By Matt Keogh MP

22 October 2020

The government has been very proactive in spruiking its “record investment in defence capabilities and industry”, with big-ticket items like the Future Frigates and Future Subs garnering much attention. However, this appears to have emphasised style over substance, explains shadow minister for defence industry Matt Keogh. 

It was my pleasure to join Minister for Defence Industry, Hon Melissa Price MP, at last week’s Defence Connect Budget Lunch, as it was an excellent opportunity to distinguish Labor’s policy for defence industry, with the Morrison Liberal government’s lack of vision or commitment.

While I had the opportunity to discuss how Australia’s defence industry would benefit from measurable and enforceable Australian industry capability (AIC) requirements, the minister could only thank the industry for its patience and acknowledge that “they’re not there yet”.

It is worth noting in that context that we are now in the seventh year of this government.

COVID-19 has given us a much-needed insight into why a sovereign, self-sufficient defence manufacturing industry supply chain is so vital.

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

The Australian government has embarked upon a $270 billion defence acquisition program over the next decade.

Unfortunately, despite headline-grabbing media releases, their commitment to Australian industry capability for defence industry has been lacking.

You only need to look to last week’s announcement that Naval Group has unveiled a $900 million tender to manufacture equipment for the Attack Class Submarine Program here in Australia.

This was a perfect example of a government more fixated on headlines than delivery; announcing something everyone thought was a given. It should not be a surprise that Australian companies have an opportunity to tender for an Australian Defence build. The surprise is any suggestion in this case that it may not be an Australian business that does the work.

While opportunities for Australian companies are always welcome, let’s remember this is an almost $90 billion acquisition. The government’s announcement represents just 1 per cent of that, or around $30 million a year over the next 25-30 years of the project, this is hardly representative of the originally promised 90 per cent local build.

This government has failed to implement or indeed articulate strong, measurable and enforceable AIC requirements in our defence contracts.

Their record on AIC in major defence procurements is highly questionable – you only need to look to the sordid history of the Future Submarines. They said it would be a 90 per cent Australian made project, then it was down to 60 per cent, however this still hasn’t been formalised in the Strategic Partnership Agreement between Australia and France.

At last week’s event I had the opportunity to lay out Labor’s new vision for Australia’s defence industry.

Say, for example, if we spent just 10 per cent 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 importantly improve our local capabilities.

In Anthony Albanese’s budget reply speech, Labor committed to implementing concrete rules to maximise local content and create local jobs in Defence acquisitions. This means negotiating appropriate, specific, enforceable and audited AIC commitments into the contractual arrangements for all major defence materiel procurements and local defence contracts. The disclosure of these commitments would be public and transparent.

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.

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

This is significantly impacting our local industry, at a time when jobs are desperately needed.

It is not good enough to see contracts sent offshore without consideration of local companies. It’s also not good enough to try and sell piecemeal contracts to Aussie companies, while the more substantial projects remain overseas.

The government needs a plan, not another press release.

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

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

It is not enough for the Morrison government to talk up its $270 billion defence spend as if big headline numbers are the end of the story.

It’s not enough to stand up for yet another photo op, without any assurance of follow up.

The Morrison government needs to articulate a plan not just for what our taxpayer dollars will be spent on, but how they will be leveraged to support Australian high-end manufacturing jobs, apprenticeships and training.

This is the only way we will ensure we build a solid economic foundation for sovereign defence industry capability and further globally competitive Australian defence industry exports.

The government’s recent announcement that Aussie businesses would need to be “considered” for defence work moving forward was welcome, but of course the devil is in the detail – this announcement 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 – it’s up to the government to be transparent about that.

An adoption of Labor’s vision 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.

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 companies, jobs and skills capability become. How does that serve our national interest?

This piece was first published in Defence Connect on Thursday, 22 October 2020.