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Foreign Affairs, Defence and Trade Legislation Committee - 02/06/2014 - Estimates - DEFENCE PORTFOLIO - Department of Defence

Department of Defence

[9:25]

CHAIR: Thank you very much, General Hurley. Mr Richardson, I understand that you do not have an opening statement. We will now move to outcome 1, which is the portfolio budget overview and questions arising from the opening statements. Are there any questions arising from the opening statements?

Senator CONROY: Yes, I will kick off. Minister, I think the Chair mentioned that you have just got back from Singapore. Did you come in on the overnighter?

Senator Johnston: I did.

Senator CONROY: Commiserations for being forced here. Would you like to give us a bit of a precis? It has got a fair bit of publicity, as I am sure you would understand why, but I wonder whether you would give us your thoughts on the debate that seemed to flow at the Shangri-La Dialogue.

Senator Johnston: Thank you for the opportunity to discuss the Shangri-La Dialogue. Firstly, can I say that Singapore have created a very successful institutional forum where defence ministers, CDFs and other defence officials can engage their neighbours in South-East Asia and East Asia; and, may I say, a very large number of European countries were represented there. I conducted something like 15 or 16 bilaterals and one trilateral.

The theme, of course, was the rising tensions in the South China and East China Sea. Without getting into too fine a point on the diplomacy side, Australia does not take sides in those disputes but urges all sides to seek resolution through international legal jurisprudential channels. We have maintained that stance, as have Singapore, Malaysia and Indonesia. Indeed there are a couple of models that came forward during the weekend. Indonesia has resolved some disputation with the Philippines through negotiation. Taiwan has resolved some fishing disputation with Japan through negotiation. So there is precedent for sovereign nations sitting down and resolving these potentially destabilising issues in an appropriate and most satisfactory forum with appropriate outcomes. The oil rig off the Paracel Islands is, of course, a matter of concern. Indeed I had a bilateral with the Vietnamese CDF, who was most informative as to what had unfolded there. I must commend Vietnam for the restraint they have shown in the circumstances.

Having said all of that, it was very much a review of the current state of the temperature of the region. I subsequently went across to Johor yesterday afternoon and attended a five-power defence arrangement meeting, which I think was very successful. MH370, of course, has dominated, to some extent, both the Shangri-La Dialogue and the five-power meeting because it is a model for international cooperation. Albeit we did not find the aircraft, the one really big positive out of MH370 is the way that the eight countries came together to conduct very logistically difficult operations some 2,000 kilometres off the coast of Western Australia.

In my speech at the plenary session, I suggested that we might conduct exercises in the region and that I wanted to hear from countries in the neighbourhood as to how Australia might facilitate search and rescue exercises into the future, such that we can hone the collective skills. I think China's contribution to the search for MH370 was a very strong one, a very positive one, and they, I think, were very pleased with the way South Korea, Japan, the United States, the United Kingdom, Malaysia, New Zealand and Australia were all able to 'muck in', if you will—excuse me for that expression—to seek to mitigate this tragedy. The Chinese, I think, are quite receptive to that sort of exercise, and Australia is very keen to engage them and bring them forward in such a maritime-focused search and rescue exercise, series of exercises or institutional annual or biannual exercises into the future.

In a nutshell, Singapore has established a very good forum. I do not think it should ever be missed by Australia into the future. The Russians were there. The Chinese were there in numbers, and it was great to see them defending their position in an open and transparent way, which I thought was very good. Secretary Hagel, of course, was there. He had brought with him his PACOM commander, Admiral Locklear. This was a great tribute to the region and it underlined and cemented the strength of the rebalance. Having said all of that, I think it was a very successful weekend. My thanks go to Dr Ng, the Singaporean Defence Minister, whose personality and hospitality are first class. I am looking forward to seeing him at the next Exercise Wallaby, down here at Shoalwater Bay.

CHAIR: Thank you, Minister.

Senator WHISH-WILSON: In relation to the operational focus on Malaysian flight MH370, I have a question in relation to the asset Ocean Shield. Would there be any move to keep the Ocean Shield in the Southern Ocean for constabulary duties around illegal fishing—Patagonian toothfish fishing?

Gen. Hurley : The future of both ownership and tasking of Ocean Shield has been determined with government and, in time, well before the end of this year, she will transition to Immigration and Border Protection as one of their vessels. So her tasking beyond her Defence ownership will really fall into their purview. As you are aware, Border Protection Command, for example, has a specific task, which includes Southern Ocean patrols in that tasking, and they will need to determine the division of her time available against those priorities. So she moves out of our control effectively in the not-too-distant future.

Senator WHISH-WILSON: I have two quick questions in relation to the comments around Afghanistan. You mentioned that you are immensely proud of Defence Force personnel. With reference to the review into the special operations task force group operation announced in the department media release on 8 May 2013, regarding an operation in Zabul province in Afghanistan, could you update us on the status of that investigation?

Gen. Hurley : Could you give me a bit more detail on that?

Senator WHISH-WILSON: Special operations task force. You put out a department media release on 8 May 2013 regarding an operation in Zabul province in Afghanistan—an investigation.

Gen. Hurley : There are two aspects to that investigation. There was an inquiry officer's investigation conducted and the Australian Defence Force Investigative Service was doing an investigation. Both of those are still open. I think the former is close to completion, but the investigative service is still working on particular aspects of it, so they are still in hand.

Senator WHISH-WILSON: Will it be publicly released when it is finished?

Gen. Hurley : Once we have the outcome, I will provide advice to the minister on that. I will reserve that until I have actually read it myself.

Senator WHISH-WILSON: Are you able to provide the date on which it was submitted to CJOPS?

Gen. Hurley : I will take it on notice.

Senator WHISH-WILSON: With reference to the inquiry into an Afghan child sustaining a gunshot wound in Uruzgan province in May 2012, could you tell us how long it took to investigate this matter?

Gen. Hurley : Again I will take that on notice. I will have the information and I will come back to you.

Senator WHISH-WILSON: Okay; and whether that was a normal length of time for an investigation and why it took nearly 12 months for that to be publicly released.

Gen. Hurley : Okay.

Senator KROGER: Firstly, I also extend my congratulations and thanks to the CDF for such extraordinary service to the country. We are a much better place for the service that the CDF has provided. I want to turn to Afghanistan very quickly. I was there a few years ago. If I went to what was our base at Tarin Kowt, what would I see there? Is there anything there anymore? Is it a clean zone, whatever that may be?

Gen. Hurley : If you look at the extent of the camp that existed perhaps when you visited, a lot of that was pulled down and reconstituted. Land was cleared and we fulfilled our requirements in terms of waste, rubbish and contamination. But there are other parts of the camp that we handed over to the Afghan government for their purposes. So you would still see some buildings there, but you probably would not recognise much from when we were in occupation there.

Senator KROGER: I am sure that you can answer this, although it would come under Foreign Affairs: have the aid personnel that were based there—I think they were actually based on the base—moved up to Kabul or do they still have a presence in that area?

Gen. Hurley : No, we have no Australians in Uruzgan. That type of work would be conducted out of the mission in Kabul.

Senator KROGER: Are we keeping our base at Al Minhad—the Al Minhad base?

Gen. Hurley : Yes, we still have our base at Al Minhad.

Senator KROGER: What sort of personnel are there?

Gen. Hurley : It is still essentially the same functions being performed there. Our headquarters for the operational space in the Middle East is based out of there. Our logistic support for the operation through there: that is where our personnel still enter the area of operations to do their preparation to go to Afghanistan and they come back through there. Also, it is still the base for our aircraft—the Air Force detachment that supports operations in the Middle East, primarily.

Senator FAWCETT: I want to go to your remarks about the role of RAAF and DSTO in the MH370 search. Whilst I commend them for that—that is a very good effort—could you talk a little more about the role of industry in connection with the innovative technology that you have discussed. You talked about DSTO and RAAF, but I understand there was a significant industry role, and I think it is important that we get that on the record.

Gen. Hurley : I think the CDS will be shocked to be brought forward so early! If I can find him, I will bring him up.

Senator FAWCETT: I am happy to come back to that question. I understand that industry played a significant role in enabling that, and I think it is important that that is also recognised on the record.

Gen. Hurley : Thank you.

[9:43]

CHAIR: We will now go to questions on program 1.1.

Senator CONROY: Could you please provide an update on the transition operation to draw down the troops from Afghanistan?

Gen. Hurley : At the present time we have just over 400—430—troops in Afghanistan in two locations. At Kandahar airfield in southern Afghanistan, we have our contribution to the training and assist and advise function of the mission to headquarters 205 Corps, which is based just outside the air base. There, we have a team of advisers—that averages about 20—with a force protection team, assisting the commander of that corps in the building of his headquarters, their processes, their planning procedures and so forth. We expect that we will continue to do that until the end of the year. Also in Kandahar we have a detachment with the Heron UAV, which the government agreed to retain in Afghanistan until the end of the presidential election process. We would expect them to complete that task by the end of this month and return home. Also, in Afghanistan, we have a small logistics base that supports our personnel there and it is an entry point into Afghanistan for some of our resupply. Also, we have personnel who are attached to the headquarters of Regional Command South as embedded officers, planning staff, logistics officers and so forth.

In Kabul, where the bulk of our people are located, our major commitment is to the ANA Officer Academy. We have trainers and staff there to help train cadets, and they have a force protection element with them. Then, elsewhere in Kabul, we have embedded staff in headquarters ISAF, headquarters IJC, and a number of other organisations that help drive the operation at the operational level. There is a small detachment at the GDPSU—I will come back to you on the acronym; it has just lost me for the moment—which is the Afghan special forces. We have about nine or so people there who help them with planning their training and so forth as an organisation.

We expect at the moment that that lay down will be the lay down we take to the end of the year. You would be aware of President Obama's recent statement of intent for the US armed forces over the next two years, 2015 and 2016. That announcement and the implications for the follow-on mission will be considered between now and about December by NATO and the US and, indeed, that conversation really starts this week with the NATO ministers' defence meeting in Brussels, which the vice-chief and the special representative are attending on behalf of Australia.

We still have now a number of months of work to do with NATO, ISAF and other allies to determine what the process to establish the next operation from 1 January onwards will be and how that operation will evolve over the next two years. Obviously, once that work has been done, we can provide advice to government on options that government might have for further engagement and involvement in Afghanistan. I am sorry; GDPSU is the General Directorate of Police Special Unit.

Senator CONROY: Are you still happy that our planning and preparation for the Afghanistan transition is appropriate to ensure a successful transition? You have not found anything that is outside of our parameters, our views?

Gen. Hurley : No. I think we are quite well positioned to move to the end of this year and then, as planning for the follow-on mission—which is at the moment known as Operation Resolute Support—evolves, I think we are well placed to determine options for government into the future with participation in that operation and then what might come beyond that.

Senator CONROY: In March you advised us that Australian service personnel have been involved in military offensive activities. Will they continue to be involved in these sorts of activities for the foreseeable future?

Gen. Hurley : I would not have advised you of that because we are not involved in any offensive activities—combat activities, no.

Senator CONROY: Combat; okay.

Gen. Hurley : Just to be clear, the two major functions we perform are the training, advising and assisting of the corps headquarters, which is really inside their headquarters' facility, and the ANA Officer Academy, again, inside an education and training institution. So we do not have people outside of the wire in that sense.

Senator CONROY: There is still some concern around the Afghanistan transition and the risk for greater instability in that country. Have any new measures been taken since March to protect Australian forces in the Middle East? Do you have any thoughts in that area?

Gen. Hurley : The Middle East or Afghanistan?

Senator CONROY: Afghanistan.

Gen. Hurley : We comply with the headquarters ISAF, Commander ISAF, directions on force protection for our forces and our people who are there. I think they are quite solid arrangements. We comply with those, as I say, and always through our own headquarters back here at Headquarters Joint Operations Command at Bungendore. We are looking at the risks involved in our presence and advising of any actions we should take or any conversations we might have with headquarters ISAF and its other headquarters in relation to force protection. So we keep a very watchful eye on it.

Senator CONROY: I have seen media reports—as you know, I do not always believe what I read in the media and I am sure you do not either—that indicate ADF personnel will remain in Afghanistan in 2015. Has a decision been made around that yet?

Gen. Hurley : No. That is part and parcel of the advice that will come back to government. Government has said previously that we will remain committed for a decade—that statement was made a couple of years back—to Afghanistan, but what form that will take will evolve over time. We have the current operation that winds down at the end of this December. Another operation sets up for at least 2015-16, and we will advise government on options it might want to consider over the next few months in relation to that. What happens beyond 2016 and what form that relationship will take with Afghanistan is something for some further thinking.

Senator CONROY: Again, there has been much media speculation about the status of forces agreement. Has it been finalised?

Gen. Hurley : The status of forces agreement has been settled within NATO and is now before the Afghan government, but it moves in parallel with the bilateral security agreement to be reached between Afghanistan and the United States. As you can imagine, the presidential elections create a period where those sorts of decisions are unlikely to be taken by the outgoing president and then we need to wait for the incoming president to be settled and be in a position to exercise his views on it. I think, though, we are all quietly confident at the moment that both the BSA and the SOFA will be signed in a timely manner to allow the follow-on mission to be established effectively and to be set up on 1 January.

Senator CONROY: I think you did mention the role we played in the elections in April. I was just wondering whether you can expand on that a little bit.

