Appropriation Bills - Supporting Australian Defence Industry

By Matt Keogh MP

25 March 2021

We are a country that punches well above its weight in so many things. We traditionally finish in the top five at the Olympics despite being so much smaller than our competition. We invented wi-fi, the black box, spray-on skin and the cochlear implant. We are world leaders in mining and sub-sea oil and gas. We have handled the COVID crisis better than most in the world. In World War II, we made the Boomerang fighter aircraft, and just now it is Australia that is leading the world in autonomous aircraft with the Loyal Wingman. So why is it that we are so doubtful about the potential of our defence industry and our own capability? We are competitive with other nations on so many other things. We have the skills, the resources and the thirst for work, but the simple fact is: we as a nation don't back ourselves in our defence industry. The Australian Defence Force is a fantastic customer of the global defence industry supply chain, but why can't we, Australia, be its primary supplier instead?

This was the crux of a conversation I had recently with a successful Australian defence industry business. They're doing well, participating in some major international defence projects which benefit our ADF but are largely for foreign primes and overseas forces, but they have the capacity to do so much more. In my discussions with the defence industry more broadly, I'm told the same thing time and time again: they look for export tenders and contracts overseas in order to be deemed 'legit' by our own Department of Defence; at the same time, they are fighting for those overseas contracts with one hand tied behind their back, because they can't point to contracts with our own ADF. We need a paradigm shift. We need our government and the Department of Defence to back our Australian defence industry businesses as a necessary and important strategic capability right up there with our naval, land and air platforms themselves. While this means taking on the risk that comes with fostering local companies, we can embrace the reward. We know full well that equipment designed and built overseas presents many other risks in any event. Ultimately, we—our government—need to back ourselves. Already, through the COVID-19 pandemic, not only have we been well down the list when it comes to sourcing PPE and commencing our vaccine rollout; we've been victims of vaccine nationalism, where countries have prioritised their own interests over their international export contracts. Why would we expect this to be any different in a conflict situation?

The Aussie spirit of mateship is alive and well in our defence industry and beyond. When we need something to happen, we pull together to make it so. We saw this during the response to the bushfires of Christmas 2019, when HMAS Canberra and HMAS Adelaide were deployed to the New South Wales South Coast fully stocked in a matter of hours due to the fact that local companies pulled together to get it done. We know that we can do what's needed when it's required, and this is the mindset we need for all of our defence industry projects. Australian defence companies don't want to be just building to spec parts off a ship blueprint that was developed decades prior or that came from overseas. There's no strategic or sovereign capability development in that. In fact, it leads us to use old and obsolete technology and to a deskilling of our industrial base. We should instead be commissioning Australian companies on an outcomes basis. If we need something for our defence kit, Australian companies should have the opportunity to put forward unique solutions. This provides the opportunity for research, development and innovation in the sector. In order to enable this, the Commonwealth must have skin in the game. It's not enough to put a contract out to tender and let international prime companies get away with 'best-endeavour' provisions, advising that Australian companies don't have the capacity or capability to undertake specific work and favouring existing, often international, supply chains.

The Australian defence industry needs to be enabled by the Commonwealth. From the Minister for Defence down, there must be a new approach. The 'A' in AIC should be about homegrown, Australian owned, Australian registered businesses. The 'C' in AIC must truly be about our sovereign capability, not just content, which, under the current government's guidelines, could mean hotels, travel agents and language classes just as easily as it could mean building ships and designing new technology.

That means that building and developing things here in Australia should be our priority. If we don't have the specific capability here, we must nurture and build that capability strategically. We must develop and foster our current mid-tier defence industry businesses from which we can grow Indigenous prime defence contractors. There is no reason that Australia can't be a world leader in defence manufacturing. If undertaken effectively, homegrown prime defence contractors will be enabled to take the lead on projects—no longer simply subcontracting to foreign lead contractors; rather, working directly with Defence to provide new capabilities and platforms to our ADF.

Similarly, we should be using Australians in all future shipbuilding programs, not just in shipbuilding labour but also in the design, engineering, drafting and integration work. A good start to that would be providing certainty for shipbuilding workers in Osborne and Henderson, who have been waiting with bated breath since December 2019 for an answer about the location where full-cycle docking work will occur for our Collins class submarines. This government has torpedoed any hopes that those workers had of certainty this week, when it yet again fluffed its way through Senate estimates, refusing to give any real answers on anything. Ultimately, it is vital that we continually invest in the development of our industry and our overall capability here at home—something that, at this rate, the government seems more interested in sinking—be it in Western Australia, South Australia or elsewhere across the country.

