

 

However, discovery and extraction are only part of the process. 

China currently dominates the processing and refining of critical minerals, meaning that even if the U.S. can source the minerals from an ally like Australia, it still depends on China to prepare them for use. 

Australia wants to strip China of this leverage as part of its critical minerals strategy, which calls for “moving beyond exporting ores and undertaking more concentration, separation, refining and smelting onshore.”

 

In addition to supporting the security of its allies, doing so would provide Australia with several benefits. 

First, it would reduce Australia’s own vulnerability to Chinese coercion. 

Second, by moving more value-added activities onshore, it would increase Australia’s export revenues. 

Already, Canberra expects rising critical minerals exports to add $71.2 billion to its gross domestic product and create 115,100 jobs by 2040. 

However, if it processed and refined more of its critical minerals at home, the government believes it could add $133.5 billion to the country's GDP and create 262,600 more jobs. 

This increased wealth would help fund other national efforts, like Australia’s defense initiatives. 

Finally, Australia’s strategy would prevent foreign companies and governments from playing an outsized role in its mining sector. 

Many foreign companies are currently securing ownership and offtake agreements for a large share of Australia’s critical minerals. 

Eventually, this could threaten the prospects of current and future Australian minerals processors and manufacturers. 

However, by increasing its domestic downstream capabilities, Australia will be able to ensure its domestic supply and better monitor and regulate exports to ensure they are not endangering its strategic and energy security.

Developing Australia’s critical minerals sector will require sizable investments, but its allies are eager to step in. 

In 2022, the United States was the top foreign investor in Australia, accounting for 24.1 percent of total investment. 

The United Kingdom was second at 22.2 percent, and Japan was fourth at 5.7 percent. 

Indeed, Canberra’s strategy targets these countries as well as South Korea, India, France and Germany. 

(Canada’s absence is explained by its own bounty of critical minerals and its limited activity in Indo-Pacific affairs beyond politics and diplomacy.)

By far the most developed relationship is with Washington, which shares Canberra’s goal of undermining Beijing’s dominance in the sector. 

As major semiconductor producers, Japan and South Korea are also keen to ensure reliable access to essential inputs like critical minerals. 

India, which aims to absorb much of the manufacturing activity leaving China and grow its manufacturing and electric vehicles industries, has signed an agreement with Australia for a critical minerals investment partnership. 

The two countries are also in talks over a Comprehensive Economic Cooperation Agreement, which will likely include the critical minerals supply chain. 

Australia is also working with its Quad partners (the U.S., India and Japan) on a strategy to develop secure clean energy supply chains.

Challenges

For all the promise of Australia’s critical minerals strategy, there are three important weaknesses. 

One is a shortage of skilled labor. 

Australia’s mining sector currently has about 10,000 vacant positions, with another 25,000 vacancies in manufacturing. 

Recent college graduates have shown little interest in the sector. 

Second, domestic infrastructure must be scaled up. 

The government plans to use public funds, coupled with private investment, to ensure that its roads, railways and ports can keep pace with its critical minerals development. 

Finally, technological development is always a wild card. 

Australia’s strategy assumes that demand for critical minerals will last many decades. 

This seems highly likely, but there is no guarantee that a major technological breakthrough in, say, batteries or semiconductors will not obviate the need for Australia’s critical minerals.

Australia’s vision of becoming an important regional power is long term. 

The naval vessel upgrades will take more than 10 years to arrive, and it will take years to upgrade the northern bases as well. 

Canberra will also need several years to uncover and develop new deposits of critical minerals and to build facilities for processing and refining. 

But so long as critical minerals are critical and China poses a threat to Australia and its allies, Canberra’s long-term strategy rests on a solid foundation.