By Matt Keogh MP

17 June 2020

National Industry in the national interest

Matt Keogh MP

As the coronavirus took hold and many nations experienced supply chain shocks, there were growing calls locally and across the globe for increased domestic manufacturing self-sufficiency.

While we can be impressed at the way our old car factories have been used to build ventilators, gin distilleries making sanitiser and prosthetics companies making PPE, this was able to happen in part because those businesses could not effectively sell their usual goods due to coronavirus restrictions.

It is often said that Australia should be a country that makes things, and we should, but we need to make sure that we get the best bang for our investment buck – that means making the most of our comparative advantages as well as best leveraging our existing spends – we should be making high value, high end manufactured goods but also the supplies required for them.

Reawakening Australian manufacturing need not be protectionist nor undermine our support for a strong, rules based, global trading system upon which our exports and economic prosperity rely but it must be focused on what is in our national interest.

Defence industry provides a useful lens to understand how we can do more.

Right now the Australian Government is embarked upon a $270 billion defence acquisition and sustainment program over the next decade.

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

In particular, there has been a complete 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 Australian sovereign defence industry capability.

It is also worthwhile considering all the parts that go into defence procurement. In addition to the obvious air, land and sea platforms and their associated systems and weaponry, there is also IT systems, health equipment and supplies, staple foods and cleaning equipment. I’m sure it’s not lost on anyone that the very things we need to ensure our Defence Force is stocked with are also some of the things that we were caught short of during this crisis.

It is not enough for the Morrison Government to talk up its $200 billion defence spend as if big headline numbers are the end of the story. It needs to articulate a plan for how those taxpayer dollars will be spent to support Australian high-end manufacturing jobs, apprenticeships and training, and provide the economic foundation for further Australian defence industry exports and non-defence domestic manufacturing that is globally competitive.

If just 10 per cent more of this spend ended up in Australia rather than overseas, it could mean an additional $2 billion spent in our local economy every year without any additional outlay. But what we have seen to date is cold comfort for Australian industry. It is simply not good enough, because as we have seen with the Future Submarines, when the Government finally bows to pressure and secures local content commitments, it is spent on travel agents, hotels and security guards.

The Government needs a plan, not another press release.

Supply chain shocks come for many reasons: increases in demand not met by supply production, disruptions to transport logistics and suppliers that prioritise other customers’ demands.

We have experienced all three of these during the present crisis and it is incumbent on Government to consider ways to best avoid them in the future, as our strategic circumstances become increasingly complex.

Considering the scope of supplies required by defence and the capacity to better spend existing budgets to develop domestic manufacturing, the opportunity for national industry in the national interest must be grasped.

Australia is already in a recession.

The Liberal Government’s failures to implement key programs properly will make the downturn worse than it needs to be, the unemployment queues longer, and the recovery more difficult.

Australians desperately need an effective, well-executed response to this crisis, and a plan that bolsters the recovery and sets Australia up for the future.

This is the plan they’ve been looking for.

Matt Keogh MP is the Federal Shadow Minister for Defence Industry and Member for Burt.