AUSTRALIAN DEFENCE MAGAZINE - MATT KEOGH OPINION - THE ALP’S BUDGET REPLY AND WHAT IT MEANS FOR DEFENCE INDUSTRY

By Matt Keogh MP

22 October 2020

As the coronavirus took hold and many nations experienced supply chain shocks, so began the ever-mounting calls for increased domestic manufacturing self-sufficiency.

While it was notable that our old car factories, gin distilleries and prosthetics companies repurposed production lines, this was possible, in part, because sales of many of their usual goods were quashed. Yet even then, they were still constrained by international supply chain issues.

Australia should be a country that makes things. We should be making high value, high end manufactured goods and the supplies required for them.

This includes defence materiel and defence industry.

Unfortunately, despite headline grabbing media releases, the Coalition Government’s commitment to Australian industry capability for defence has been lacking.

It is incumbent on government to consider ways to best avoid the supply chain shocks we have seen through COVID-19 in the future, as our strategic circumstances become increasingly complex.

This Government has failed to implement or indeed articulate strong, measurable and enforceable Australian industry capability (AIC) requirements in our defence contracts.

It’s record on AIC in major defence procurements is highly questionable – you only need to look to the sordid history of the Future Submarines.

So far there has been a lack of enforceable contractual requirements imposed on defence suppliers to ensure that they meet their Australian industry capability commitments, nor has there been any real effort to ensure that this work actually contributes to the development of our sovereign defence industry capability.

It is up to the Federal Government to implement contractual requirements that compel Defence primes to do the work here in Australia, and to work with local companies now.

The lack of such requirements is significantly impacting our local industry, at a time when jobs are desperately needed, as well as denying our nation capability development we dearly need.

The more the Australian Government supports our defence industry, the better that industry can grow its export markets. Strategically, it makes sense for defence builds, sustainment, maintenance and repair work to occur in Australia for the ADF as much as possible, as well as for our friends and allies who operate in our region.

We have the skills, the willing labour force and facilities to make it happen.

This is why, in Labor Leader Anthony Albanese’s Budget Reply speech, Labor committed to ensuring major defence project contracts and procurements contain measurable, enforceable, audited and transparent AIC requirements.

It is not enough for the Morrison Government to talk up its $270 billion defence acquisition program over the next decade as if big headline numbers are the end of the story.

It needs to articulate a plan not just for what those taxpayer dollars will be spent on but also how they will be leveraged to support Australian high-end manufacturing jobs, apprenticeships and training. This in turn will provide the economic foundation for further globally competitive Australian defence industry exports.

If we spent just 10 percent more of that $270 billion allocated for defence capability procurement over the next decade in Australia, we would see an additional $2.7 billion of work go to our local defence industry every year. This financial certainty for business would support thousands of jobs and improve our local capabilities.

It is not good enough to see contracts sent offshore without consideration of local companies.

When the government does bow to pressure to specify AIC content for projects, as they did with future submarines, they count spending on Australian travel agents and hotels when they should be counting Australian batteries and switchboards.

The Government needs a plan, not another press release.

The Government recently announced that Aussie businesses would need to be “considered” for defence work – however this does not carry any significant weight when it comes to securing defence work overall. It’s also too late for the billions of dollars in spending

already allocated to overseas companies for large scale projects.

We need enforceable and measurable Aussie capability requirements in all our defence manufacturing contracts.

Labor’s policy would not only create ongoing Australian jobs, it would further develop Australia’s sovereign capability, ensuring workers are technically skilled up to not just build Defence equipment but maintain and upgrade it into the future.

A future Labor Government would also ensure at least one in ten jobs on major projects be filled by apprentices, including future major defence procurements.

Under the current trajectory, we are at risk of seeing a continued decrease in local defence work in favour of offshore suppliers, with all the international supply chain risk that entails, as has been highlighted during the COVID-19 pandemic.

Australian companies need to be factored into the defence project supply chain from the very beginning of the design phase - the longer we let this go on, the more at-risk Australian businesses, jobs and skills become, which are all fundamental to our national interest.

This piece was first published in Australian Defence Magazine on Thursday 22 October, 2020