Gen. Hurley : Again, we would not have had a major direct role. But, through our mentoring or training of ISAF and to assist the 205 Corps, we would have assisted them in their planning and conduct of their operations to secure the election in a broad sense: how to plan to position troops to secure polling booths, distribution of election material, gathering of election material, protection of candidates' meetings and so forth. We would have helped them in that planning.

Also, our Heron UAV detachment operating out of Kandahar would have provided overhead imagery and so forth to assist both ISAF and ANSF forces in their day-to-day conduct of the operation. That would be an example of how we were of assistance there. Then, obviously, our personnel who are in the higher headquarters in Kabul would have been involved in the planning of the ISAF support for Afghan forces who were providing the physical protection for the election.

Senator CONROY: Mr Chair, I am happy to cede to someone else if they would like to ask questions in this area. I have a range of other questions to ask of the CDF.

Senator FAWCETT: I notice that we have CDS here. Do we want to come back to the question about MH370? Dr Zelinsky, the CDF made a very appropriate comment commending the RAAF and the DSTO on the development of a new capability to use the Orions and their sonobuoys to detect the pinger box. Can you just talk to the committee about the role of industry in that process?

Dr Zelinsky : We have cooperated with industry. Essentially, the industry has taken that capability and has been taking it further. I believe that the company you are referring to is Sonartech Atlas, who did the work. It is now a capability which is actually deployed. In relation to the MH370, our work has been mainly with providing technical advice to the Navy and Air Force, and also to the ATSB, as required.

Senator FAWCETT: So, just for the public record, it was actually Australian industry that did the development in both software and hardware and actually deployed it on the aircraft with the RAAF people for a number of sorties to prove the concept, and then rapidly manufactured, I think, an additional five units?

Dr Zelinsky : I believe that is correct. I cannot comment on the actual numbers that were manufactured, but I think generally the proposition that you have put is correct.

Senator FAWCETT: So, for Australia to be able to rapidly adapt technology and deploy it for a new operational scenario, it was only possible because we had indigenous industry here that have those skill sets.

Dr Zelinsky : It is an advantage to have people working closely with R&D and transferring the R&D obviously to indigenous companies that can then be available to do the work; yes, of course. This is an example of that.

Senator FAWCETT: Thank you very much. It is just good to have that on the record. Chair, can I just continue with some questions under program 1.1?

CHAIR: Does anyone have questions on the opening statements?

Gen. Hurley : Chair, perhaps I could respond to Senator Whish-Wilson's question. I do not have the complete answer, and I will come back to the second part later, but you referred to an incident on 1 May 2012 where a young boy was wounded in an operation involving the SOTG. The incident was on 1 May, as I have stated, and the inquiry was publicly released in April this year; so that was 11 months. It was on 11 April, actually, so that took 11 months to complete. I will just chase down that compared to the length of inquiries and come back.

CHAIR: Thank you. As there are no further opening statement questions, Senator Fawcett, 1.1.

[9:56]

Senator FAWCETT: Can I just go to the issue of the budget? In previous estimates I have raised a number of concerns about the work done by Mr Pappas, the fact that we have not seen previous budgets meeting the cost growth pressures and the fact that that was putting significant strain on Defence in terms of sustaining the force in being, quite apart from the deferred acquisition program. This budget, I understand, has brought the funding, as a percentage of GDP, back to about 1.8 per cent. I notice that Mr Thomson from ASPI—in his fine body of work—talks about $1½ billion being brought forward to meet urgent funding pressures. Could you just talk to the committee about what those pressures are and, specifically, how this additional funding is starting to backfill some of those pressure points that we have had in maintaining the force in being?

Mr Prior : You are correct in terms of the percentage of GDP, that it has risen now to around 1.8 per cent of GDP. This time last year it was around the 1.6 per cent of GDP level, so there has been a general rise in the amount of funding. I refer the senator to our PBS, at page 17, and also to the portfolio supplementary additional estimates statements for 2013-14, at page 3. Those two documents combined would outline the bringing forward of the $1.5 billion into earlier years to attend to funding requirements in the earlier years. Would the senator like me to go through, in broad terms, where that funding went to?

Senator FAWCETT: We have touched in estimates previously on pressures you have had on things like maintaining fuel farms, remediating buildings that have had asbestos in them—there is a whole raft of things—and refurbishing vehicles that have been on deployment. You have made the comment that Defence has had to make priorities within the funding constraints it has. There has now been funding brought forward. What I am interested to know is how much of that funding has been directed to recovering the force in being as opposed to starting to fund acquisition activities for future capability. I am interested to know where we are at in practice or in our planning to reconstitute the ADF from the hollowed out state that it has been in.

Mr Prior : If I break the funding down into two pieces, of the $1.5 billion, $500 million is brought forward into this financial year. That money is earmarked to attend to DMO and their program of approved major capital investment works and to make payments under the foreign military sales program. That is where the $500 million has gone to. That is for existing contracts, an existing program that was in need of additional funds for this financial year. The other billion dollars was brought forward into the 2014-15 and 2015-16 years to make funds available for important areas such as ICT and the estate, in the main, because of the lack of funding that has been in those areas from previous budget rounds. That is the main focus at the moment.

Going forward, of course, there is the white paper. That process will then prioritise funding in terms of the priorities required across the next 10 years.

Senator FAWCETT: Mr Thomson has made comments in his work about Defence's ability to absorb an increase. I think this year was a six per cent increase in Defence funding, which is the first time that has occurred for a while. But given the backlog of maintenance-type activities, what I am concerned to understand—and I am happy to take it on notice—to see is a more detailed breakdown of where that funding is not just being directed to the things that make good announcements but directed to those things that we need to actually keep the capability running. Fuel farms are a classic example. We had a number of discussions around fuel farms and a backlog of maintenance to actually keep those operational. I would like to see a breakdown that indicates that the priorities Defence is putting on its additional funding is actually addressing those key sustainment issues for the force, in being, as opposed to be all directed at future acquisition and capability.

Gen. Hurley : I do not think that is the case. We will give you the detail. The bulk of the funding that has been brought forward has been applied to priorities. They are not all in the sustainment of the force, in what people might think in terms of equipment, but we have facilities issues we need to address in terms of OH&S, maintenance of the Defence estate and ICT issues that we need to address that both support our management of the department and conduct of operations. There is remediation going on in some of those areas which needed remediation. Again, we will get you the breakdown of the figures. We have not just put that into DMO DCP capital expense. It is in other areas of the portfolio that needed to be addressed.

Senator FAWCETT: I understand that. That is the point I am trying to get on the record because Mr Thomson's contention is that the ADF might go on some spending spree for new toys.

Gen. Hurley : No.

Senator FAWCETT: I am wanting to highlight the fact that we actually have a huge catch-up—

Gen. Hurley : I understand. That is why I came back in, because it is really addressing some issues that need to be addressed, as I say, in terms of estate, WHS, ICT issues and so forth. So it certainly is not going on to our direct equipment, specialist military equipment purchases priority list.

Mr Richardson : When you think about it, it is just logical that we cannot go on a spending spree. There was essentially $1.5 billion moved out of 2017-18, brought forward, then there was $500 million out of 2017-18 pushed back. That is good because it is smoothing the pathway. Bringing the money forward does not lead to a spending spree.

Senator FAWCETT: That is good. You mentioned the white paper before, Mr Richardson. Would you care to update the committee on where preparations are at for the white paper; particularly in light of the budget, whether this white paper is going to have some detailed funding attached to it or statements around funding?

Mr Richardson : I think the government has stated previously that the central challenge in next year's white paper is to match funding and capability. At the moment there is a mishmash between the capability that is theoretically there and the funding that we have available. So the central challenge in next year's white paper is to bring those two together.

The work on the white paper is progressing. The white paper team, within the department, is being led by Deputy Secretary Peter Baxter. There is, in parallel with the white paper, a force structure review, being led by both a two-star general and a division head working to the VCDF and to Deputy Secretary Baxter. There is an external panel that has been established and announced by the government chaired by Peter Jennings of ASPI . That external panel provides input both to the white paper and also provides independent advice to the government. It has been set up in a way in which it can challenge assumptions, challenge views that the department might put forward and talk independently to the minister and to the government. All of that is proceeding well, and we are on track for a white paper around the middle of next year.

Senator FAWCETT: Is that force structure review also going to consider the role of Australian Defence Industry as a fundamental input to defence's capability?

Mr Richardson : Defence Industry will certainly be part of what emerges from the total white paper process. There may well be a separate industry statement—may or may not be. But certainly industry will be considered in all of that.

Senator FAWCETT: Is there is a path, if you like, for industry either individually or through various associations to input into the white paper process in the force structure review process to articulate more fully the role that industry has and should be playing as part of the core capability that the ADF relies on for its inputs?

Mr Richardson : The government has announced a public consultative process as part of the white paper. That will be led by the external panel. So there will be an opportunity there for industry groups and for individual companies to actually input into the totality of the white paper.

Senator FAWCETT: Is it a fair assumption that, out of the force structure review and the white paper and the DCP that will flow from that, there will be a close linkage between the government's commitment to reach two per cent of GDP over the decade and the funding requirements, not only for capable acquisition but also sustainment of our force, in being, over that same decade period so that there will be an alignment between the funding provided and the plans which are outlined?

Mr Richardson : That is the stated goal. That is the central challenge.

Senator FAWCETT: Thank you.

CHAIR: Senator Conroy.

Senator CONROY: There have been a few ADF deployments recently, Afghanistan and South Sudan, to name a couple. If there are any others, could you identify them? Are we learning lessons from these deployments? I am thinking in terms of the equipment we use, the techniques, doctrine or methodologies specifically.

Gen. Hurley : If you look at the range of operations we are involved in at the present time, land based, Afghanistan sits by its own, in terms of scale and the nature of the operation compared to the others we are conducting. The other three of substance would be the United Nations Truce Supervisory Organisation that sits on the border of Syria, Israel and Lebanon. Then we go down to the Sinai, to the multinational force observers there, which is obviously in the Sinai Peninsula in Egypt and then across to south Sudan. In each of those we have small numbers. South Sudan averages about 20, 21 personnel who are either military liaison officers or staff on the United Nations force headquarters there. In the MFO in the Sinai, again we have a small number, in the 20s, who work on the staff of the headquarters there. Thirdly, in UNSO, most of our people are observers on border posts there.

There are similarities between those three non-Afghanistan-based operations, but we have been in UNSO now since 1956. So we are well schooled in what happens there. We have been in the MFO, I would think, for at least 20 years—I can correct that—but again we are very aware of the nature of the activities that go on there. It is staff and it is planning for a specific type of activity.

In south Sudan, again working in headquarters in a peacekeeping operation is doctrinally familiar to us. Obviously the different countries have different colouring to the type of the operation and what are the key risks and so forth. But doctrinally we are reasonably well suited and up-to-date in those types of activities. Headquarters joint operations command, however, does take regular reviews of the nature of those operations and brings back reports from teams we send there, senior visitors, the contingent commanders. We continually evolve and adapt the way we are approaching those operations, both on the ground and in the advice we give back to government about how they are progressing or issues they need to consider. But when you look at the nature of some of these operations, they are quite long term and evolve slowly. Our doctrines can keep across that.

Senator CONROY: Thank you for that. I am just going back to a question I asked you a little earlier about offensive operations in Afghanistan. I am just referring to a letter that was forwarded to the committee after the last estimates. You indicated that our units are not participating in offensive activities, but you made the point in your letter that on occasion, however, ADF personnel may be embedded within coalition forces but not as part of an Australian unit. These personnel, as part of their employment with coalition elements, may become directly involved in offensive activities conducted by that coalition force. You said at that time that ADF personnel were embedded with the British and the US forces in Afghanistan and in the combined air services centre who may have become directly involved in offensive activities as part of their employment. I was just referring to that aspect, rather than the unit—

Gen. Hurley : Yes, sorry.

Senator CONROY: I probably confused you by sticking with the words 'unit forces'.

Gen. Hurley : My apologies. When those sorts of questions come, I am thinking about Australian groupings. We have one or two individuals—

Senator CONROY: No, there was a lack of clarity in the question. I was asking whether there is any ongoing involvement. Have we still got personnel involved?

Gen. Hurley : We still have personnel involved in what we call third country deployments, primarily the US and the UK. That number varies in terms of opportunity. It is often personnel who are posted on exchange to a unit in either of those two countries and if that unit then comes into sequence to be deployed to Afghanistan, then they will deploy with them. They are under very strict directive about what they can and cannot do, rules of engagement and so forth. It is quite a formal process to approve their participation. As I say, it is really on an occurrence. We will not know necessarily from year to year how many would be over there at any one particular time.

Senator CONROY: Are we aware whether we have any that are actually engaged in any offensive activities at the moment in Afghanistan?

Gen. Hurley : I will get you that. I will come back to you on that.

Senator CONROY: Thank you very much.

Gen. Hurley : Just on the Multinational Force and Observers operation in the Sinai, we first deployed there in 1981, so we have been there for quite a significant number of years.

Senator CONROY: I am thinking mainly of Afghanistan and South Sudan in the next question, but has there been any change to the doctrine regarding any of our equipment and how it is deployed?

