Opening of CDIC in Adelaide

CHRISTOPHER PYNE: It’s great to be here with the Premier obviously, Jay Weatherill, and the co-chairs of the Centre for Defence Industry Capability, Paul Johnson and Kim Gillis, and Kate Louis from the Department of Defence. Today is a red-letter day for Defence industry, for South Australia, for the Government’s- the national Government’s program of promoting our $195 [sic] spend on Defence capability over the next 10 years, taking it to a new level.

We’re starting to see some rubber hitting the road now since the election. We made a whole lot of decisions in the last Parliament about what we’d like to do when we release the Defence White Paper, the Defence Industry Policy Statement, the Integrated Investment Plan, made decisions about where various projects would be delivered. So in the case of the submarines here in Adelaide, the Future Frigates in Adelaide, the Offshore Patrol Vessels beginning in Adelaide and then moving to Henderson, the Centre for Defence Industry Capability being established and run here in Adelaide, and since the election a number of these major ambitions are starting to get some meat on the bones, if you like.

So we’ve signed the contract with DCNS for the design and mobilisation of the submarines. We’ve chosen the combat system integrator in Lockheed Martin Australia to do the combat system integration for the submarines, which will all be based out of Mawson Lakes and of Osborne. In a different program, the Joint Strike Fighter program, we won the right to be the maintenance and sustainment hub here in Australia for the Joint Strike Fighters for Asia and the Pacific, which of course is worth great value to the Australian economy, and today we are announcing the Centre for Defence Industry Capability opening.

The CDIC will be based here in Adelaide; about 40 staff altogether of which 20 will operate out of here and the other 15 to 20 will operate around Australia as advisors. It has a very unique role. It is a combination of Industry and Defence – so the Department of Industry and the Department of Defence – using the skills in both to maximise the Australian involvement in all of these major projects. This is the first time that the Government’s attempted to do this, and I think it will be very beneficial for jobs and for investment; not just in Adelaide in our state, but also spread around Australia. But in naval shipbuilding, it’ll be primarily here in South Australia.

Centre for Defence Industry Capability will run the Defence Innovation Hub and the Innovation Portal. Both are live from today. The Defence Innovation hub is $630 million designed to take projects or products and services that have been developed through the Defence Science and Technology Group and the Next Generation Technologies Fund, from research and development level to commercialisation level. So they’re actually not just great ideas, but that they’re ideas that are creating jobs, creating high tech and advanced manufacturing. The Defence Innovation Hub will be operated out of Adelaide. It will take applications from industry about how they think they can take their products to the next level. The Innovation Portal will be the opening, the gate for all of those people to come through Defence and Industry to do just that.

So we’re trying to make it as easy as possible for business, particularly SMEs, because large primes all have whole departments that work on creating government work and interacting with government. SMEs are usually trying their very best to just stay afloat, keep the doors open, try and take their ideas through to fruition. So the Government’s going to try and help them as much as we can to take those ideas to a level where they can actually be creating wealth and jobs for our state and our country.

This is a great national endeavour, but for South Australia, since having won the right to build the submarines and the Future Frigates here and begin the Offshore Patrol Vessels, it’s very much a South Australian endeavour, and that’s why I asked Jay Weatherill here today, because the South Australian Government has been working very closely with us in a very cooperative way, putting jobs and South Australians first, rather than politics first. So it’s my great pleasure in the presence of the co-chairs and the Department of Defence and the Premier to declare the CDIC open for business. And Andrew Garth, also. Andrew Garth is managing and running the CDIC here from Adelaide, to declare it open, and I might first let the Premier say a few words, and then I’ll pull the cord. Might even do that together, in the spirit of bipartisanship, and then we might take some questions if you wish to ask any questions to Jay.

JAY WEATHERILL: Well, thank you Christopher, and it’s a great pleasure to be here at this important announcement, not only for South Australia but for the nation. South Australia is known as the defence state. This announcement confirms Adelaide as the defence capital of our nation. We know that the decisions that are going to be made in the next 20 to 30 months will determine how South Australia benefits over the next 20 to 30 years through this Defence industry. There are young people today that are wondering about what their future looks like. What they can plan with great certainty is that if they gain the skills and capabilities which will allow them to participate in the Defence industry, they can have jobs which will stretch on for decades and decades: careers. So when we invest in our science and maths labs at schools, what we’re dong is creating the opportunity for young people to gain the skills they need to participate in this industry.