The government and Naval Group confirmed this week that a revised strategic partnership agreement has finally been signed in relation to the Attack class future submarines, but no minister has actually read the amendments to that document. Last month, I had the pleasure of meeting with the Naval Group global chief executive, Pierre Pommellet, when he was at parliament for talks with Commonwealth officials on a range of issues, including a 60 per cent minimum spend on the Future Submarine project. It was a shame he didn't have the same opportunity to meet with the actual Minister for Defence. We discussed the agreement he was yet to finalise with the Commonwealth, in which there would be a 60 per cent spend minimum in the course of the build of all 12 future submarines. That means that the 60 per cent minimum won't be reached until the very end.

I'm disappointed that the Morrison government is keeping the details on this—and any potential for penalties against Naval if they don't meet these requirements—a complete secret, under the guise of commercial-in-confidence, despite the fact that there is no competitive process now. Naval are the ones building these submarines. There's no competitive process at all. So we've been seeking the definitions of 'spend' and 'content', and what the government is including in this minimum 60 per cent that it now says it has committed to, but, even after a full day of defence estimates yesterday, we are none the wiser. It is all part of the don't-ask, don't-tell mentality that we continue to see under the Morrison government.

This uncertainty, though, for business and for Aussie jobs—and, frankly, this government's complete inability to support the future of a sovereign Australian defence industry—is just appalling. We're running in silent mode, stealth mode, when these things should really be coming to the surface. We keep trying to dive deeper, but the government won't give any of the information.

It's why Labor has already committed to implementing concrete rules to maximise local content and create local jobs for defence acquisitions. It means negotiating appropriate, specific, enforceable and audited AIC commitments into the contractual arrangements on all major defence materiel procurements and local defence contracts. The disclosure of these commitments must be public and transparent. Labor's policy would not only create ongoing Australian jobs; it would further develop Australia's sovereign capability, ensuring workers are technically skilled up not just to build defence equipment but to maintain, upgrade and augment it into the future. A future Labor government would also ensure that at least one in every 10 jobs in major projects, defence—including future defence programs—or otherwise were filled by an apprentice,. We need to rebuild the nation's manufacturing industry with a comprehensive plan to create jobs, boost viable skills, bring industry expertise back onshore and supercharge our collective national productivity.

We know this government has no understanding of supporting Aussie businesses. Yesterday, it was revealed that the Treasury expects that up to 150,000 people will lose their job as a consequence of the government's withdrawal of JobKeeper in just three days, this Sunday. Some experts have even said that the number could be as high as 250,000 jobs lost. The Morrison government has no plan for the economy and no plan to support Australian businesses and workers. The only suggestion, with three days left until JobKeeper is withdrawn, is Centrelink encouraging people to sign up early to ensure they can receive the JobSeeker payment, which is around 60 per cent of the JobKeeper payment that these people will be losing.

Labor, on the other hand, does have a plan for Aussie jobs. We want to create a defence industry development strategy which will better leverage the $270 billion investment pipeline, develop sovereign industrial and research capabilities and build skills and expertise within the Australian workforce. We need to put Australian industry, workers and security first with a framework to maximise and with public disclosure of local content for all major defence materiel procurements. We're also looking to improve our manufacturing skillset and capability through a national rail manufacturing plant to see more trains built here in Australia by local workers with local know-how. Maybe that will make sure that they can actually fit through the tunnels and into the stations that we already have. We need to ensure that every dollar of federal funding spent on rail projects boosts our local jobs and our local industry, and the same has to be said for Defence as well.

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 risks that entails, which has been very much highlighted over the last 12 months of the COVID-19 pandemic. It's up to the federal government to implement contractual requirements that compel Defence primes to do the work here in Australia and work with local companies now to put in place the mechanisms to grow Australian defence industry, from SMEs up to primes. There are minimum levels that are only met at the end of a project, with no transparency. That's not good enough. Australian companies need to be factored into the Defence project supply chain from the very beginning—involved in design, involved in engineering, involved in developing capability, involved in the technological developments for the whole life of a platform's build and ongoing sustainment. We must share the risk, put our skin back into the game, and, frankly, we need to back ourselves in Defence, like we do in the Olympics.