Gen. Hurley : A big question, Senator. If you look at the evolution of our ground base army equipment primarily, for example, over the period we have been deployed to Afghanistan, I think you will see significant changes in a number of areas. In terms of mobility, we went from softer-skinned vehicles to the Bushmaster as our primary mobility vehicle. That provided us with the blast protection in particular that we needed to counter IEDs. In parallel with that, and it still is, there is quite an enormous effort in operating in the electromagnetic spectrum, so countering IEDs that are not initiated by pressure but by remote control. That has been a continual evolution. The science and technology, and particularly the work from industry and DSTO, in relation to that has been superb and continues to be so.

In terms of our communications, that has evolved, and particularly the way we exercise command and control and the fusion of information that we can achieve now. With all of those, if you went to a headquarters in 2007 and compared it to what you might see today, there has been a significant evolution. That obviously feeds into our capability development process, looking to future requirements.

Similarly, in the vehicle space, you would be aware of Land 400, the major project to replace the Army's combat vehicles. Again, that experience from Afghanistan, and Iraq before that, will be important in understanding what those vehicles should be capable of doing and the environments in which they should be able to operate into the future.

You could go through a whole sweep of the functions of a force of the character and nature that we put into Afghanistan and look at areas where we have evolved. There is the way we establish headquarters, conduct our mission rehearsal exercises, how we prepare troops, how we receive them into theatre, how we administer them into theatre, the support systems that sit alongside that, our communications mix, and how we have redesigned our intelligence and our force support units. All of those areas have evolved quite considerably over the period that we have been there—indeed, down to how we contract the support forces when they are deployed. All of those systems have evolved and changed in that timeframe. It is a big task and it really is a spiral development in its truest form regarding the way you evolve a force and try and keep ahead of the threat.

Senator CONROY: I want to ask some questions about locally engaged employees—those people in Afghanistan that have worked with us and may be at risk of physical harm and their resettlement in Australia. Has there been any change to that policy?

Gen. Hurley : No. We are in the resettlement process. I think it was in December 2012 that the then government announced the visa policy which offered resettlement to eligible locally engaged Afghan employees at risk. That process has been put in place with the department of foreign affairs and other relevant agencies. We continue to work through the applicants to resettle them as appropriate.

Senator CONROY: There is still no cap on the policy?

Gen. Hurley : There is no cap.

Senator CONROY: There was a story in The Daily Telegraph on the weekend headed 'How we'll save Afghan "diggers"', which suggested that more than 500 people will be relocated under this program. Can you confirm the number of applications for resettlement that have been received so far?

Gen. Hurley : What I can say is more than 500 Afghan nationals—that includes them and their families—have now been granted visas to Australia under the 2013-14 refugee and humanitarian program.

Senator CONROY: How many was that?

Gen. Hurley : More than 500. But we will not release or speak publicly about the total number because, again, we try to keep that information that is a bit sensitive in-country. But it is in that order that you can see now—more than 500.

Senator CONROY: As I said I agree with your policy. It is just that The Daily Telegraph appear to have been given some well-informed information which militates against the very suggestion you are making here that we should not really talk about it too widely. I appreciate the point you are making and I will not press you on that. Based on your answers from November last year, I understand that some applications are made by family members of locally engaged employees. How many of the applications are from family members?

Gen. Hurley : I do not have that information to hand. I will take it on notice.

Senator CONROY: Roughly how long is it taking to process an application?

Gen. Hurley : Again, if I could, I will come back to you on that.

Senator CONROY: You can probably take these two on notice as well: what is the longest period of time it has taken to process an application? And given the significant risk of harm that some of the individuals are in, are these visas given a high priority?

Gen. Hurley : Senator, I can cover all of that. I would say, on the last one, that we will expedite when we are aware. I will get the other detail for you.

Senator CONROY: Have many been refused?

Gen. Hurley : Again, it is more with the department of foreign affairs to do the handling of it. We will come back with that.

Senator CONROY: Yes, take that on notice—and, also, if there are any reasons that you are able to publicly give, appreciating the sensitivity around this issue that you have identified. I understand there is an initial assessment for eligibility done by the department. Once the application is deemed 'eligible' it is forwarded to Immigration to go through the normal visa application process. Do you follow the application once it has been handed over?

Gen. Hurley : No, the Department of Immigration and Border Protection will—

Senator CONROY: Do you follow it after it has been handed over to them? Do you say, 'Hey, we need this done in three months,' or 'We need this done in six months'? Is there liaison that goes on after you have passed it on?

Gen. Hurley : If we are aware there is a risk to a member, we would be working with head of mission and his staff in-country—because, again, we do not have eyes across the board there—if we are aware of that. Obviously, we would be working hard with the relevant agencies to ensure that people are moved if they need to be expedited.

Senator CONROY: I appreciate that you will probably need to take this on notice: what is the average time for an applicant from the lodging to being resettled in Australia?

Gen. Hurley : Again, I will take it on notice.

Senator CONROY: On Sunday, 1 June the PM issued a press release, Senator Johnston. You were probably in mid-air or deep in conversation, so you may not have been aware of it immediately. It was entitled 'A message from the Prime Minister—70th anniversary of the D-day landings'. I want to ask you some questions about that. Are you vaguely familiar with it? Has your office or Mr Richardson had a chance to bring you up to speed on it?

Senator Johnston: I had a bilateral with the French defence minister. We discussed briefly the commemoration of those events. I have not actually digested the press release but I will take on notice whatever you want to ask.

Senator CONROY: Are you aware of the Prime Minister's press release put out yesterday entitled 'A message from the Prime Minister—70th anniversary of the D-day landings', that linked the 70th anniversary of the D-day landings with the coalition's political agenda?

Senator Johnston: I have heard about it but I have not seen it.

Senator CONROY: Are you also aware of a YouTube clip of the Prime Minister reading out this press release word for word to camera?

Senator Johnston: No.

Senator CONROY: I do not blame you. Would you or your office have been involved in the drafting of this press release?

Senator Johnston: I do not know. I do not think so. I do not know anything about it. If I had been asked about it, I would tell you. I would know if I was involved, and I would tell you. I do not know whether my office might have been involved. They may have been involved.

Senator FAULKNER: It is one of those questions about whether you or your office—

Senator Johnston: I do not know about my office. I certainly was not.

Senator CONROY: Would you be able to, during morning tea, find out if your office was involved?

Senator Johnston: I will ask around.

Senator CONROY: Obviously, from the sound of it, you did not, but did you or your office approve the press release?

Senator Johnston: I could not say. I will find out.

Senator CONROY: Thank you. Mr Richardson, was the department involved in the drafting of the press release?

Mr Richardson : I was not personally. Whether anyone in the department was, I will find out for you.

Senator CONROY: Do you know why the transcript of the YouTube clip was taken off the Prime Minister's website?

Mr Richardson : No. It would not fall within my responsibility.

Senator CONROY: Senator Johnston, you have not had any info on that?

Senator Johnston: I have not even seen the website. I do not know what has been on it or what has come off it.

Senator CONROY: Do you know why the YouTube clip still has the original title in the opening credits: 'A message from the Prime Minister—70th anniversary of the D-day landings'?

Senator Johnston: No.

Senator CONROY: Are you aware that, of the people that have viewed the clip—8,735—975 have 'disliked' the clip already?

Senator Johnston: No.

Senator KROGER: Is this a question for the defence minister?

Senator CONROY: I will come to him as well, do not worry. I am just ensuring that a senior minister has had no involvement.

Senator Johnston: I take it you have been pumping the 'dislike' button furiously since you saw the clip.

Senator CONROY: I can assure you that I have not actually viewed it personally yet. I look forward to seeing it. We might jointly watch it, Senator Johnston, and we can muse on it together.

Mr Richardson : Senator, I am advised that the department was not involved.

Senator CONROY: Did you or anyone in your office contact the Prime Minister's office to tell them that this release and video were inappropriate and therefore should be taken down?

Senator Johnston: I will take that on notice.

Senator CONROY: Did anyone in the defence department contact you or your office to suggest that this release and video were inappropriate and should be taken down?

Mr Richardson : There are about 100,000 people who you could be referring to. I am simply not in a position to answer for every single individual. I can say that the department, as a department, did not.

Senator CONROY: Could you explain why the YouTube clip remains online when the press release has been withdrawn?

Senator Johnston: No, I could not. I will see if we know anything about it and come back to you.

Senator CONROY: Minister, the press release in the YouTube clip is still entitled, 'A message from the Prime Minister—70th anniversary of the D-day landings'. When you were meeting with your French counterpart to discuss this did you also discuss with him, as part of clearly the Prime Minister's view, that you welcomed investment and that you were making investment more attractive by scrapping the carbon tax and the mining tax, cutting 50,000 pages of red tape and ending the analysis paralysis on major projects? Did you discuss any of those issues with the French minister when you were discussing the 70th anniversary of the D-day landings?

Senator Johnston: No, I did not.

Senator CONROY: Does it surprise you that those issues were raised as part of a press release to commemorate the 70th anniversary? You did not see fit to raise them?

Senator Johnston: I am not surprised.

Senator CONROY: You are not surprised?

Senator Johnston: No, I am not surprised.

Senator CONROY: He has withdrawn it. He is already running away.

Senator Johnston: Well, that is your interpretation.

Senator CONROY: You do not have to attach yourself to it, Senator Johnston.

Senator Johnston: No, that is your interpretation. This commemoration is a very significant one and a very important one.

Senator CONROY: It is very significant.

Senator Johnston: The relationship we have with France over this is very strong. I think you need to take it up with PM&C, quite frankly.

Mr Richardson : I do not want to get involved in something that is not in my area, but I would simply note for the record that the Prime Minister is going to the 70th anniversary. He is also visiting France. As part of his bilateral visit to France it would be unusual if he was not involved in matters relating to business and investment. Beyond that I am not able to comment.

Senator CONROY: Do you agree that the 70th anniversary of Australia's involvement in the event, which is described in the press release as having 'changed the course of human history', deserves its own press release without the added political baggage of debating carbon taxes and the like?

Senator Johnston: If you are drawing me into criticising the Prime Minister for highlighting and underlining the important events of the commemoration of D-day, you are not going to get any joy. I support everything that the Prime Minister has said about this. If he sees fit to underline the importance of the commemoration in the way that he has, I support that.

This is one of the significant events that has changed the course of human history. I think it is very important. To some extent, I am pleased you are talking about it because I think we should all be aware of how significant that landing was. It has seriously benchmarked the way amphibious operations have been conducted ever since. Accordingly, I support everything the Prime Minister has said about this, so long as people are aware of how significant it is and that the commemoration of it is this year.

Senator CONROY: I support the highlighting of this anniversary, Minister. It is a very, very, significant anniversary. Will you undertake to counsel the Prime Minister not to politicise such events?

Senator Johnston: I certainly will not.

Senator CONROY: His office do not mind lecturing you publicly.

Senator Johnston: That is fine. It is the Prime Minister's prerogative to do as he wishes with respect to these matters. You should put them to him.

Proceedings suspended from 10:32 to 10:47

CHAIR: I call the meeting to order. We will resume.

Senator CONROY: If I could just finish my questions.

CHAIR: Please proceed.

Senator CONROY: Senator Johnston, I was just wondering whether you had any update from your office as to whether your office had been involved in any way with this?

Senator Johnston: The only update I have had is that this is a Veterans Affairs matter.

Senator CONROY: I was just checking to see whether it was—

Senator Johnston: The people that I have spoken to say they know nothing about it.

Senator CONROY: Your office had no involvement in this?

Senator Johnston: To the very best of my knowledge and belief, there is no connection between any of what you were referring to and my office because it is a Veterans Affairs matter.

Senator CONROY: I look forward to questioning Senator Ronaldson about this in the near future.

Senator Johnston: I am sure he is very pleased to anticipate those questions.

Senator CONROY: I am sure he will disown it in the same way your office has.

Senator Johnston: We have not disowned it. We just do not know anything about it.

CHAIR: Continue with your questions.

Senator CONROY: Sorry, I could not hear. Was that an invitation to keep going?

CHAIR: Yes, it was.

Senator CONROY: Thank you. Minister, you would be aware I have asked you questions on this issue in the chamber. To assist the committee and the officers at the table, I have some photographs to be handed out by the committee secretariat. To help the committee officers, there are some photos that have been handed out. Minister, just to confirm for the committee, that is the Prime Minister in those photos?

CHAIR: Can I just ask whether the committee is happy to accede to this matter.

Mr Richardson : It has nothing to do with us.

Senator CONROY: You are not accepting them, Mr Richardson?

Mr Richardson : I am not accepting the photographs of the Prime Minister and others. I am a public servant.

Senator CONROY: I just asked that it be tabled and handed to you.

Mr Richardson : No, it is for you guys to sort out.

Gen. Hurley : It is well outside our portfolio.

Senator CONROY: I just wanted to make sure you had seen the photos and say I was not making it up. Minister, just to confirm, that is the Prime Minister in these photos?

Senator Johnston: Yes.

Senator CONROY: Also in those photos is the South Australian Liberal leader, Steven Marshall; is that correct?

Senator Johnston: It appears so.

Senator CONROY: Can you confirm for me, minister, that behind the Prime Minister and Mr Marshall is a Liberal Party political banner?

Senator Johnston: It looks like it.

Senator CONROY: Can you confirm that this event took place at the RAAF Base Edinburgh on 13 March, two days before the South Australian election?

Senator Johnston: I most certainly cannot.

Senator CONROY: Sorry, you cannot?

Senator Johnston: I cannot.

