Speech to CEDA Luncheon - Adelaide

**Check against Delivery**

Committee for Economic Development of Australia Luncheon

South Australia

7 December 2016

I am delighted to be here today in my home town of Adelaide to address you as the first Minister for Defence Industry.

Today, I would like to outline Defence’s strategic priorities and discuss the critical importance of a capable, innovative, strong and sovereign defence industry to the nation’s national security.

In particular, I want to explain how the government is ensuring that industry continues to play a vital role in Defence’s future planning through closer, better-targeted and better aligned partnership.

This objective lies at the very heart of the Defence White Paper we released earlier this year.

But it also has significance beyond the defence sector.

For a defence organisation that can work more effectively and efficiently with key partners in industry and elsewhere – not just to better safeguard our national security but to also enhance our prosperity – is central to the Turnbull government’s plans.

Current national security climate

The Defence White Paper provides a guide to how the government is strengthening Australia’s defence capabilities to meet the challenges of the more complex strategic environment we will face over the next two decades.

It sets out a framework for our national defence strategies, grouped under three key strategic interests: a secure and resilient Australia; a securer region closer to home – including maritime South East Asia and the South Pacific – and a stable Indo-Pacific region and rules-based global order that supports our interests.

Three key strategic objectives will guide the structure and posture of the Australian Defence Force in pursuit of these strategies:

• First, to deter, deny and defeat attacks on or threats to Australia, its northern approaches and national interests;

• Second, to make effective military contributions to support the security of maritime South East Asia – as well as supporting the governments of Papua New Guinea, Timor-Leste and key Pacific island nations to build and strengthen their security – and

• Third, to contribute military capabilities to coalition operations that support Australia’s interests in a rules-based global order.

The White Paper deliberately gives equal weighting to each of these objectives.

This will better secure the capability that we need to be able to respond to more diverse and complex threats.

That, of course, means the government is determined to deliver a more capable, agile and potent ADF that is better aligned with these requirements.

The challenge we face is to maintain – and extend – our capability edge to better prepare us for the more complex high-tech conflicts of the future.

Australian Defence Industry, as a fundamental input to capability, plays a major role in securing our nation.

That is why at the heart of the White Paper we have a clear path on how the government will ensure that Australia has the critical industrial, scientific, technological and innovative capabilities outside the Defence forces that we need to guarantee our national security.

Defence industry’s role in national security

Defence industry already renders critical support to the ADF’s capability and operations, be it global primes or the countless local enterprises across the country that play their part in supporting our fighting men and women.

Defence industry designs, builds, maintains and supports defence force equipment and bases.

Defence industry provides and supports the ADF’s information and communications technology.

Defence industry also delivers the vital logistical and health support that enables our forces to operate effectively.

Defence industry is our national endeavour.

Industry cooperation will be critical to the delivery and sustainment of our enhanced defence capabilities into the future.

Our planned capability investments will provide an enormous range of opportunities for enhanced collaboration and partnering between Defence and Australian defence industry.

The Government’s Integrated Investment Program, released alongside the White Paper, will provide both Defence and Australian industry with the consistency and certainty they need to plan and implement what lies at the very heart of the Government’s plans – the largest force modernisation program in Australia’s history.

I’m sure you know, but it’s worth repeating the size of this program – $195 billion for new Defence capabilities over the next decade.

It’s also worth repeating that the spending is already fully costed within the Government’s defence funding plan.

The program will not only provide a roadmap for the next 10 years. It also provides advice on broader investment plans in the following decade to 2036.

But most importantly it brings together, for the first time, all Defence related investment – including capabilities, facilities, workforce and information and communications technology.

This will include capabilities that will provide opportunities for industry cooperation in such diverse areas as cyber security, base upgrades and information and communications technology infrastructure, airlift and sealift capabilities, maritime platforms, strike and air combat capabilities and enhancements to both our land combat and amphibious warfare capabilities.

But this high priority accorded to industry engagement is not just designed to maintain our capability edge.

It is absolutely central to the Turnbull Government’s wider plan.

We are determined to use the Defence dollar to drive a high technology, advanced manufacturing future.

Across the nation, industry is making the transition to high-tech manufacturing, embracing the innovation that will drive our continued national prosperity.

This is where the jobs of the future will be created, along with the broader growth we need to ensure Australia maintains its position as an advanced economy among the top ranks of nations in the twenty first century – an advanced economy that is able to provide for the defence of our national interests and enable us to play our part maintaining international security.

As Minister for Defence Industry I will do everything in my power to develop and grow the sector into one of the most important parts of our economy.

This high priority accorded to industry engagement in developing and enhancing our capability as set out in the White Paper is reflected in the accompanying Defence Industry Policy Statement.