At the moment, there’s talk of unemployment at different parts in South Australia. We need to make the plans today to make sure that we’re not talking about a future of skill shortages, and that is a realistic possibility if we don’t do the sorts of things which are implied by the Centre for Defence Industry Capability. That’s what this does. It allows us to match the pipeline of work that is undoubtedly going to flow from these extraordinary Defence contracts and match them up with the people who are able to do the work to actually supply these Defence needs.

So it’s an exciting day for South Australia. It’s an enormous … decision, I think, for the Commonwealth to take. We’re incredibly proud of South Australia being chosen as the place where this can be coordinated from and from which this is launched, and we stand ready as a partner with the Commonwealth Government to meet the Defence needs of the nation. And this is a great day for South Australia, and we offer our support and praise for the Federal Government in taking this step today. Thank you.

[Applause]

QUESTION: Minister, just for a practical sense, can you explain how this might work for an SME that might have some defence work already but is looking grow its capabilities? And how will it deal with this?

CHRISTOPHER PYNE: Well, an SME might for example have a good idea for a part of a frigate that they think they can improve on what has gone before. They’ll look at the designs that have been promoted through the request for tender. So- actually I’ll give you a better example. Last Wednesday we released the request for tender for the offshore patrol vessels, on time. Which is great news. So an SME will look at that request for tender and see there’s quite specific and detailed specifications for what the offshore patrol vessels need to look like, and the point of view of what Defence wants in its capability. They’ll say to themselves, we think we can do that. They might then work with the DSTG to improve the research and development on their part. DSTG might then say yeah, we think you can now take that to market. They’ll then contact the Centre for Defence Industry Capability. They’ll say, how can we do that? They’ll contact them either through the Innovation Portal or directly here in Adelaide. They’ll then meet with industry advisors about how that might be done. If it’s decided that yes it can- it does suit our needs, it might just need a bit of work here or there, then the Defence Innovation Hub – which has got funds associated with it – will be used to try and get that to the point where they can then say to the winner of the offshore patrol vessels tender, we’d like to supply this part. And the OPV building says yeah, we’ll use that and it might be out at Wingfield or it could be in McLaren Vale, wherever they might be operating. And away they’ll go. That’s exactly how it will work.

QUESTION: Minister, how does it tie in with the cyber-security side of things in terms of making sure there aren’t vulnerabilities in the supply chain?

CHRISTOPHER PYNE: That’s a good question, Tory. So the cyber-security aspect here in Australia is going to have to go to a whole new plane. Obviously we have very high sophisticated cyber-security protections in Government, and- industry, many businesses have very sophisticated protections for cyber-security in their businesses because they’ve been operating in defence for some time. Because of the big ramp up of local activity in defence industry, there will need to be a lot more focus on cyber-security in those businesses. Because what we’ve seen overseas – and sometimes here in Australia – is those are countries who’d like to find out what we’re doing in terms of defence try and get through industry rather than potentially through government. And they might therefore try and find a way into a business that might then end up in the supply chain as you say.

So, there will be a lot of increased expenditure on cyber-security. Some of those decisions have already been made but we can’t talk about them. Others will be made in the future, which we can talk about. That will be an important part of the skills base. So if I was a university or a TAFE or a vocation, education and training provider I’d be looking at cyber-security issues in terms of training that skilled workforce that we’ll need in cyber-security, because there’ll be a big ramp up of those kinds of jobs. But obviously, the CDIC will help businesses with that too. But businesses won’t win contracts unless they can prove that they have the cyber-security protections necessary in place that Defence requires if they’re going to supply us with product.

QUESTION: Minister, are you able to update us where the contractual negotiations are at on the submarines and, has the issue of energy security and cost arisen during that process given what we’ve seen in South Australia in the past few months?

CHRISTOPHER PYNE: Well, the contract with DCNS has been signed for the design and mobilisation of the submarines. So that was signed I think in September. So we’re well ahead of schedule on the submarines, which is fantastic. We’re ahead- we’re on schedule for the OPVs, the future frigates and the submarines, as well as LAND 400. So, my job has been to basically keep us on schedule and working with Defence in a very cooperative way, we are doing that. So the contract’s been signed.