Senator CONROY: I wrote to you about this. I asked you questions in the past.

Senator Johnston: I cannot confirm that this photograph is anywhere at all. I was not there. I do not know where the photograph is. Quite frankly, that should have been a very obvious answer to you.

Senator CONROY: Can I go to the transcript of the Prime Minister's press conference where he says: 'It was terrific to arrive here at RAAF Base Edinburgh today in one of the Royal Australian Air Force's Wedgetail aircraft.' Further in the same press conference on that day: 'Here at RAAF Base Edinburgh we are basing, in the years to come, the Triton unmanned surveillance aircraft.' Does that assist you in your knowledge?

Senator Johnston: Not one bit.

Senator CONROY: So the transcript of the PM's press conference at the RAAF Base Edinburgh on that day does not assist you confirm that that is—

Senator Johnston: Not one bit.

Senator CONROY: Have you followed up, following my letter to you?

Senator Johnston: No.

Senator CONROY: Minister, did the Prime Minister seek authorisation from your office to hold a press conference with the South Australian Liberal leader?

Senator Johnston: I have no idea.

Senator CONROY: I wrote to you on this matter some months ago now.

Senator Johnston: I have been quite busy on other important matters.

Senator CONROY: Did the Prime Minister seek authorisation from you to use the Liberal Party banner?

Senator Johnston: I have no idea.

Senator CONROY: Was permission sought from a member of the armed services, General Hurley?

Gen. Hurley : Not to my knowledge. I do not know.

Senator CONROY: Is it a requirement to seek authorisation for the use of banners like this on Defence bases?

Senator Johnston: I am not sure it is on a Defence base. I am not going to be led into making adjudications on a photograph that I cannot work out where it is or what it is.

Senator CONROY: It is in a hanger on the Air Force base.

Senator Johnston: I was not there. You want me to adlib. You want me to agree with where you want to lead me. It is not going to happen.

Senator CONROY: No. The facts are the facts. Perhaps if the Chief of the Air Force could come to the table he could confirm that that was where it was, for your information. So you are denying that this press conference took place?

Senator Johnston: No. I am telling you I am not going to confirm something that is beyond my comprehension and understanding. I am not going to help you on this, because I do not know. You should have realised, before you set about this stunt, that I would not know because I was not there.

Senator CONROY: But we have asked you questions in parliament and have written to you and asked you to confirm.

Senator Johnston: I think you will find that I have given you the same answers. I was not there and I do not know.

Senator CONROY: Is it appropriate?

CHAIR: The minister is making—

Senator CONROY: Wilful ignorance is consistent, yes. Is it appropriate for the Prime Minister to hold a press conference with a party political banner as a backdrop on an Australian Defence Force base?

Senator Johnston: You are making the assertion that he did that. I do not know and I was not there and I did not see the footage. You have given me a photograph that is completely equivocal. It could have been taken anywhere. I am not going to put my head in the noose for you on this spurious stunt.

Senator CONROY: Could I ask: is there someone in the room who attended the press conference? I am asking. Our Air Force representative might like to confirm for you that it took place. Were you present?

Air Marshal Brown : Yes, I was present at the Triton press conference.

Senator CONROY: Sorry, we had a brief interruption. That was no-one at any of the tables. Can you confirm that these photographs were from that press conference at the Triton?

Air Marshal Brown : It is difficult to say from that.

Senator CONROY: Oh, please! They are clearly from inside the hanger there.

Senator Johnston: No, they are not.

Senator CONROY: Yes they are! You were standing in the same hanger.

Senator Johnston: I was?

Senator CONROY: No. I am talking to Air Marshal Brown. Seriously! You can confirm a fact. The fact the minister does not want to confirm the fact.

Air Marshal Brown : The way the event went down was that the Triton announcement was made. The Prime Minister left that particular announcement. We had finished all Air Force business at that stage and they set up an Australian government banner somewhere else. They went off with—

Senator CONROY: Inside the hanger? That is not an Australian government banner, Air Marshall Brown. Even Senator Johnston has admitted it is a political banner of the Liberal Party. They went from outside where the Triton was on display to inside the hanger, is that not correct?

Air Marshal Brown : No. The Triton was actually inside the hanger. There was a definite split between two activities.

Senator CONROY: Sorry?

Air Marshal Brown : There was a split between the two activities.

Senator CONROY: I accept that you were not made to participate in any way, shape or form. So please do not misunderstand my question. There was clearly a break between the Triton event and a separate event that then took place in close proximity, within the hanger, in front of this banner. That is all I am asking you to confirm, that that is a fact. You observed it. You indicated they moved off to another part of the hanger.

Air Marshal Brown : They did. To be honest with you, I did not actually observe what the banner was.

Senator CONROY: No, I accept that, which is why I have got a photograph of it. It has been on the television, particularly in South Australia. I appreciate that you had nothing whatsoever to do with it and were not dragged to be a prop in it. The fact that it took place inside the hanger is still on Defence—

Senator Johnston: You have not established that it took place inside the hanger.

Senator CONROY: Sorry, Air Marshal Brown has—

Senator Johnston: He said it went to a separate place.

Senator CONROY: No. He said it moved from where the Triton was. Where did they walk to? If Senator Johnston is going to be so silly as to try to pretend it moved out of the hanger, could you inform us where this second event took place?

Air Marshal Brown : The second event actually took place in the hanger.

Senator CONROY: Thank you. It is an on-water matter that we can discuss. Thank you for confirming that. Minister, now that Air Marshal Brown has confirmed it took place in the hanger at Edinburgh Defence base, is it appropriate for party political press conferences and party political banners to take place on the Edinburgh air base?

Senator Johnston: What the Prime Minister chooses to do with respect to such matters is his prerogative. You must put those matters to him. I am not going to adjudicate on any of those sorts of matters.

Senator CONROY: What are the rules and regulations of—

Senator Johnston: I have no idea.

Senator CONROY: Sorry?

Senator Johnston: I have no idea.

Senator CONROY: Mr Richardson or CDF, what are the rules and regulations about the use of Defence—

Mr Richardson : They are broadly designed to ensure that Defence personnel, both public servants and military, maintain political impartiality and are not drawn into things. That was the case. I was not there. I do not know much about it but my understanding is that, in answer to a subsequent question, a spokesperson for the Prime Minister said that the Prime Minister held a short, distinctly separate press conference following the end of formal proceedings. No military personnel took part, nor were they invited to.

I do not know more than that. I have nothing more to add. There is obviously already a question being put at some point to the Prime Minister's office. They have answered it and—

Senator CONROY: I have written to the minister.

Mr Richardson : I certainly have nothing to add to it.

Senator Johnston: Neither have I.

Senator CONROY: I wrote to the minister on 17 March this year. In the letter I asked what measures would be taken to ensure that the use of political banners on ADF bases does not happen again. Have we suggested that there are some rules about this or can I hold a Labor Party press conference next time I visit Defence facilities? I appreciate the point you make, Mr Richardson, about personnel, both Defence and service, but assets are part of the armed forces and this is a Defence asset that has been used. I am just seeking—

Senator Johnston: No.

Senator CONROY: Are there any rules into the future that could be introduced? Let us just say there were no rules.

Senator Johnston: No, there are rules.

Senator CONROY: But are there any rules into the future?

Senator Johnston: There are rules. The secretary has told you what the rules are.

Senator CONROY: So I can hold a press conference with a Labor Party banner?

Senator Johnston: The guidelines covering visits to bases by parliamentarians are designed to ensure that defence personnel, both public servants and military, maintain political impartiality. You have heard there were no defence personnel involved. I think that is the end of the matter.

Senator CONROY: So I can hold a press conference with a Labor Party banner on a defence facility in the future?

Senator Johnston: I am not going to speculate on what you would want to do.

Senator CONROY: I think that would be completely inappropriate.

Senator Johnston: I saw you spend $400,000 promoting a white paper that fell off the rails within minutes. So let us be perfectly frank here: do not get me speculating on what sort of political stunts you want to put onto military bases.

Senator CONROY: I think it would be utterly inappropriate for me to conduct a press conference with a Labor Party banner on a defence base.

Senator Johnston: You stick to that.

Senator CONROY: The question is: are you and the Prime Minister going to stick to that? Will you give us an assurance there will be no further party-political conferences with party-political banners on defence bases?

Senator Johnston: I have told you what the guidelines are. I have told you the guidelines were adhered to, and I think that is the end of the matter.

Senator CONROY: So it is carte blanche. You, the Prime Minister or any minister can hold party-political press conferences on air bases, according to the guidelines?

Senator Johnston: Well, they are the guidelines.

Senator CONROY: Do you want to suggest a change in the guidelines?

Senator Johnston: I am not suggesting it is carte blanche.

Senator CONROY: It is exactly what you are suggesting.

Senator Johnston: I am suggesting that what we have done is pursuant to the guidelines.

Senator CONROY: So it is carte blanche for the Prime Minister to start wandering the country—

Senator Johnston: No. Do not verbal me, Senator. Please do not verbal me, which is one of your great attributes. I have said the guidelines have been complied with. If the guidelines are inadequate then the department and I will address that. I do not perceive that they are.

Senator CONROY: So the Prime Minister could hold further events—

Senator Johnston: I am not going to speculate on what the Prime Minister might do or what you want to invent in terms of Walt Disney events.

Senator CONROY: I want to know whether or not the guidelines stop the Prime Minister holding party-political events on defence bases. You are saying that the guidelines allow it.

Senator Johnston: Clearly, they do not, because he has, and he has done nothing wrong. That might be a bit hard for you to swallow, but let me say it again: he has done nothing wrong.

Senator CONROY: In your view it is acceptable for the Prime Minister, you or any of your colleagues to stage party-political events with banners for political parties on defence air bases, and you think that is okay and you do not need to change the guidelines?

Senator Johnston: Let me tell you what I have been advised by the department. The Department of Defence facilitated the Prime Minister's visit to the RAAF base in Edinburgh on 13 March. At the base an announcement about the government's acquisition of Triton—which I pause to say had been cancelled previously by the Labor Party—was made. Incidentally, there was no political material at the Triton announcement.

Senator CONROY: We have not suggested that there was.

Senator Johnston: Following the announcement the Prime Minister held a separate media doorstop with the Liberal Party leader of South Australia. No Air Force personnel or aircraft were involved in the doorstop. This means there was no politicisation at all of the Australian Defence Force.

Senator CONROY: So the Air Force hangar is not a Defence asset?

Senator Johnston: I hope that is of assistance to you.

Senator CONROY: So the Air Force hangar—

Senator Johnston: You have shown me a photograph that does not disclose one single piece of—

Senator CONROY: Air Marshal Brown—

Senator Johnston: Do you want to hear the answer or not?

Senator CONROY: Air Marshal Brown—

Senator Johnston: Do you want to hear the answer or not? You have shown me a photograph which is completely inadequate in supporting your case that this is a defence base. I have told you that. You do not like it but I am telling you that. There is nothing in those photographs to support that this is being done on a defence base. There are no personnel involved.

Senator CONROY: Seriously!

Senator Johnston: Well, point them out.

Senator CONROY: Air Marshal Brown has just said it was held in the same hangar.

Senator Johnston: Yes, and the public were none the wiser.

Senator CONROY: That is okay then?

Senator Johnston: Well, it is okay.

Senator CONROY: The public did not know there was a trick. So we have a Prime Minister that politicises the D-day—

Senator Johnston: No, he does not. He does not politicise anything.

Senator CONROY: —The 70th anniversary of D-Day—

Senator Johnston: I will not be verballed by you.

Senator CONROY: And he politicises defence bases.

Senator Johnston: Nor will the Prime Minister. This is an equivocal stunt that you are seeking to make some mileage out of—and, may I say, very poorly.

Senator CONROY: I think you mean 'unequivocal stunt'. Let us be very clear: there is a pattern of behaviour emerging here.

Senator Johnston: Oh, now there is a pattern of behaviour! What is the pattern?

Senator CONROY: Of behaviour. The Prime Minister politicised on the weekend the 70th anniversary of D—day, something that should be above politics.

Senator Johnston: That is your opinion.

Senator CONROY: The Prime Minister has withdrawn the press release.

Senator Johnston: No, that is your opinion. I have heard no-one else say that.

Senator CONROY: And renamed the YouTube clip and deleted the link.

Senator Johnston: That is your opinion. I have heard no-one else say that.

Senator CONROY: That is fairly straightforward.

Senator Johnston: That is your opinion. I have heard no-one else say that.

Senator CONROY: The Prime Minister politicised the use.

Senator Johnston: No, he has not.

Senator CONROY: And Air Marshal Brown has confirmed—

Senator Johnston: He has not politicised anything.

Senator CONROY: —that this press conference, with banner, took place in the hangar. Those are the facts, Minister, and you are not prepared—

Senator Johnston: No, they are not.

Senator CONROY: —to stand up for our service personnel, not put them in this embarrassing position—

Senator Johnston: I will not be verballed by you.

Senator CONROY: —and not counsel the Prime Minister to stop—

Senator Johnston: Everything you have just said is incorrect.

Senator CONROY: —politicising the D-Day 70th anniversary.

Senator Johnston: You are just rambling on because this whole stunt has fallen flat.

Senator CONROY: What has fallen flat is that you are not prepared to defend the military personnel sitting next to you from being put in this embarrassing position. That is what has fallen flat.