It’s also reflected in the government’s decision making, in the projects announced so far to get this great national endeavour underway.

We have already selected DCNS as our preferred partner for the design of the $50 billion Future Submarine to be constructed here in South Australia, and have signed the design and mobilisation contract ahead of schedule.

We have selected Lockheed Martin to be the preferred Combat System Integrator.

We have signed a contract with Austal Ships Propriety Limited to build and sustain up to 21 steel-hulled vessels to replace the existing fleet of Pacific Patrol Boats as part of our new Pacific Maritime Security Program.

We have approved the $500 million Electronic Warfare Operations Support for Maritime and Land Forces project.

This will deliver electronic warfare equipment and infrastructure that will sharpen the ability of both naval vessels and army units to deal with complex electronic warfare threats.

We have signed a four year sustainment contract with Boeing Defence Australia to support the new P-8A Poseidon aircraft which, like the Orions before them, will be based in Adelaide at RAAF Edinburgh.

And we have announced the separation of ASC Propriety Limited into three individual government owned companies to support the key capabilities of shipbuilding, submarine sustainment and infrastructure and enable a more flexible approach to managing investment across these fields.

Finalising the infrastructure planning is an important step in completing the Government’s continuous build Naval Shipbuilding Plan.

I’m delighted to confirm today that on Monday 5th December, the Commonwealth Government engaged Odense Maritime Technologies (OMT) for the detailed design stage of the Osborne Shipyard.

OMT are global leaders in design, engineering and project managers for the maritime industry. OMT will work with a range of stakeholders including Defence, ASC, the SA Government, Future Frigates & Offshore Patrol Vessels shortlisted tenderers to deliver a purpose fit shipyard to ensure both the minor & major surface vessel programs are delivered on time in 2018 & 2020 respectively.

Redevelopment of the Osborne shipyard & the implementation of the Offshore Patrol Vessels & Future Frigates programs will be carefully managed to ensure that the Air Warfare Destroyer & Collins Class sustainment activities continue to meet the expected schedule milestones.

The continuous build Naval Shipbuilding Plan will deliver some 5200 direct & thousands more indirect jobs across the life of the program.

The Turnbull Government is beginning one of the world’s largest defence expenditures, an endeavour that will have impact on national security and national prosperity for decades to come.

The long lead times of much of this process leaves us with no scope for complacency.

Time wasted at the beginning of any project is always time you have to make up at the end.

That means we must get things right from the start.

The scale of defence is now vastly bigger than anything we have seen in modern times.

That’s why we have released the Defence Industry Policy Statement to transform the framework for effective engagement between Defence and the defence industry.

The Defence Industry Policy Statement

The Defence Industry Policy Statement sets out the government’s commitment to forging a new partnership with the sector focused on maximising defence capability – capturing and harnessing the industry and the broader research capability that lies in this nation.

This new partnership with Australian defence industry will ensure the ADF gets the equipment, systems and personnel it needs on time and on budget.

The Government will cut red tape and invest in new technologies – not just to help build Australian defence industry competitiveness, not just to support our national security but also to generate economic opportunity for Australians.

As I said, defence industry is now recognised as a fundamental input to defence capability and, working with the sector, we are reviewing written doctrine, procurement policy and seeking to shape culture across the Defence Department to institutionalise this.

To take one example of this new doctrine in practice, it is now mandatory for Defence to consider Australian industry in the formal capability development process.

This way, we will not only be able to better match the development of new capabilities with industry’s ability to deliver.

We will also be able to make more informed plans for maintaining and growing Australian defence industry capacity – which in turn will enable us to maximise the participation of Australian industry and the benefits to national prosperity across our projects from start to finish.

Defence is in the process of establishing several facilities to transform its approach to dealing with industry.

These include the Centre for Defence Industry Capability that I opened on Monday here at Industry House. It will be fully operational by the end of the year.

The Centre is designed to give practical effect to our determination to connect defence needs with the innovation and expertise of the Australian defence industry.

It will provide bridges between all levels of government, access to academic and research institutions and advice on businesses skills, innovation, exports and assistance in tapping into international supply chains.

The challenge for the future is this: What does Australia need over the next decade to ensure we have a sovereign defence capability in this country, without having to rely on other nations. This is why we are creating a Defence Industrial Capability Plan, which will identify what we need and provide Australian industry with that clear advice. The CDIC will lead this task.

This will be developed through focussed research, analysis and consultation, across Defence and defence industry. It is designed to identify strategically critical industrial capabilities that must remain within Australian hands if we are to effectively maintain our national security.

As part of this task, we will outline a roadmap for developing our industrial base to meet our defence industry needs, and also the range of Government and Defence measures that could be implemented to ensure our sovereign capabilities’ health and sustainability.

