Speech to 2020 Defence Connect Budget Lunch

By Matt Keogh MP

13 October 2020

***Check against delivery***

I wish to start by acknowledging the traditional custodians of the land on which I join you from for this event today, the Whadjuk Noongar People of South-Western Australia, and the Nunawal and Gnanbury people of the ACT, and pay my respects to their elders past and present.

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 impressive that our old car factories were reworked to build ventilators, gin distilleries subbed in sanitiser and prosthetics companies produced PPE, this was possible in part because sales of many of their usual goods were quashed.

Australia should be a country that makes things, but we also need good bang for our investment buck – that means leveraging our existing spends.

We should be making high value, high end manufactured goods and the supplies required for them.

Reawakening Australian manufacturing need not be protectionist nor undermine our support for a strong, rules based, global trading system - it must be focused on what is in our national interest.

Defence industry provides that opportunity.

Right now the Australian Government is 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 - not the “rivers of gold” the Government claims.

This Government has failed to implement strong, measurable and enforceable Australian industry capability requirements in our defence contracts, which is really hurting our local industry, at a time when jobs are desperately needed.

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, potentially supporting thousands of jobs and building our local capabilities.

In last week’s Budget Reply, Labor committed to ensuring major defence project contracts contain measurable, enforceable, audited and transparent AIC requirements.

The Federal Government must implement contractual requirements that compel Defence primes to do the work here in Australia, and to work with Australian companies.

So far 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.

The more the Australian Government supports our Defence industry, the better that industry is able to grow its export markets – 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 may be operating in the 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 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, and provide the economic foundation for further Australian defence industry exports that are globally competitive.

This could mean billions of dollars added to our economy and would result in countless jobs.

What we have seen to date is cold comfort for our Australian manufacturing industry.

It is simply not good enough to see contracts sent offshore without even considering local companies.

When the government does bow to pressure to specify AIC content for projects, as they did with future submarines - which started at 90% and has now fallen to 60%, they count spending on Australian travel agents and hotels instead of Australian motors and switchboards as part of AIC.

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 about as useful as putting a screen door on a submarine. 

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.

Should Labor be elected, this policy would not only create ongoing Australian jobs, it would further develop Australia’s sovereign capability, ensuring workers are skilled up and Australia increases its technical know-how to not just build Defence equipment but maintain and upgrade it into the future.

It is incumbent on Government to consider ways to best avoid the supply chain shocks we have seen through COVID 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, there is an opportunity right here for the taking.

This Liberal Government has been AWOL when it comes to supporting Australian defence industry.

If the Morrison Government does not adopt Labor’s approach, we are at risk of seeing a decrease in local defence work and more work going to 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 become.