Senator Johnston: You have heard none of them were involved.

Senator CONROY: You have been unwilling to stand up for the military personnel sitting next to you.

Senator Johnston: You have heard none of them were involved, and I will always stand up for military personnel, as you well know.

Senator CONROY: Then stand up to the Prime Minister.

Senator Johnston: I will not criticise them personally. I will not accuse them of being conspiratorial and doing the government's business politically. I will not ever do that, unlike somebody that I am thinking of.

Senator CONROY: Are you prepared to change the guidelines to ensure that no more political events can take place on defence bases?

Senator Johnston: I will discuss it with the department. If we see a need to change the guidelines, we will address them.

Senator CONROY: You will not move to change the guidelines? It is your responsibility—

Senator Johnston: I have just told you the answer. How much more explanation do you really need—or am I speaking Swahili?

Senator CONROY: No, you could write—

Senator KROGER: It is Monday morning. He is a bit slow. Give him a break, Minister.

Senator CONROY: You could write back to my letter of 17 March, which asked the same questions, which you have not responded to. That is why we are asking them today. You avoided the questions in Senate question time.

Senator Johnston: It is much better that we answer them now, and I think we are answering them.

Senator CONROY: You did not write back to a letter on 17 March and you have declined the opportunity to say it will not happen again.

Senator Johnston: I have told you I will consult the department and we will discuss the situation. If there is a requirement for change, we will make the change. Indeed I can promise you I will give you a briefing on the changes if there is a requirement for change.

Senator CONROY: I look forward to the briefing on the new guidelines.

Senator Johnston: Like the several dozen other briefings you have had.

Senator CONROY: We would support you on changing the guidelines, if they do not rule this out.

Senator Johnston: Good.

Senator CONROY: Minister, are you aware that your office denied the member for Shortland access to Williamtown air base to join me on a visit to the base last week?

Senator Johnston: No, I am not.

Senator CONROY: Could you tell me who made the decision? Obviously, it was not you.

Senator Johnston: I will take that on notice.

Senator CONROY: I am happy to pause at that point and pass to Senator Xenophon because I understand he has a short period of time before he has to go to another committee.

Senator XENOPHON: I want to ask some questions on an issue of fraud control within Defence. These are issues that I raised at the previous estimates. I want to follow through on some of the answers on notice in respect of that. In terms of the number of complaints that are received in respect of fraud within Defence, I would be grateful, on notice, if you could provide details of how many complaints have been made in the past two financial years. In relation to the questions I asked on notice, there is a regularly updated defence fraud control plan. When was it last updated?

Mr Prior : I do not have the exact date. We do update that fraud control plan each year. That fraud control plan is part and parcel of our annual financial management processes.

Senator XENOPHON: Does the fraud control plan include a method of encouraging people to come forward if they have concerns about untoward activities in respect of fraud control?

Mr Prior : Indeed. We do have what we call a whistleblower regime where individuals can remain anonymous if they wish to raise issues.

Senator XENOPHON: How many whistleblowers have come forward in, say, the past 12 months?

Mr Prior : I do not have that detail in front of me.

Senator XENOPHON: Could you provide that—

Mr Prior : I will, indeed.

Senator XENOPHON: And, say, for the last three financial years, and this year to date, in respect of the number of whistleblowers coming forward in respect of fraud control, as well as details of the number of prosecutions and recoveries in respect of fraud control?

Mr Prior : Yes, we do have that information.

Senator XENOPHON: Do you have any of that to hand here today?

Mr Prior : Sorry, I do not have it with me. We do, obviously, keep that information.

Senator XENOPHON: The answer on notice referred to the fraud control plan being supported by a strong network of fraud control coordinators. Could you provide, on notice, how many fraud control coordinators there are? The IT system includes data collection reporting capabilities. When was that IT system updated and what is the nature of that IT system? Do you have any information on that?

Mr Prior : I do not have the sort of detail that I think you are after, except to say that we do run software across our transactions on a regular basis. It is a bit like what the banks do. Banks monitor transactions to look for unusual and what we call outlier transactions. We certainly do that on a very regular basis to try to identify fraudulent activity.

Senator XENOPHON: At the moment the Australian Defence Force Investigative Service, ADFIS, and other special police investigators assist with the investigation of lower level frauds committed by serving ADF members normally where the value of the fraud is less than $20,000. Is that the normal cut-off in terms of where it has escalated to a different level of investigation?

Mr Prior : That is the current cut-off, yes.

Senator XENOPHON: Is that $20,000 per event or overall?

Mr Prior : As per event; that is my understanding, but I am happy to look at that a bit closer. Bear in mind that an event could involve a number of items. Relating to a particular individual; that is what we try and do.

Senator XENOPHON: There seems to be a bit of ambiguity in respect of that. Do you aggregate it, because there could be a number of frauds that are under that $20,000 threshold that will not be subject to the same level of scrutiny as a fraud above $20,000?

Mr Prior : I would like to put it to you that all fraud is investigated thoroughly. It is just a matter of different management processes. Regardless of the quantum, all fraud is investigated thoroughly and properly.

Senator XENOPHON: If it is a historical matter that goes back a number of years, would you still investigate it if they are still serving members?

Mr Prior : Any fraud, regardless of when it happened, is something we would investigate as a matter of course.

Senator XENOPHON: If it goes back historically 10 or 15 years—

Mr Prior : I am not a legal expert but there is a point at which people that are involved in managing these cases advise that it can be very difficult to accumulate and amass evidence, so the older the event, the more difficult it is then to collate the appropriate evidence. Judgements are made at some point as to whether an event is likely to be investigable or not.

Senator XENOPHON: If there is documentary evidence that would make it easier to launch a prosecution, wouldn't it?

Mr Prior : Indeed.

Senator XENOPHON: In terms of other jurisdictions, for instance the UK, with their defence force, do you look at what other defence forces do that we have alliances with, that we have close relationships with, in terms of what they do in respect of fraud control?

Mr Prior : I am not aware of that analysis but it may occur. I am just not aware of it.

Senator XENOPHON: If you could—

Mr Prior : I will look at that.

Senator XENOPHON: I am not suggesting anything untoward, but it appears, from my understanding, that in the UK they have a closer level of scrutiny in relation to fraud matters and a greater strike rate. It could be for a whole range of reasons. I am just trying to establish whether we learn from the best practices in other jurisdictions.

Mr Prior : I am not aware of the UK being better at their fraud investigation than we are. But I can say that I am regularly made aware of matters which could be classed as potential fraud. I am not aware of any diminution in the effort that is required to properly and appropriately deal with the investigation of those matters.

Senator XENOPHON: In terms of the ongoing training of those involved in fraud matters, you said that for matters involving less than $20,000 it is dealt with by the ADFIS and other service police investigators; is that right?

Mr Prior : That is correct.

Senator XENOPHON: Above $20,000, who looks at that?

Mr Prior : Above $20,000 our internal audit people are involved in that, and their associated investigators look at those matters. Ultimately, of course, depending on the scale of the matter, they may be referred to the AFP.

Senator XENOPHON: Can you tell me, in terms of fraud recovery—on notice, if you do not have the figures handy—for the last three years and to date, what has been recovered in terms of fraud recovery, whether there have been any actions, prosecutions or disciplinary action taken in respect of that? I have a number of technical questions that I will put on notice. That might be the best way of dealing with them.

Mr Prior : Okay.

Senator MILNE: I just have a couple of questions with regard to Afghanistan, in particular, incidents of the shooting of children in Afghanistan and the follow-up to that. The first one is in regard to the 2012 incident in Uruzgan province where an Australian soldier shot a child. Can I ask: given the report was submitted to the department in May 2013, why was there such a long delay between the submitting of that report to the department and the release of the report publicly, even though heavily redacted, in April 2014?

Gen. Hurley : Which particular incident? Do you have an incident date?

Senator MILNE: The victim was a 13-year-old boy. He was survived the incident and was discharged—

Gen. Hurley : This would be 1 May 2012.

Senator MILNE: Yes.

Gen. Hurley : We already have that question on notice from Senator Whish-Wilson. If we could come back to you on that? He asked that this morning.

Senator MILNE: I am sorry I was not aware that he had. Did he ask about the compensation payments?

Gen. Hurley : No, but we do not provide information about the amounts, if that is the question.

Senator MILNE: Let me continue in relation to that. What injuries did that child suffer and is there ongoing treatment that is required associated with his injuries? What are we doing to support that ongoing treatment?

Gen. Hurley : In terms of the nature of his injuries, I have here that he was struck by a bullet, injuring his face and neck. He was transferred to the Role 2 medical facility in Tarin Kowt and then to the Role 3 facility in Kandahar. He was discharged into the care of his family some time after 6 May. In relation to the rest of your questions, I do not have any information directly here. I will come back to you, if you are happy with that.

Senator MILNE: Okay. My main issue here is what monitoring are we now doing as to his condition, given that the report that has now been made public recommends that there be a process for civilian casualty tracking and that that process be reviewed to ensure that a casualty is routinely monitored post-incident. Has there been any ongoing monitoring of this particular child? Secondly, is there any review into protocols with regard to ongoing tracking of people who have been hurt in these circumstances?

Gen. Hurley : Again, Senator, I do not have the detail right in front of me. I will come back to you as soon as I can.

Senator MILNE: Okay. The other incident I wanted to ask you about was one in which I have had a question on notice since November 2013. It was in relation to the incident near Tarin Kowt on 27 September 2013 where an Afghan man was found dead holding the body of a six-year-old child after a raid involving Australian troops. I want to ask: why has that question not been answered since it has been on notice since November 2013?

Gen. Hurley : What was the precise question, Senator, in that question on notice? I do not know why it has not been answered. I will find out.

Senator MILNE: It was particularly in relation to an incident near Tarin Kowt on 27 September 2013 where an Afghan man was found dead holding the body of a six-year-old child after a raid involving Australian troops. I wanted to ask, since I have had it on notice and it has not been answered, whether an investigation into this incident has actually taken place?

Gen. Hurley : The incident has been investigated and the investigation is complete. We will be following through our processes now to advise the minister as to the nature of release and so forth.

Senator MILNE: You have not yet provided that report to the minister?

Gen. Hurley : I do not have that detail with me. I do not think we have. Certainly, the inquiry is complete.

Senator MILNE: Can you tell me if any compensation was paid in relation to this incident?

Gen. Hurley : Yes, there was.

Senator MILNE: But you are not going to tell me how much?

Gen. Hurley : No.

Senator MILNE: Or to whom it was paid?

Gen. Hurley : No.

Senator MILNE: So you are not going to provide any further information as to whether the boy had been used as a human shield, as was said at the time, or anything else in relation to the incident?

Gen. Hurley : I think that is best left to the handling of the inquiry subsequent to now, and we will deal with the release of that in turn. I will not comment on the inquiry outcomes at the moment.

Senator MILNE: You will undertake to determine why my question has not been answered?

Gen. Hurley : I certainly will.

Senator FAULKNER: Can I ask a follow-on question, Chair?

CHAIR: Of course, Senator.

Senator FAULKNER: It might be useful, for the record, CDF, for a brief explanation to be provided—I know the answer to this, but a person listening may not understand—as to why the amount of compensation and to whom compensation is paid as a matter of course in these sorts of incidents is not made public by Defence. There are, in fact, some good reasons for this. It might be a useful thing, very briefly, for that to be outlined to the committee.

Gen. Hurley : Thank you. We do not disclose either the amount or who received the funding because of the very evident risk to the members of families who receive that money and the amount. They can either be threatened or have the money stolen or taken from them, either through direct force or through social pressure and so forth. It also leads to some contrived incidents and personnel then seeking to gain payment. We certainly have had incidents where people have been paid funds through this compensation system and the money has been taken off them; we have actually paid them twice. We really try to keep that very close hold to reduce risk to the people involved.

Senator MILNE: Can I ask, as a matter of principle, how we are going to proceed from here now that Australian troops have been withdrawn from Afghanistan. What is our follow-up on children and other people who have been injured? What is our follow-up to make sure that they are being supported and assisted with the medical support that they may need?

Gen. Hurley : If I could wrap that up in an answer to that overall question, I will be able to provide that later on, if you are happy with that.

Senator MILNE: Thank you.

Senator FAULKNER: Can I just make the point, Chair, and ask the minister if he would agree with this, because I think it is important that the CDF explain, as he has to the committee, why this approach is taken and the safety and security issues that are involved in that in relation to those and the families of those receiving compensation. But would you acknowledge that also means that there are particular responsibilities for the defence minister to ensure, given that use of public moneys is not effectively in the public arena, to ensure that these matters are dealt with appropriately by Defence? That is a burden, or a proper responsibility, that, at the end of the day, falls on the minister, because effectively a parliamentary committee like this, for good reasons, is not able to have complete oversight and transparency about such an issue.

Senator Johnston: I thank you, Senator, for that, because you are absolutely correct. There are matters in this portfolio, almost peculiar to this portfolio, where the burden falls upon the minister. Accordingly, I take those matters very seriously. Now, having just come back from Shangri-La, one of the things that are indelibly imprinted on my brain and the methodology that I use is transparency.