The CDIC will also highlight the areas for attention for workplace growth, skilling, competitiveness, coordination, export facilitation and, of course, innovation.

Innovation

That last element – innovation – is essential if we are to drive the development of defence capability that anticipates and is able to respond to an increasingly complex security environment.

Just as we need a potent, capable and agile future force, we will also need a strong, capable and innovative defence industry behind it.

The defence industry’s capacity for innovation will not only be vital if we are to maintain our world class, leading edge defence capability, the government also regards it as fundamental to our larger plan for innovation across the entire economy.

We believe innovation in defence will spur greater and broader economic activity, bringing growth to local businesses and jobs to communities across Australia – and creating new application’s through technology transfer and the adaptation of new methodologies.

Again, we are transforming Defence’s approach by creating a seamless link between capability needs, smart ideas and innovation in Australia industry.

An important innovation and now export is the Nulka Active Missile Decoy which has become one of Australia’s largest and most successful defence exports. The Nulka has a unique hovering rocket that has revolutionised ship protection by flying a pre-programmed flight path to entice sea-skimming missiles away from the ship.

According to BAE Systems, the Nulka project has created more than 400 jobs in Victoria and South Australia

The effectiveness of the Nulka was demonstrated two months ago with the protection of the USS Mason off the coast of Yemen, crashing incoming missiles into the sea.

This is just another example of the innovation we need to achieve our ambitions and to assist with us we have established the $640 million Defence Innovation Hub to foster collaboration on new technologies that can deliver better capability outcomes; and through investing $730 million over the next decade in the Next Generation Technologies Fund.

Together, these initiatives demonstrate the government’s dedication to developing a world class Australian defence industry, drawing on the skills, expertise and innovation in small to medium enterprises across the nation.

They also present a wealth of opportunities for industry to work with us to grow and maintain our technological edge.

Back in September I announced the priorities of the Defence Innovation Hub – intelligence, surveillance, reconnaissance, electronic warfare and space and cyber capabilities.

We need to focus on key drivers such as infrastructure, ICT, science and technology that will allow the ADF to operate across all domains in our region to the maximum effect.

We will need to focus on land combat and amphibious warfare systems to gives us the hardened and adaptable forces we need to protect Australia and contribute to regional and, when necessary, global stability.

And all the time we must be seeking maximum return for our investment.

We must guarantee our investment in capability that produces the intellectual capital that can flow over from the defence sector to industry generally.

One of the biggest challenges that we face, and that I am sure everyone here is aware of is the skills challenge. The Government is committed to using as much Australian content as possible, and that means Australian workers as well as Australian steel.

To ensure that we utilise the skills of as many people as possible who are currently working in the shipbuilding industry, we are developing ways to ensure that as many people stay in the shipbuilding industry, to bridge the Valley of Death left to us by the previous Labor Government. One of which I have flagged today in the announcement of the detailed planning work for the infrastructure at Osborne, which will start to be built mid next year.

However, even retaining all of these workers will not be enough in the long-term.

Remember it is estimated that the Future Frigate programme will employ 2000 people at its peak, and the Future Submarine programme will employ 2800 people. Meeting this will be a difficult task and will necessarily require a national approach.

One example of this being done successfully is Huntington Ingalls Industries, America's largest shipbuilder. Huntington has two shipyards, one in Pascagoola in Mississippi and one at Newport News in Virginia.

Between these two shipyards they employ roughly 30,000 people. To meet this high demand for workers they have to look locally, but they found that this wasn't enough to meet the demands of the shipyards so they started to look nationally. They now recruit from across the country and bring them to either Virginia or Mississippi. This highlights one of the great advantages for South Australia in developing a shipbuilding industry here. It can't be done remotely. You have to be where the ship is being built.

We will look to mirror this approach, though on a smaller scale, and set up a truly national approach to providing the right skills for Australia's shipbuilding industry.

The focus that the Turnbull Government is putting on defence industry as a growth industry in Australia is starting to show results.

Two years ago SAAB offered 5 graduate engineer positions at their offices in Mawson Lakes. They received 10 applications. Last year they decided they would up their number to 10 graduate engineer positions and received more than 200 applications. That is a twenty fold increase in a year and shows that the Government's message is working. Graduates are starting to see the defence industry as a growth industry in South Australia, and Australia more generally and want to get in on the ground floor.

In order to meet these challenges we will have to partner closely with the universities and VET providers in South Australia, but also across the country. As I have said, this will need to be a truly national effort, and I can assure you that the Government will have more to say about this particular subject in the very near future.

I welcome you joining me, to work together to deliver this ambitious agenda not just to provide for our nation’s future defence and security needs but to achieve jobs and economic growth across Australia.

[ENDS]