Lowy Institute for International Policy

Lowy Institute for International Policy

13 December 2017

*Check against delivery*

Thank you very much for that introduction. It is a great pleasure to address the Lowy Institute this morning.

With a distinguished board, it does us all a great service by stimulating debate and discussion on policy and Australia’s place in the world.

This contribution is particularly valuable on foreign and defence policy.

It leads me to think of the 19^th century philosopher and student of Napoleon, Carl von Clausewitz, who had much to say in his enduring analysis on war, about the relationship between war and politics.

His elegant prose is these days distilled to simply “war is the extension of politics by other means”.

I’m no stranger to this phenomenon as you may imagine. Some of the Opposition’s more outlandish shock and awe tactics often cause me to wonder which part is politics and which is simply war.

However it is Clausewitz’s view on strategy that I like most.

He said the talent of a strategist “is to identify the decisive point and to concentrate everything on it, removing forces from secondary fronts and ignoring lesser objectives”.

In other words, concentrate on the main game. It’s how Napoleon won many of his greater victories.

Three hundred years on, we can look to that view of strategy to articulate the Turnbull Government’s approach to defence industry.

This government has set its own “decisive point” as the establishment of a sovereign defence industry, fit to last a century. This involves the transformation of our strategic industrial base.

We are well on our way to this.

Through the 2016 Defence White Paper, the Defence Industry Policy Statement and our Integrated Investment Plan, the Turnbull Government has laid out a clear vision for expansion of Australia’s defence industry.

Today – as we look to the end of a busy year – I want to update you on where we are up to in implementing all this.

It was only a year and a half ago since I was sworn in as Australia’s first Minister for Defence Industry. Recognising the importance of defence industry to our defence forces, I am focussed on ensuring that we are maximising our Australian industry content in developing the capability of the Australian defence forces.

In February of this year, the Turnbull Government announced a 200 billion dollar commitment to the largest peacetime renewal of our defence capability since World War II.

It is an enormous undertaking, unprecedented in its scope. It provides simultaneously for the defence and security of our nation, and contributes mightily to the future prosperity of the Australian community.

This massive program supports and readies us to defend and secure our borders.

It helps us assure peace and security in our region.

It enables us to contribute to security around the globe wherever our presence is welcomed and needed.

It supports the men and women of our defence force who serve to protect us – the people who put themselves in harm’s way for us.

By creating a major sovereign defence industry, for the long term, it enhances our self-reliance in a global context.

Through an unprecedented construction program, by far our largest and most diverse ever, it creates jobs and boundless opportunities in which Australian industry and business can innovate and thrive.

For those aspiring to work in defence industry, it provides new direction and new training opportunities.

For young Australians in our schools, our universities, colleges and TAFEs, it points the way to the jobs of the future.

You may have seen the advertisements on television and elsewhere that describe the Workforce Behind the Defence Force.

That workforce is the under-recognised but deeply effective human enabler of our defence capability.

We want the Australian community – workers, businesses, and job seekers— to be alert to the tremendous long-term opportunities in defence industry.

The campaign emphasises Science, Technology, Engineering and Mathematics training paths. It is essential that enough young Australians are in this pipeline of skills and expertise that will be in so much demand in the future.

People with trade, technical and management skills to support continuous shipbuilding will be in high demand.

Australians looking for work – perhaps those in automotive areas – might find new opportunities in defence industry.

Increased demand for industry capability will extend across many industry sectors – from construction to ICT and cyber, to medical, project management and services.

Shaping those sectors to prioritise defence and be ‘defence ready’ will take time.

A robust defence industry helps put the nation in a better economic position than it might otherwise be. It will become an extremely important aspect of our economy, well into the future.

This is fundamental to our global and regional security, and our defence readiness.

Under Labor there was an unforgiveable six-year drought of ship orders, long beset by indecision. Not one ship was commissioned over six years from an Australian shipyard.

We have replaced it with our Naval Shipbuilding Plan, released earlier this year, which injects around 90 billion dollars in a strong and sustainable naval shipbuilding industry.

The Plan will overhaul Australia’s naval capability, create economic growth, stimulate Australian industry involvement and secure thousands of jobs for decades to come.

By employing Australian workers, in Australian shipyards, with Australian resources, it will reach deep into the community and economy, and spread the benefits.

It will see continuous construction from now until the middle of the century of 12 future submarines, nine frigates and 33 smaller naval vessels.

Work on our naval shipbuilding plan is well underway.

Our Australian team working on the Future Submarines Program have already started relocating from Australia to ‘Hughes House’, our purpose-built joint facility in Cherbourg. They are working on the concept and preliminary design of the Future Submarine. A pre‑sizing activity was completed in September 2017, with solid agreement on the initial sizing envelope of the Future Submarine.

I was pleased to participate in a keel laying ceremony for the first of 21 Pacific Patrol Boat replacement vessels at Henderson in Western Australia in July this year.

Last month I announced Lürssen’s selection as the prime contractor for our 12 Offshore Patrol Vessels.

This multi-billion dollar project will be delivered by Australian workers, in Australian shipyards using Australian steel.