In certain circumstances we cannot be transparent; you are quite right. We cannot be transparent because of the risks that General Hurley talks about. I do acknowledge to you that I accept the added responsibility and, indeed, you and I have discussed matters that might be reviewable in certain circumstances, but there is an added responsibility upon the minister to make sure that these matters are of high integrity, that they are managed appropriately, that they simply do not sail through the minister's office and that scrutiny is intense. This is one of a few matters—particularly a few matters—that fall into that category. I thank you for your comments on that because I want to agree with them on the record now.

Senator FAULKNER: But the committee can be assured that in the instances that Senator Milne refers to—and I do not pretend to be expert about all the background because of the limited amount of information in the public arena—you will take a personal interest to ensure that there is appropriate ministerial oversight of the issues that CDF—

Senator Johnston: Yes.

Senator FAULKNER: or the circumstances that CDF has explained to the committee.

Senator Johnston: Certainly, I can confirm that I will.

Gen. Hurley : Senator Milne, is your question on notice No 35 regarding the incident near Tarin Kowt, seven questions?

Senator MILNE: Yes; thank you. I have just received from the secretariat a note that an answer was provided to the committee on 3 January. So thank you for that.

Gen. Hurley : I was just checking.

Senator MILNE: Thank you.

CHAIR: Is that all, Senator Milne? Senator Whish-Wilson?

Senator WHISH-WILSON: Just one question, either to General Hurley or Admiral Griggs perhaps. Are you aware that a vessel sank in the Southern Ocean at the end of March? I understand AMSA put out a media release on this. Were you involved in any briefings or any attempts to locate that vessel and save lives at sea? Were any assets diverted from the search for Malaysia flight 370 to seek out this vessel in distress?

Gen. Hurley : I am not aware of an incident of that nature on 3 March. I will ask the Chief of Navy.

Vice Adm. Griggs : I am not aware.

Senator WHISH-WILSON: It was in late March. It was believed to be an illegal fishing vessel, a factory ship as part of an illegal fishing fleet. It sunk with all lives on board. I understand there was a significant number of people on board the vessel. AMSA did put out a media release that they were aware of the incident and it was regrettable. I was wondering if you were involved in any—

Gen. Hurley : I have just received this note. On that date it would have occurred during the search for MH370.

Senator WHISH-WILSON: Correct.

Gen. Hurley : We will just take that on notice. Other than we think it was, as you say, a fishing vessel, to our recollection we were not involved in any response to it. Certainly, that would not be our decision to make a response. That would come through AMSA and so forth. We are not aware of any assets being sent to look for a vessel. We will come back to you on that.

Senator WHISH-WILSON: You would normally be involved in that type of operation, given the distance and the location in Commonwealth waters?

Gen. Hurley : We have been in the past. One would not say it is the norm, but we do have assets with that reach. We will, as I say, come back to you.

Senator WHISH-WILSON: Would the asset normally be the Ocean Protector?

Gen. Hurley : That is not ours. The Ocean Protector belongs to Customs.

Senator WHISH-WILSON: I understand that, yes.

Vice Adm. Griggs : The asset would be the best asset. The best asset is usually the most available asset. It could vary from a range of vessels.

Senator WHISH-WILSON: Thank you.

Senator CONROY: I will just go back to my recent visit to the Williamtown air base. As I indicated, Ms Hall was not allowed to join me on a visit to that base. I asked who made the decision. I think you indicated you would take it on notice, which clearly indicates it was not you. I would have been surprised if it was you.

Senator Johnston: I am not sure what the circumstances are. I want some time to have a look at what happened there.

Senator CONROY: No, I accept that you have taken it on notice. To assist you in that, we received an email from your office—I am sorry; the email from your office was to Ms Hall, which said, 'You do not have approval as Senator Conroy already has the local member Ms Claydon in attendance.' The member for Shortland, Ms Hall, has constituents who work on this base. The base is very important to the local community and the local economy. I would have thought that you, as defence minister, would want MPs to have a strong understanding of the work of the ADF and the great contribution they are making to the security of our country. I was just a little surprised that such a limitation was enforced. You do not have to comment; I am happy for you to take that on notice.

Senator Johnston: Yes.

Senator CONROY: I can assure the minister that it was very worthwhile.

Senator Johnston: Good.

Senator CONROY: The ADF personnel at Williamtown are doing a great job. Congratulations to the personnel who looked after me very well. Could I also let the minister know that there were two extra seats in the van that drove us around the base. I do not think having another person join us would have disrupted the visit too much. Minister, I am just hoping you can look at all of these as a bundle. I have a couple of other issues. I am very grateful for the support from both the ADF personnel and your office in my visits to these bases.

Senator Johnston: Very good.

Senator CONROY: Also, while Ms Hall was denied access to the base, are you aware that a staff member of the office of Assistant Minister for Defence did attend?

Senator Johnston: No.

Senator CONROY: Are you also aware that the same staff member was sent to accompany me when I visited RAAF Base Richmond and Holsworthy Army Barracks in New South Wales a few weeks ago, on 6 May?

Senator Johnston: I suspect that is standard practice.

Senator CONROY: My understanding is it was not something that was done to you as a policy under the previous government. We did not send a minder along to keep an eye on you. I am happy for you to correct the record.

Senator Johnston: I seem to remember a minder being present almost at every turn of every corner. I did not have that many opportunities, I must confess, because I was denied a lot of briefings over the period. Point taken!

Senator FAULKNER: Not by me. I was the—

Senator Johnston: No, certainly not by you.

Senator FAULKNER: I can assure you I also made sure you were not followed around.

Senator Johnston: If I could correct the record, certainly not by you.

Senator FAULKNER: I just make the point that, when I was the minister, Senator Johnston, you were never denied a briefing. In fact, I believe you will find that you were not followed around any Defence establishment. I think you would have to acknowledge that.

Senator Johnston: I do acknowledge that.

Senator FAULKNER: Thank you.

Senator Johnston: I would say that that policy did not subsist—

Senator FAULKNER: I do not know about anyone else's policy. I merely know about mine.

Senator Johnston: I am sure you do not.

Senator CONROY: I will follow up. I am not aware that that was a policy. In fact it has been put to me that was not the policy. I am happy to take your word and follow that one up, Senator Johnston.

Senator Johnston: I have tried to give you as many briefings as you have asked for.

Senator CONROY: As I said, I wanted to thank you for access. I have a long forward plan of visits, and briefings are being made available. I acknowledge that.

Senator Johnston: Good.

Senator CONROY: As I said, I was just wondering whether you could take on notice: what was the cost of sending a staff member to Sydney and Newcastle to accompany me on these visits?

Senator Johnston: Sure.

Senator CONROY: This includes flight and any accommodation costs. There may not have been any. If we could get an indication of the cost of having a minder following me around?

Senator Johnston: I will take all of that on notice.

Senator CONROY: As I said, I accept that. As you have indicated, I will be visiting ADF bases around the country over the next few months. I am very much looking forward to that. It has been great to talk with the ADF personnel and the CEOs on these bases. They have always been very welcoming, very professional. As I have said, they are doing great work. CDF, if you could pass on to the base commanders my appreciation?

Gen. Hurley : I certainly will.

Senator CONROY: I was just wondering whether you would minister—and I appreciate it is not your staff—indicate whether or not I would be accompanied and what the cost would be for having a government staff member visit with me to bases in Adelaide, Darwin, Brisbane, Townsville, Melbourne and Perth, if that was the intention. So if I could get an indication of the costs of both flight and accommodation, if they were planning to do that?

Senator Johnston: Sure.

Senator CONROY: Secretary, is there a departmental budget allocation for such travel?

Mr Richardson : If it is ministerial staff travel, it is not funded by the department. It is funded by the Department of Finance.

Senator CONROY: I am sure by the time we add all that up there will be many thousands of dollars if they do accompany me to all those places. Hopefully we will get some resolution of this. How many departmental liaison officers does each of your ministers have, including yourself?

Senator Johnston: I have two, I think. I will come back to you and correct that if there is a difference there. I think I have two.

Senator CONROY: Assistant Minister Roberts?

Senator Johnston: I have no idea. I will take that on notice—one or two.

Senator FAULKNER: For the completeness of the record, minister, of course there are ADCs too, which some people—

Senator Johnston: I am sorry, you are quite right. I have an ADC.

Senator FAULKNER: It is just that we got caught a number of years ago by a minister not saying that. Just for the record, there are DLOs and ADCs.

Senator Johnston: And ADCs, yes.

Mr Richardson : I might add that the assistant minister has one DLO and also has an ADC. The parliamentary secretary has one DLO.

Senator CONROY: If I could also take this on notice: how many DLOs have there been in each of these offices since the change of government? Could you please include temporary and permanent staff?

Senator Johnston: Sure.

Senator CONROY: I want to talk about turnover in staff, both DLOs and personal ministerial staff, since the change of government, both for the Defence Minister and the junior ministers. Unfortunately you have been overseas, minister. They seem to wait until you go overseas before they do this sort of backgrounding, which is a little unfortunate for you, I am sure you agree. I saw a recent media report titled 'David Johnston wins the battle of chiefs of staff'. This was reported by Greg Sheridan exclusively in the Australian last Thursday. It said that your chief of staff and another adviser are leaving your office. Is that report correct?

Senator Johnston: I do not want to comment on personal staff matters, in line with the practice of the previous government and practice generally. The report is the report. I am not going to comment on it.

Senator CONROY: I appreciate that. I am going to ask the questions and you can make that point. The report claimed your now former chief of staff and you never enjoyed a good relationship. The same report says another of your ministerial advisers had a falling out with you.

Senator Johnston: I am not—

Senator CONROY: That was the article. It is there on the public record. I am just seeing if you wanted to comment.

Senator Johnston: I am not going to comment. It is a personal matter to the staff in the office and I do not want to comment.

Senator CONROY: I am just giving you the opportunity to respond to scurrilous media commentary around your office. Another report, this time in the Sydney Morning Herald online, titled 'Staff dispute fuels speculation over the performance of Defence Minister David Johnston'. It says that your colleagues were baffled by your decision to let him go. I am just offering you the opportunity to respond, if you would like to.

Senator Johnston: No response.

Senator CONROY: Then an earlier article, on 13 November, reported that your chief of staff was 'imposed on Senator Johnston by the Abbott government's staff hiring star chamber headed by the Prime Minister Tony Abbott's chief-of-staff and the second most powerful person in the new government, Peta Credlin'. I repeat that is a quote. I was wondering if you wanted to comment on the claim that you never enjoyed a good relationship.

Senator Johnston: I do not want to comment on any of those articles that are speculative and inaccurate.

Senator CONROY: As I said, I am offering you the opportunity to respond to scurrilous media. How was your new chief of staff chosen?

Senator Johnston: He is a person that I have known for a very long period.

Senator CONROY: Did it go through the government's star chamber, as it is referred to?

Senator Johnston: I believe so.

Senator CONROY: It is reported that your new chief of staff had been an adviser to former defence ministers Robert Hill and Brendan Nelson. Is that correct?

Senator Johnston: Correct I think, yes.

Senator CONROY: Did your new chief of staff work with the Prime Minister's chief of staff in Mr Nelson's office?

Senator Johnston: I would take that on notice. I am just not sure.

Senator CONROY: Are you aware of another media article that was in the Australian Financial Review on 8  May titled 'Credlin's hit list'? It says that Ms Credlin had compiled her own hit list of underperforming ministers and: 'Watch out defence minister David Johnston! The over ambitious Immigration Minister Scott Morrison is eyeing off your job.' Do you want to respond to any of this scurrilous media?

Senator Johnston: What do you think?

Senator CONROY: I offer you the opportunity.

Senator Johnston: Lovely. I am not going to respond.

Senator CONROY: It also says that you are in line to become the next President of the Senate. Is that correct? Can you categorically rule out that you are going to become President of the Senate?

Senator Johnston: I actually can categorically rule that out.

Senator CONROY: Has the party room picked the successor yet? I think they have, have they not?

Senator Johnston: I am not going to discuss party room tactics.

Senator CONROY: The senators are nodding here. Senator Parry is even with us!

Senator KROGER: Senator Parry has turned up just for the question. What are you talking about?

Senator CONROY: Just for the question! You can categorically rule that out?

Senator Johnston: I can categorically rule that out.

Senator CONROY: I am sure that is good news for many. Can I ask you about your new chief of staff. Before working at ASC, what position did the chief of staff hold?

Senator Johnston: I do not know.

Senator CONROY: I understood he worked as a director for Government Relations Australia. Does that sound familiar?

Senator Johnston: I would have to take that on notice. I am not sure about that.

Senator CONROY: That is a lobbying firm, I understand.

Senator Johnston: I do not know.

Senator CONROY: Their website says that GRA is at the forefront of the government relations sector providing strategic advice to clients across all industry sectors at the federal and state levels of government. What clients did your new chief of staff have when at GRA? Are you familiar with those?

Senator Johnston: No.

Senator CONROY: GRA lists one of its clients as Navantia. Are you familiar if your new chief of staff represented that company at GRA?

Senator Johnston: No, I am not.

Senator CONROY: Given some other officers have had some problems in this area, well documented, have you taken steps to ensure there will be no conflict of interest in the area of procurement and other areas of Defence that he will have responsibility for?

Senator Johnston: Of course.

Senator CONROY: Before GRA, your chief of staff cofounded a company called Miller Costello and Company in 2008, a commercial advisory firm specialising in government procurement. Are you familiar with what clients your chief of staff had at that company?

Senator Johnston: No.

Senator CONROY: Have you taken any steps to ensure that there will be no conflicts of interest when it comes to companies that have been the former clients from that occupation?

