Liquid Gold Rationing and Supply Chain Disruption

A week out from Christmas festivities and a Friday to boot, let’s talk gold, liquid gold and a ‘rubber hits the road’ example of why yesterday’s move by the world’s biggest central bank to slow down inflation is too little too late.

Lion and Carlton & United Breweries, two of the largest brewers in Australia, have begun rationing their product in BWS bottle shops. Customers are limited to purchasing 2 cartons of their favourites such as Great Northern and Pure Blond. Pandemic disrupted supply chains have also hit imports such as the Corona beers from Mexico.  The ironically named brews have been restricted to 20 cartons per store per week.

Core inputs such as bottles, lids and labels have been in short supply for months. Even the timber pallets that beers are stacked on throughout the distribution process have been running low for almost all of the brewers. Lion executive Warwick Parks announced earlier this week that a large number of the smaller lines are now no longer being produced, as they simply won’t be able to ship them anywhere even if they produce them. 

Victorian Transport Association CEO Peter Anderson argues that the supply chain issues in the lead up to Christmas are anything but a seasonal phenomenon. Rather, the shortages we are seeing now reflect deep structural flaws in Australia’s ‘supply chain sovereignty’, which have been exposed by government policies over the last two years.

“Labour shortages and an ageing workforce of drivers has been an issue for years, but Covid and the way it has driven workers from the industry through restrictions, compliance and vaccination mandates is starting to resonate in the community.”

-Peter Anderson, CEO of the Victorian Transport Association (VTA)

Australia’s truck driver shortages have been serious since 2019 with the Australian Industry Skills Transport and Logistics Skills Forecast 2019 reporting that over 80 per cent of employers experienced a skills shortage that year. The Age reported last month that Victoria in particular is suffering from a ‘driver exodus’ exacerbated by strict COVID-19 testing regimes and vaccine mandates. VTA’s Peter Anderson estimates that about 10,000 drivers have now left the industry permanently. Inconsistent and ever-evolving rules that threatened heavy fines, being stranded interstate and loss of bodily autonomy were all major frustrations of those leaving. Drivers were at times required to test every three days, and would be required to sacrifice non-work time to do so.

Shortages of truck drivers are becoming more and more common globally with the American Trucking Association reporting that drivers were already retiring and leaving the industry both before and after COVID. The United States is now down approximately 80,000 big rig drivers since March 2020. Estimates are that shortages have raised the cost of goods approximately 20%.

Whether you are in Australia or the United States, the trucking industry is struggling to attract younger entrants into the industry. The long hours, time away from home and historically low wages have made the sector unappealing for most. According to Business Insider, truckers are now getting six-figure salaries, with trucking companies desperately trying to find drivers and raising prices as a result. The New York Post reported as early as June of this year that the shortages are now carving out new niches for labour hire companies that can source drivers to the highest bidders. The contractors are shipping drivers in from anywhere in the country, and paying for their housing as well. Rich Jennings, Vice President of RSS is quoted saying “I get calls from desperate Fortune 500 companies every day that need to move perishable food. It’s most dire in the food industry right now.”

With 75% of product being freighted on our roads, it’s more than likely that government intervention in the trucking industry is likely to lead to continued driver shortages. Whether or not the increased wages, increased shipping costs, or prices of goods and services are shown in government reported CPI numbers remains to be seen.

One thing is certain, none of the above seems ‘transitory’ where the rubber (literally) hits the road…. Gold is sniffing out the outcome already, rising to $1800 again overnight…