The inter-governmental agreement with France will soon be signed, which means that we are- there’s nothing standing in our way of getting on with the job.

We’re working with the South Australian Government to talk about the infrastructure down at Osborne South and North. I’ll be making an announcement about that this week as well. And in terms of power- well, power hasn’t yet been raised with me. Might have been raised with officers of my department; hasn’t yet been raised with me as a concern by DCNS but of course if it is, then we will need to put in place the infrastructure that’s necessary to ensure that the project is not delayed or becomes so costly that it becomes unviable. Of course much of those- many of those decisions are the purview of the Premier, and as we’re being so bipartisan today I don’t propose to delve into those issues or difficulties that the state’s having right now.

QUESTION: While you’re being diplomatic, can I ask…

CHRISTOPHER PYNE: We’re always diplomatic.

QUESTION: …would you or the Australian- any other Australian Government official seek to make contact with a Taiwanese as Donald Trump has done?

CHRISTOPHER PYNE: That’s not our policy, no.

QUESTION: And do you think China is right to criticise him?

CHRISTOPHER PYNE: I’ll leave those answers to those questions to the Foreign Minister, that’s her responsibility. I’m responsible for jobs and growth in defence industry. She’s responsible for commenting on issues to do with foreign policy.

QUESTION: Minister, where is LAND 400 at? Is there an announcement imminent?

CHRISTOPHER PYNE: No, the last announcement for LAND 400 was the risk mitigation phase that they’re in now so Rheinmetall and BAE are working on convincing Defence that they have the best product. Rheinmetall and BAE have been having – as well as the Department of Defence – these very successful workshops all around Australia, but particularly Adelaide up to Brisbane to encourage SMEs and other businesses to be engaged in their supply chain so that when they come for the final bids they can say this is how much Australian industry involvement we’re going to have, which I think’s a big far cry from where project began. The same things are going on with OPVs, Future Frigates and submarines, of course, but particularly the OPVs and the Future Frigates, and they’ve been held here and in Adelaide and right around Australia.

So the feedback I’m getting from the industry and business is they’ve never had so much engagement and involvement from Defence, which is terrific. So the next decisions about LAND 400 will be made probably mid-next year and beyond, when there’ll be decisions made about these products that are being offered by Rheinmetall and BAE. So there’s nothing about to be announced about that. Patrick?

QUESTION: The Government’s considering some sort of emissions intensity scheme, which is a version of carbon pricing. How is this any different to a carbon tax?

CHRISTOPHER PYNE: Well, I’ll refer you to the AM program this morning where Josh Frydenberg answered all those questions as adroitly he always does. But obviously the Government doesn’t support a carbon tax. The last carbon tax was a $15.4 billion hit on the Australian economy, and soon as it was removed, of course, energy prices dropped automatically. So we have absolutely no intention of returning to a carbon tax.

We will meet and surpass our 2020 emissions targets with the policies that we have in place. We have an ambitious target for 2030 of 26 to 28 per cent reductions in our emissions; we’ve signed the Paris Agreement with respect to climate change. So we are doing all the things that you would want to do to protect our environment, and of course we’re also very focused on jobs and growth and investment in our economy. So we don’t intend to mud the economy with a carbon tax in the way that the Labor Party did.

QUESTION: As a South Australian though, do you think a price on carbon in the electricity sector might actually help improve the stability and price of South Australia’s electricity?

CHRISTOPHER PYNE: No.

QUESTION: Premier, on that issue, can we ask you? Josh Frydenberg at least seems to be leaving the door open to the idea of an energy intensity scheme.

JAY WEATHERILL: We’re confident that an energy intensity scheme will be recommended as part of the Finkel Review. It’s something we’ve advocated for, and it’s a sensible reform, and I welcome the fact that the Energy Minister today seemed to be favourably disposed to at least this being considered as part of the review. Of course, we want it to be implemented and soon; we’ve asked for the Finkel Review to be brought forward. It’s pleasing that a review that was going to occur in 2017 has already commenced now, which is great.

