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Australian infrastructure projects risk higher costs and lower resilience if policymakers push for supply chain ‘relocalisation’, according to the OECD’s latest Supply Chain Resilience Review.
The report finds that strategies to push local manufacturing and supply could cut global GDP by over 5 per cent and deliver no clear gains in stability – particularly for highly integrated sectors like transport, energy and construction.
The warning comes as Australian governments and major contractors weigh new procurement policies aimed at boosting local manufacturing and reducing reliance on offshore suppliers.
The OECD cautions that supply chains serving infrastructure are already deeply globalised, especially in critical sectors such as steel, petroleum products, power systems and digital technologies.
Strategic manufacturing – covering inputs like electronics, machinery and refined fuels – was identified as among the most exposed to global shocks.
Across OECD economies, 26 per cent of inputs for these industries are imported, and 27 per cent of their output is destined for foreign markets.
For Australia, which imports a significant share of its construction materials and equipment, abrupt moves to re-onshore production could amplify risk rather than reduce it.
Crucially, the OECD’s modelling shows that domestic shocks often have a greater economic impact than foreign ones.
This challenges the idea that ‘local equals safer’ – particularly in an island economy with a small industrial base.
Over-concentration on a limited set of domestic suppliers could leave large infrastructure builds more vulnerable to disruption, not less.
The report also flags new pressures on infrastructure-related supply chains, including digital and environmental compliance requirements.
Nearly half of global production is now affected by supply chain sustainability laws – covering labour conditions, emissions, and traceability. While these frameworks align with ESG goals, they raise compliance costs, particularly for SMEs and contractors managing cross-border sourcing.
In the face of growing geopolitical and environmental risks, the OECD argues for more agile and diversified approaches.
Policy recommendations include reducing trade barriers in logistics and finance, supporting digitalisation to improve supply chain visibility, and investing in shared risk management tools with the private sector.
Supply chain resilience, the OECD concludes, depends less on location and more on flexibility, transparency and coordination.
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