More than one billion dollars will be invested in modern shipyard infrastructure at Osborne and Henderson, and 25 million dollars is allocated to workforce growth and skilling initiatives starting in January 2018.

We recently announced the selection of Lendlease as the managing contractor for the upgrade to the Osborne South Shipyard in Adelaide.

This project alone is worth over 500 million dollars and will create over 600 jobs at its peak.

We will also deliver significant upgrades to our Collins Class submarines and Anzac Class Frigates.

A workforce that is appropriately skilled and allows Australian defence industry to do the job is essential to fulfil our vision to ensure a continuous naval shipbuilding industry.

The naval shipbuilding workforce is expected to grow to around 5,200 workers by the mid-to-late 2020s, with more than quadruple this number in sustainment activities and supply chains across Australia.

Many will need to be trained or retrained, which is why, in collaboration with my former Departments of Education and Training, and Industry, Innovation and Science, Defence is developing a Strategic Workforce Plan for the naval shipbuilding enterprise as a whole.

The plan will guide the operations of our new Naval Shipbuilding College. The College will attract, train and retrain the workers we need for our continuous shipbuilding program and will commence operations in early 2018.

We must also ensure that the workforce which has been working on the Air Warfare Destroyer project is retained. The previous Government created this valley of death by not commissioning any ships, but the Turnbull Government is committed to fixing this problem and providing long-term security to the workers at Osborne.

That’s why just this week I announced that the Turnbull Government would be investing up to 29 million dollars to retain 200 workers at Osborne. This will include 50 workers going to the Future Submarine Project Office, 50 people going to Collins sustainment and maintenance operations and up to 100 scholarships for workers to upskill their Computer Aided Design and Manufacture skills.

Put together these initiatives will ensure that Australia’s future shipbuilding industry will have the right skills, at the right time, available to ensure that it will be as successful as possible.

We have also seen progress on the F-35 Joint Strike Fight program, to give the Royal Australian Air Force unprecedented capability in the air.

Because we signed up to the project early, Australian defence industry is able to reap significant benefits.

Companies like Marand in Victoria are one of the biggest beneficiaries in Australia. Though formerly in the automotive sector, Marand now make tail pieces and specialised engine trailers for the JSF. They announced earlier this year that over the next decade, their order book from the project will be worth more than 1 billion dollars.

We are pushing ahead with our four to five billion dollar LAND 400 Phase 2 project to build new combat reconnaissance vehicles, to enhance our land operations.

This is a demonstrably huge undertaking, reflecting a fundamentally different approach to defence industry. It is focussed on a clear “decisive point” – our future security.

On the way there, it provides confidence and direction for industry and unlimited potential for Australian defence to constantly renew itself to meet ever evolving and changing challenges.

To support small-to-medium enterprises across Australia to promote competitiveness and guide priorities across defence industry, I opened the Centre for Defence Industry Capability a little over a year ago. It is an essential component of the 2016 Defence Industry Policy Statement and resets the Defence and industry relationship.

I also launched the Defence Innovation Hub, investing around 640 million dollars into maturing and developing cutting edge technology for our ADF.

The Hub has already received over 330 innovation proposals. Around 23 million dollars in innovation contracts have been signed with Australian industry.

In March this year, I launched the Next Generation Technologies Fund, a 730 million dollar investment in the emerging technologies for the future defence force.

In July came the first Defence Cooperative Research Centre. This 50 million dollar Centre addresses Trusted Autonomous systems and is bringing together academia, research, industry and Defence to deliver game‑changing unmanned platforms.

We are giving certainty to Australian industry, guiding them so they can reliably invest in skills, infrastructure and innovation for long-term capability.

And there is still much more that we plan to do.

By mid-2018 we will have announced the successful tenders for the LAND 400 Combat Reconnaissance Vehicles, and the Future Frigates.

A Defence Industry Skilling and STEM Strategy will be released at around the same time to match demand for defence industry capability with the workforce and skills required.

We are also currently developing our first Defence Industrial Capability Plan, which will lay out our Sovereign Industrial Capabilities – those industrial capabilities we absolutely must maintain here in Australia.

We are busy, step by step, making the decisions required to fulfil this ambitious and vital agenda.

The past year has also seen us expand the opportunities for Australian industry to grow its capabilities.

In 2016-17 we issued 74 defence capability-related project approvals.

This financial year we have already made 61 decisions.

This is a significant increase in approvals.

Before the introduction of the Integrated Investment Program, the highest number of defence capability-related approvals achieved in a year, not including IT and infrastructure approvals, was 46.

In June this year I strengthened Australian involvement in defence projects. This fortified the template for Australian Industry Capability Plan requirements on tenders for all major capital equipment procurements of $20 million and above.

Tenderers must address how Australian industry involvement will be maximised across a given project. It will require them to outline how they will build enduring industrial capability, transfer technology and promote export opportunities for Australian businesses.

We are a country that has to wring every bit of capability we can from every dollar in order to achieve our Defence mission with a relatively small, advanced force.

We can’t change the scale, scope, and capability of our defence industry overnight.

That will come from commitment, vision, timely decisions and action.

That is exactly what the Turnbull Government has started. Now it is up to defence industry to help us reach our objectives.