So today I think is series of positive announcements by the Federal Government in the energy space. Last week we had the Federal Government blaming states like South Australia for some of the challenges in the national energy market. Now we see this week the federal Energy Minister accepting responsibility nationally for the role that they must play together with the states in reforming the national electricity market, and that’s a positive thing.

So in the spirit of everybody being friends today, I think I’ll concentrate on the positive elements of today, which were very positive. The favourable remarks that Minister Frydenberg made give us some comfort that the review will in fact recommend an energy intensity scheme that can be quickly implemented. It will have immediate benefits for South Australia.

QUESTION: What are those benefits? I mean, how does putting a tax on cheap coal production actually benefit a state like South Australia, which already has very expensive power?

JAY WEATHERILL: Well, what happens is a couple of things. It cleans up your energy system because you can essentially substitute lower emissions electricity sources – so gas in particular – for coal. Secondly, it does something very important for South Australia, is that it will encourage additional generation, and therefore additional competition into the energy market. So paradoxically, even by changing the difference in order(*) through an energy intensity scheme, what you do is you get potentially lower electricity prices through the effects of competition. So that’s one of the things that we’ve modelled, and we think it works, and that’s why we’re strong supporters of this.

Also, it creates another benefit. It creates a more secure energy supply by bringing on further base-load stable power. It allows us to continue to plough clean, cheap, renewable energy into the national electricity market, but also have the stability of a base-load generator. So it really is an excellent policy because it gives you affordable stability and also cleanliness in relation to your electricity system, and that’s why we’re promoting it. It’s good to see that the federal Energy Minister is favourably disposed to it.

QUESTION: What do you make of the criticisms about last week’s blackout being sparked by renewables?

JAY WEATHERILL: Well, I just think they’re wrong. But this week we’re getting a different approach, and I focus on the positives.

QUESTION: When will we start seeing- and these jobs are already being filled from this opening today?

CHRISTOPHER PYNE: Look, there’s 10 jobs that have been filled here already at the CDIC, in Industry House; there’ll be another 10 jobs in the near future that Andrew Garth, I’m sure, is busily filling. Some of those are from inter-state, some of them are local people. Here in Adelaide, 20 jobs- at least 20 jobs here in Adelaide, of course including the management of the Centre for Defence Industry Capability, because this is where it’s based. The purpose of the centre, of course, is to be an outreach so that the 15 to 20 CDIC staff spread throughout the country are doing exactly the same job but on a much lower scale.

QUESTION: So confirmed in Adelaide positions, do we know the exact number?
CHRISTOPHER PYNE: Yes, I’ve said it about several times: 10 already and another 10 to come. So there are 20 people…

QUESTION: And those other 10 will be in Adelaide?

CHRISTOPHER PYNE: Yes.

QUESTION: And that question of cyber security earlier, could that come at a significant cost to SMEs if they have to ramp up their own cyber security? Could that sort of …

CHRISTOPHER PYNE: Well there would be a cost to doing business, yes.

QUESTION: But could it rule out some SMEs with potentially good ideas who can’t afford to go down that path?

CHRISTOPHER PYNE: Well the purpose of the ramp up of defence industry capability in Australia is to give every SME the chance to be part of this global supply chain, so we’re putting $1.6 billion into doing just that over the next 10 years. So if a business wants to access government support to increase their cyber security capacity, yes of course we’ll assist them to do so, but that isn’t the green light for every business who wants to get some cyber security improvements to come to the Commonwealth and say you have to pay for our cyber security. It’s obviously got to be a two-way street.

Part of the process of the next few years is supporting the businesses that are already very capable in supplying Defence. There are many Australian businesses that are on the cusp of being able to do that, and with a bit of help – whether it’s in cyber security or through the Defence Innovation Hub, or through the Next Generation Technologies Fund – getting them over that hump and being able to be fully capable. There are other business who probably aspire to work in defence but aren’t able to do that and probably never will. Now, we will obviously be honest with them as well, because we’re not going to be able to simply support every business that thinks the panacea to their particular problems is defence industry contracts.

It’s a competitive market. The whole purpose of much of the spending and the programs is to bring Australian potential defence SMEs to the point where they can supply, not just believe that they can supply, and cyber security is obviously a big part of that. Okay, thank you.