Senator Johnston: We will deal with the conflict of interest matter in accordance with the Prime Minister's guidelines. You can be assured that all of those matters will be appropriately attended to.

Senator CONROY: I am hoping so. As you have seen, there has been a controversy around Senator Nash's staff and Senator Scullion's staff. I am sure you will ensure that we will not have any repeats of that magnitude.

Senator KROGER: You had a few issues with the Australian Network, did you not, in the tendering for the Australian Network?

Senator CONROY: No.

Senator KROGER: Just a few.

Senator CONROY: It went smoothly.

Senator KROGER: Just a few.

CHAIR: Have you got any more questions, Senator Conroy?

Senator CONROY: I am happy to take a break there if you want to pass questions to others.

CHAIR: Senator Fawcett has the call.

Senator FAWCETT: I want to move to 1.2.

CHAIR: Have you finished with 1.1?

Senator CONROY: I still probably have a few questions. I do not want to be seen to hog the call. I am happy to let Senator Fawcett ask a few questions, as long as I can come back.

CHAIR: It is in the next bracket. Let us finish this first.

Senator CONROY: I wanted to talk about the issue of Hot Issue Briefs. There seems to be a little confusion around them. As we know, Hot Issue Briefs are an important transparency measure and, according to the Defence website, provide improved accountability within the Department of Defence. They are there for the department to publish on its website summaries of recent Defence matters that are in the public interest. The last Hot Issue Briefs was published on 6 December last year, the day before the election. After last year's November estimates, in answer to question on notice No 57, which was provided in February of this year, we received a response stating that the department had not yet asked the minister to consider the arrangements for Hot Issue Briefs and that the department will provide advice to the minister for his consideration in due course.

Following this answer, we asked for an update at February estimates. The answer provided this week says that following the election the department proposed suspending the public release of Hot Issue Briefs. Unfortunately it does get a little more confusing. In an answer to question on notice No 56 in the House of Representatives asked by Mr Feeney, the department stated that it had sent 47 Hot Issue Briefs to the minister's offices as at 5 May. I am struggling to see quite how all of these contradictory answers on notice, in writing, seem to conflict.

In February, the department had not spoken to the minister about Hot Issue Briefs. In May, the department said they had spoken to the minister's office about it right after the election. This week, we find out that the department continued to prepare the Hot Issue Briefs and that 47 Hot Issue Briefs had not been sent to the minister's office despite an apparent decision soon after the election to cease the publication.

Can I just get some clarity as to what action has been taken? I remember we had a discussion about this, including with Senator Johnston. What is the truth?

Mr Richardson : The confusion that you point to is right. That is a confusion for which the department is entirely responsible. The sense then—the minister has agreed—is that the hot issues briefs should be resumed. The fact that they have not resumed following the election was the fault of the department, and the department's entirely, and the different answers you have pointed to and the confusing answers you have pointed to simply highlight the fact that we fell down on that one.

Senator CONROY: Firstly, could I congratulate the minister on the decision to keep them going or recommence them, given that they were not uncommenced—I am not sure if 'recommenced' is the right word. The department indicated that it had spoken to someone in the minister's office at one stage; is that incorrect?

Mr Richardson : I do not know. But I do know that last week or the week before—I think it was the week before—we had a meeting with the minister at which this issue was specifically raised by the minister and a decision was taken to resume the hot issues briefs.

Senator FAULKNER: Is there a new clearance process?

Mr Richardson : No. It is simply that the department took a decision the day before the election to suspend them. The department did not see it as a priority. There was then confusion within the department and that has led to the delay in their being resumed. The minister took the initiative himself two weeks ago to raise it with us and it has since been clarified. There is no new clearance process; they will resume as they were prior to the election.

Senator FAULKNER: Before Senator Conroy continues with his line of questioning, could you or someone from the department explain what the clearance process is for the hot issues briefs.

Mr Richardson : I would need to get—

Senator FAULKNER: I suppose that I am really asking: is it exclusively departmental or is there currently a ministerial office—

Mr Richardson : Whatever the process was before the election is what the process is now.

Senator FAULKNER: I am asking what the process was before the election.

Mr Richardson : I will have to take that on notice.

Senator CONROY: Coming back to the evidence that you gave, Mr Richardson, back in February, you indicated that the minister had not been briefed on hot issues briefs?

Mr Richardson : That is right.

Senator CONROY: But the answer to the question on notice said that the minister's office agreed to the suspension of hot issues briefs. So what has caused that confusion?

Mr Richardson : I am not sure.

Senator CONROY: I accept in good faith that Senator Johnston said, 'No; let's just put it back on board.'

Mr Richardson : What has caused it is simply poor work within the department, quite frankly, and a lack of appreciation that issues such as the hot issues briefs can become sensitive; and, if you let something like that slip for too long, it can become an issue.

Senator CONROY: Appreciating that by definition they are not likely to be hot issues any more, will the outstanding 47 be added to the website any time soon? They are probably cold issues briefs by now, but—

Mr Richardson : We can do that.

Senator CONROY: For the purposes of the historical record, on the 47, you are comfortable with that?

Mr Richardson : Yes, absolutely. In terms of transparency, which the minister has highlighted, there is no reason why that would not be done.

Senator CONROY: Thanks for clearing that up. Congratulations, Minister, on proactively seeking to restore that transparency measure that the department had slowed down, shall we say.

Senator FAULKNER: Could I just ask for one other thing, if you do not mind, Mr Richardson, to be taken on notice, if you cannot answer it. It is not entirely clear to me, and has not been for a while, precisely who the determining authority is as to what a hot issue is. What makes it—how do you cross the line into a hot issues brief? You may know the answer to that but, if not, could I ask you to take that on notice too?

Mr Richardson : I will.

Senator FAULKNER: Thank you.

Senator CONROY: Could I ask you to confirm that, 30 days after the event, hot issues briefs will still be published, so it is a 30-day window?

Mr Richardson : Yes.

CHAIR: I would like to ask some questions about defence capabilities. Firstly, Minister, what are we doing to prepare Australia's military forces for future contingencies and threats?

Senator Johnston: We are doing a lot, Chair, but I think General Hurley is best qualified to talk about levels of readiness and the principles underlying our readiness status, if that is in line with your question.

CHAIR: Yes, it is, and I would like a comparison with Labor's defence capability plan.

Senator Johnston: What you have seen in the last budget is an improvement in our capital provisioning, but the fully detailed, costed plan—the public plan—will not be available in terms of defence capability planning and development until the white paper comes into play early next year. Currently, we are working on repairing the removal of funding on the capital side over the last four years of some $16 billion, such that we have a credible, funded DCP accompanying the white paper next year. We have a team working towards that right now. But if you want to talk about general levels of readiness for contingencies, our capacity to meet things such as MH370, I am happy to hand over to the general to tell you the basis on which we do that. The point I should make about the planning for the development, the commissioning and service of operational capability is that it is a long and timely process that really requires a well-thought-out, funded plan, and we are in the process of putting that together now.

CHAIR: Is there anything that General Hurley could add to that?

Gen. Hurley : I suppose this falls into two broad elements. Firstly, as the minister has covered, it is about looking to the future in terms of priorities for capabilities, levels of investment, where investment should fall and so forth, not just in capital—and people tend to think of capability just in terms of equipment—but also in our personnel, our ability to generate the force and sustain it, so the integrated nature of the workforce with the Public Service and the ADF producing outcomes and so forth. That all falls within the white paper, force structure and first principles reviews of the department and defence policy that are underway at the present time and will come together at some stage in 2015. We are obviously very involved in that, and that will lay out the future direction for the ADF, the range of capabilities that it is expected to maintain into the future and give direction as to which of those need to be most ready over time. That will only be sort of coarse-grained in the white paper process, though.

Below that, we go through our normal processes in terms of defining the readiness of the ADF and its various elements—that is, racking and stacking capabilities that can respond very quickly to humanitarian assistance or disaster relief requirements, tasks like the search and rescue we did for MH370, and all of those short-notice requirements, and then backing up to preparing forces for capability requirements into the future or of higher intensity of conflict or in various natures of conflict. That, for us, is pretty much a routine process. Our budgeting cycle that we go through every year allocates funding against those priorities. Our exercise program that we go through each year looks to ensure that those forces are available, both at the single-service and at the joint level. Our international engagement program assists as well. So it is a many layered process.

CHAIR: I would like to ask some other questions in a broader sense. We have had United States marines in Darwin for a little time now. I hear that they are increasing the numbers of people stationed there from the United States Marine Corps. What are the benefits to Australia of having United States marines in Darwin?

Senator Johnston: I will hand over to the general to take you through what benefits there are to Australian Defence Force service members. But the fact is that we have had 1,100 marines in Darwin for some several months now and they have been exercising in the Northern Territory. What we have been doing with them has been understanding their doctrine, understanding what is necessary to interoperate with them and generally allowing them to practice and rehearse the sorts of things that marines do. To this point in time, that interaction and that rotation have been very successful. Indeed I trust that the committee would be quite surprised to know that we have had 1,100 marines working diligently in their trade crafts and military operational practice in the Northern Territory. So I am very pleased with the way this rotation has proceeded. I will hand over to General Hurley, who will take you through what the ADF gets out of this interaction.

Gen. Hurley : As you can imagine, the interaction with the marine corps while they are on their six-month rotation to Australia is quite intense, although we are not building from a zero base here. We have had a long relationship with the US Marine Corps, in terms of training and exercise activities in Australia. We have quite strong personnel links with them. We attend their colleges and they come to ours. You would be aware that, every second year, we have Exercise Talisman Sabre. One of the central features of that will be a significant US Marine Corps involvement. Company exchanges have occurred over many years with the marine corps. So we do not come, as I say, from a zero base in terms of our interaction with the marines in Darwin.

To extend that to what we do in Darwin, they obviously have some of their own training that they need to do. That is why they are there in this sort of environment. They have their unilateral requirements. At the bilateral level, we will do interpersonal small team up to subunit training with them and then we will look to see how we develop that into the future. First of all, the advantage for us is that it builds upon interoperability. Interoperability is very important to us, the US obviously being our major ally and the most significant power in the Pacific region. We engage across the board with all of the US forces in the Pacific. With the marine corps, we are looking at that day one connectivity: how do you go on an operation of any sort with the marine corps and be able to fit together and work together very smoothly?

One of the big benefits out of this is building on, again, with a new generation of people in the ADF, how we work together, what they bring to the battlefield, what we bring and how you make that work together. Significantly for us, though, at the moment is the expertise they obviously bring in amphibious war fighting capabilities. We are on the cusp of reinvigorating the ADF amphibious capability with the LHDs coming into service and with the Choules. It gives us quite a capable amphibious force. The land element and the Air Force element come together. The marines are probably the best exponents of amphibious capability on the globe and we have learned a lot from that. Again, that interaction both at the soldier level, talking to their staff and then integrating them in our exercises, bringing their people to our meetings and discussions about implementing our amphibious capability, are all very important to us. In the future I think it will not just be the land—the soldiers and the marines—but how they integrate their air capability into an amphibious capability will be very important to us. The ship-to-shore movement is the crux of this, and the processes they have in place to do that and the training for their personnel will be of great benefit to us.

CHAIR: Do you see the number of marines stationed in the Northern Territory increasing?

Gen. Hurley : The plan at the moment, as I recall, works in three steps. In the initial two years we had about 200-odd marines in Darwin. We have now moved up to 1150 and the longer-term plan is to increase that to 2500. At the moment the date for that is 2017, but that will be under review as we move through this first larger tranche of 1150 to see the appropriateness of that timing.

CHAIR: Will they be operating in locations other than the Northern Territory, for example North Queensland or the north of Western Australia?

Gen. Hurley : I would think you will see them in North Queensland if Exercise Talisman Saber comes up. If I were the Marine Corps I would be looking at the marines already present in Australia to be the force that deploys for that exercise. You will see them over there, but I do not think it will be routine; it will be for specific activities.

CHAIR: Presumably there are benefits from conducting joint operations in understanding how other forces work that will be useful in future exercises.

Gen. Hurley : If you look at the real step change we are going to take in amphibious capability in the ADF, there are two marine elements in the world that we are working with to implement that change. One is the US Marine Corps; the other is the Royal Marines. We see much, much more of the US Marine Corps than the Royal Marines, and given the geographic area in which we are going to operate we will be rubbing shoulders with them quite often. The fact that we do have these major exercises every two years makes it sensible that we should work closely with them and benefit from that interaction.

CHAIR: I noticed in media reports over the weekend at the conference that the minister attended in Singapore that China was present. I wondered about the current state of Australia's defence relationship with China?

Gen. Hurley : We have a very good relationship with the PLA. We have had annual senior leadership talks when the ADF goes to Beijing—the secretary and the CDF. We talk to our counterparts. At the moment it is General Fang, the chairman of the general staff department, who is my counterpart. We have been doing those talks for 16 years unbroken and I think that speaks volumes for the desire and the intent to keep a good, strong working relationship going. Below that we do a lot of senior visits and interaction with the various services to keep those personal contacts in place, including discussions in the non-uniform space as well. Training and education has grown, and so we have quite a number of PLA officers in our educational institutions. We are entering into some in China. That is a bit slower but I think we will come to a comfortable level of activity there. We have had a number of physical exercises with the PLA, based around humanitarian assistance and disaster relief—one in China, one in New Zealand and one coming up here. We will keep that process rolling on.