With the huge existing expertise in our defence force behind us, we are creating new opportunities for industry on an unprecedented scale.

We are giving confidence for them to invest, take risks and provide leadership of their own.

In early November, we announced a 207 million dollar boost to the Nulka active missile decoy system.

We achieved an important first stage contract milestone with Raytheon in the Short Range Ground Based Air Defence project, a project worth up to two billion dollars.

We announced that Australia’s fleet of nine Future Frigates would be equipped with the Aegis Combat Management System, together with an Australian tactical interface developed – right here – by SAAB Australia.

The Government mandated that where the high-end war-fighting capabilities of the Aegis system are not required, a SAAB Australia developed combat management system will be used on all of Australia’s future ship projects.

Only this morning, I was pleased to join the Prime Minister to announce a partnership between BAE Systems Australia and Raytheon Australia. This has led to the creation of 50 new jobs right here in Sydney to sustain the Air Warfare Destroyer.

These decisions will significantly drive our investment in Australia’s long‑term, sovereign defence industry capability.

We are also asking global primes to do more through the Global Supply Chain Program, under which the primes are contracted to identify and award export contracts on merit.

These efforts are bearing fruit, and during my recent visit to the United Kingdom I also announced that two Australian companies had won work on that country’s BAE System’s Type 26 Global Combat Ship construction program.

Tasmanian-based Liferaft Systems Australia will provide the ship’s Marine Evacuation System, while Victorian-based Mackay Consolidated Industries will supply pipe hanger inserts.

Through the Global Supply Chain Program they have been able to find export opportunities in BAE Systems’ supply chain, and these two contracts will support around 220 Australian jobs.

On top of this, Fincantieri Australia have engaged Hoffman Engineering from Western Australia to manufacture a bow-thruster for one of Fincantieri’s international shipbuilding projects. Fincantieri have also signed a memorandum of understanding with Hoffman which could provide work of up to 250 million dollars to Hoffman and their Australian supply chain.

These success stories show the great capabilities and international competitiveness of Australia’s defence industry.

There is always more than we can do to support Australian defence companies to further transition to an export-orientated, advanced manufacturing future.

Defence exports are an essential part of our vision for Australia’s defence industry. Exports will sustain industry through peaks and troughs in domestic demand. They will hone our international competitiveness and promote international engagement.

Ahead of the release of the Defence Export Strategy in early 2018, as Minister for Defence Industry I have been building up some important international relationships and partnerships we need to support our interests and to pave the way for greater defence exports.

Over the past 12 months, I have visited the United States, Canada, the United Kingdom, France, Austria, Poland, Saudi Arabia twice and attended IDEX in the UAE.

On every single one of these official visits, I am proud to highlight the innovative capabilities of Australian defence industry. We are already widely respected, and there is considerable potential for us to export more of what we do to our friends and allies.

With Poland’s Minister for National Defence, I discussed opportunities for Australian defence companies to export capability like the Hawkei.

While in the UK, our two Governments committed to a Ministerial defence industry and capability dialogue. It has since met with immediate outcomes.

We announced a capability study beginning early next year, to assess the potential fitting of Australia’s world-leading CEA Technologies’ ‘CEAFAR’ radar to British ships.

Our inclusion in the definition of the United States’ National Industrial and Technology Base, along with the United Kingdom and Canada, is another real opportunity to draw our defence industries closer together and develop areas for further cooperation.

This initiative has great potential to decrease the barriers between our four countries.

It will help improve the sustainability of our industrial bases, our ability to develop joint solutions, and enhance our collective war-fighting capability.

2017 has been a busy year of progress and delivery in defence industry, but I’m sure 2018 will be busier.

When we look ten years ahead in this transformation of defence capability, we can see a defence force equipped with far more advanced capabilities than it has today – and with the momentum, and the innovation culture needed to continuously augment and improve our capabilities.

It will be a transformed strategic industrial base.

We do not underestimate the complexity of this – designing and integrating capabilities, introducing them into service, and deploying them effectively in independent and coalition operations is hard.

We urge industry to identify its opportunities now, and invest in the people, skills, technology, and infrastructure needed in two, five or 10 years on.

Defence for its part, is upgrading the way it works with industry to position industry to meet our future defence capability needs.

I am very proud of what the Turnbull Government has done in such a short time and I have no intention of taking the foot off the accelerator in 2018.

This is the great national enterprise of the next decade. I’m keen for as many Australians as possible to be part of it.

Conclusion

The Turnbull Government has a clear vision for a globally competitive, sustainable and sovereign industry.

Through it we can be confident in the renewal of our defence capabilities to safeguard and enrich us in the future.

We are serious about having a strong, sovereign and world-leading defence industry in Australia, because we know that it will benefit us all.

Clausewitz, in his treatise On War, encouraged analysts to “succeed in lending a hand to those who in our dear native land are called upon to speak with authority … that we may … excite them to make a candid examination of the subject.”

I’ve paraphrased that, but he may well have been writing the Lowy Institute’s job description.

As you think more about it, you may well wish to ponder how you too, might be a bigger part of it.

[ENDS]