We have engaged in maritime exercises—small but capable of being built on—with the Navy and the Air Force still to progress. It is a good, solid relationship. I think we can craft meaningful activities. We are just working out over time between the two of us what that comfortable level of interaction would be in terms of scale and frequency and that is important. In addition to that, we obviously meet with our counterparts or representatives from the PLA in a number of fora in the Western Pacific, from purely in maritime naval symposiums to ADMM-Plus, the ASEAN Defence Ministers Meeting Plus. There are a whole range of activities—even, I dare say, at the Shangri-La on the weekend—and these are all opportunities to interact with our counterparts and just keep the dialogue going and discuss regional issues.

CHAIR: China is regarded as fairly closed. Is there any problem with transparency in terms of their military activities that you have encountered or you are able to comment on?

Gen. Hurley : Each protects their own. They might say that about us as well. This has been a theme that a number of us have conducted in our talks with the PLA over the years about the value of transparency, particularly in understanding, as the PLA modernises and expands the size of its force, what drives some of those decisions, their purposes for new capabilities and so forth. We engage in those conversations and we will get responses at various levels. Every now and again, we have a sort of show and tell session where we will be allowed to sit in one of their aeroplanes and count the dials and they will do the same with one of ours, but it is at that sort of level. What they have in their equipment is not so much the case; it is really thinking through what is driving you to make the sorts of decisions you are making and we can discuss those reasonably freely with them.

CHAIR: That is very interesting. Do you have any concerns about strategic competition between the United States, China and the Western Pacific area, affecting our relationship with China or your relationship with China?

Gen. Hurley : I have a very adept secretary, who has great foreign affairs experience and might want to dive in it to answer that question.

CHAIR: Is it a complication?

Mr Richardson : As the CDF said, we have a highly developed relationship with China—there is still a long way to go. However, it is very different from our relationship with the United States. We are in a formal alliance.

CHAIR: Yes, of course.

Mr Richardson : There is clearly an element of strategic competition between China and the United States— part of that is simply an inevitable part of the geopolitical process that plays out. There are certainly challenges there, but it does not get in the way of our developing relationship with China.

CHAIR: Does it have any impact on our relationships with other countries in the region such as the Philippines or Japan?

Mr Richardson : No. We have a more highly developed relationship with Japan in the defence strategic area than we do with China. That is a matter for the public record. We have a trilateral dialogue, involving ourselves, Japan and the United States. So we seek to manage all of those relationships. Our relationship with China does not get in the way of that. Our relationship with China does not get in the way of our relationship with other countries, particularly in ASEAN, whether it be the Philippines, Vietnam, Indonesia or the like.

CHAIR: Specifically, it does not impact our relationship with Japan?

Mr Richardson : No, certainly not. We take forward our relationships with Japan, with China and with other countries in the region in their own right; by and large they do not impact on each other. Down the track, that is an open question that people can debate and talk about, but certainly not now.

Gen. Hurley : One of the benefits of the ongoing relationship we have with PLA was evident in the MH370 search where the Chinese air force deployed two aircraft, they were prepared to work alongside us in the command and control function, they received support from us and they became very much part of the team. And I think that was sort of indicative of the knowledge and trust that have been built up over a number of years between the two defence organisations.

CHAIR: I am advised that there were some Chinese naval vessels transiting through the northern waters of Australia earlier this year—

Mr Richardson : Not waters of Australia; it was well north of Australian waters.

CHAIR: Is that north of Papua New Guinea?

Mr Richardson : No it was north of Christmas Island, south of Indonesia, but certainly not through Australian waters.

CHAIR: All right; that is interesting. Were you informed of these vessels transiting that area?

Mr Richardson : No, China was under no obligation to inform us of the passage of its ships. However, they were transparent about it; there was material in the Chinese press about their movements.

CHAIR: Did the RAAF surveillance aircraft pick up these vessels?

Mr Richardson : Yes the RAAF did what the RAAF does and performed highly professionally.

CHAIR: So they advised you that these vessels were in the area?

Mr Richardson : No, they did not advise us at all. We became aware of them being in the area, but they did not advise us that they were going to be in the area; they did not have to.

CHAIR: I mean the RAAF, not China.

Mr Richardson : Oh, the RAAF—we were certainly aware of what the RAAF was doing.

Gen. Hurley : I did know what the RAAF were up to. Just to follow on from the Secretary's comments, the Chinese media was saying that this surface action group was steaming south. When we became aware of what their projected route would be coming down through the Sunda Strait into the Indian Ocean we had aircraft already out in that area. As became opportune as the surface action group moved from west to east along the southern coast of Indonesia we did the normal missions we would do with the P3s in terms of maritime patrol, equivalent to wiggling wings and communicating with them and so forth, and then they moved on and shot up north through the Lombok Strait. We accompanied them for a couple of days.

CHAIR: In between the iron ore carriers.

Gen. Hurley : There are a lot of them up there.

CHAIR: Very well, thank you very much.

Gen. Hurley : I have two answers to questions that were given, if I could. There was a question asked, I think from Senator Conroy, in relation to ADF personnel on combat duties in Afghanistan. At the moment we have three personnel, all with US units. And in terms of the nature of the duties they are conducting, two of those could conduct combat operations. In response to Senator Whish-Wilson's question about the Southern Ocean search and rescue, the RAAF supported a civilian search and rescue approximately 1,800 nautical miles south-west of Perth on 30 March this year. The AMSA incident number was AUSR2014-1886 and it went as follows: 'The Joint Rescue Coordination Centre received a beacon alert believed to be associated with a fishing vessel called the Tianan approximately 1,800 nautical miles south-west of Perth. The coordination centre requested ADF assistance with the provision of a long-range drop capable aircraft. One P3 associated with the MH370 search was identified and tasked with assistance for the SAR. The coordination centre also sourced a civilian business jet from Melbourne. The business jet located a debris field with a beacon detection in the centre; however, no indications of life rafts or personnel were found in the area. The P3 departed from RAAF Base Pearce, transited to the area and dropped a self-locating SAR datum buoy in the area. The P3 identified another ship, the Changbai, to the north-west of the debris field—a presumed sister ship to the Tianan. They were unable to establish communications with the vessel to determine whether they had recovered persons from the Tianan. The P3 remained on station for 39 minutes for a total flight time of 10 hours and 44 minutes and recovered to RAAF Base Pearce and the coordination centre cancelled the request for ADF assistance on 31 March based on survivability assessments, lack of surface response vessels in the area, predicted poor weather in the area and a risk to potential search assets.'

CHAIR: Thank you, General Hurley.

Senator CONROY: Minister, do you agree with your own portfolio budget statements that show a cut of 2,406 APS average full-time equivalents over the period of 2013-14 to 2017-18?

Senator Johnston: Yes.

Senator CONROY: That is table 8, page 22?

Senator Johnston: Yes.

Senator CONROY: That is a cut of 11.7 per cent to APS Defence employees over four years. Are you worried that this will result in a reduction in capability as these highly skilled people are sacked?

Senator Johnston: I am conscious of the responsibility of making sure that we do not salami slice, like the previous government did, 3,200 off that list. What we are doing is looking at natural attrition and making sure that, in areas where we require specific skills and capability, we are very careful to retain that skill and capability. But 20,500 public servants running 56,000 uniforms is, I think, too luxurious.

Senator CONROY: Mr Richardson, are you fat and happy? Or are you fat and unhappy at the moment?

Senator Johnston: No, he is not fat and happy; but that ratio per uniform, the tooth-to-tail ratio, is unsustainable.

Mr Richardson : I might just add in respect to that—

Senator CONROY: They are not my words, as I am sure you understand.

Senator Johnston: They are mine.

Mr Richardson : I think it is important to just put on the record that about eight to 10 per cent of APS in Defence are in the intelligence agencies and they are part of the national intelligence capability, operate under the national intelligence collection requirements—

Senator CONROY: They are classified as Defence personnel but they have a very specific operational—

Mr Richardson : Yes, they do and they serve a national purpose.

Senator CONROY: They are not backing up uniforms in a direct way?

Mr Richardson : They do that, but as part of their national intelligence capability.

Senator CONROY: That is a front-line capability really, isn't it?

Mr Richardson : In no other jurisdiction are the public servants in intelligence agencies part of—

Senator CONROY: The headcount for uniform versus non-uniform component.

Mr Richardson : Precisely. I just wanted to clarify that. However, I do not have an issue with the proposition that the ratio of civilians to ADF should be the lowest possible. That is self-evident.

Senator CONROY: In a speech to ASPI on 12 November you said:

There is a bit of a tendency for some to see Defence civilians as constituting something called a ‘back-end’ supporting the ADF ‘front-end’.

You continued:

Try telling someone in Special Operations Command that a civilian in the Australian Signals Directorate is ‘back-end’ and, by implication, not particularly essential to the task in hand. Try telling a fighter pilot that civilian engineers and technicians are not essential to their operational capability. Try telling ADF personnel on operations that civilians responsible for their pay and allowances are less than essential.

Mr Richardson : Again, you have a Defence enterprise for a particular purpose, and the purpose of the Defence enterprise is not to employ civilians except insofar as they provide essential support and capability to what you can put into the field. From a philosophical perspective, I do not have a problem—

Senator CONROY: So you are definitely not sensitive about this?

Mr Richardson : I am not sensitive at all, provided there is respect given to the work done by Defence civilians.

Senator CONROY: You are sounding a bit fat and grumpy!

Mr Richardson : No, I am not.

Senator CONROY: I am pleased to hear it; I am sure the minister is equally pleased to hear that.

Mr Richardson : I am quite comfortable and relaxed, as other people have said in the past.

Senator Johnston: The main point, Senator, is that, in reducing the civilian workforce, we must do so very, very carefully so as not to diminish capability. We have set about the task of doing that, and that is why you have got forward estimates running out to 2017 talking about this reduction. It is a careful, graduated reduction.

Senator CONROY: I would be interested in your response to the issue of how many jobs are to be cut. I would also appreciate information on the structure of the cuts in the following way. Can you tell us how much will come from each division in each year of the forward estimates? I am happy for you to take that on notice if you can.

Mr Richardson : No. There would be no point in taking it on notice. We have not yet taken decisions in respect of that. Indeed the first principles review will obviously look at that question again. I imagine the first principles review will make recommendations about the size and structure of the civilian workforce. In the meantime we have been doing work on that. We do have some views in terms of how the civilian workforce could be reshaped. We are continuing to do work in respect of shared services; we believe there are further efficiencies to be gained there.

Senator CONROY: How many people are there in the Defence Science and Technology Organisation?

Mr Richardson : About 2,300.

Senator CONROY: Do they fall into that category you were talking about before?

Mr Richardson : Yes. They are part of the 20,100 public servants who currently work in Defence.

Senator CONROY: Are they the same as the people you are talking about in intelligence? How many people are in intelligence?

Mr Richardson : No. I simply separate out the public servants working in the intelligence agencies because there is no other comparable jurisdiction that I am aware of that simply lumps them in.

Senator CONROY: How many was that—without giving away any national secrets?

Mr Richardson : It is around 10 per cent of the civilian workforce.

Senator CONROY: So it is about 2,000 as well?

Mr Richardson : It is around that; it may be a little less; it depends what you want to count in.

Senator CONROY: So that is 2,000 involved actively in the intelligence side of the operation and 2,300 in the Defence Science and Technology Organisation?

Mr Richardson : Yes. But I would not put the Defence Science and Technology Organisation in the same category as the intelligence agencies.

Senator CONROY: So the Defence Science and Technology Organisation falls into the 'fat and happy' category?

Mr Richardson : You are using words—

Senator CONROY: I am using the minister's words.

Mr Richardson : The minister issued a statement making quite clear the context of those comments, and I certainly did not take them amiss.

Senator CONROY: I am just trying to get to a position where we can compare apples with apples; I do not want to get into an apples with oranges comparison. Could you provide the end of financial year average full-time equivalent that you are projecting?

Mr Richardson : As of about a week ago, full-time equivalent staff in the APS workforce in Defence was approximately 20,154.

Senator CONROY: Could you tell us the FTE for each year for the ACT?

Mr Richardson : I would need to take that on notice. Again, we have not yet done the precise sculpturing of that because I assume that is something which the first principles review will want to look at and we have been careful to avoid making decisions which could be seen to pre-empt the first principles review.

Senator CONROY: The minister has previously indicated—and also, I think, he did a little earlier—he expects to achieve these cuts through natural attrition. Is that still your belief?

Mr Richardson : Yes. You will always have some voluntary redundancies; that is simply part of the management of the workforce. For instance, over the last 12 months we have had 94 voluntary redundancies. But, overwhelmingly, the reduction will come through natural attrition, as the minister has indicated.

Senator CONROY: Have you budgeted for redundancies voluntary or involuntary?

Mr Richardson : No, because we are not anticipating the need for a general round of voluntary redundancies. If you are going to have a general round, you need to budget for it; if you are not going to have a general round, and you have an ad hoc voluntary redundancy here and there, it is something that you absorb within your budget.

Senator CONROY: Have you already asked for expressions of interest in redundancy?

Mr Richardson : No. We do not intend to have a general round of voluntary redundancies. Therefore, we do not seek general expressions for voluntary redundancy.

Senator CONROY: Not surprisingly, many APS staff in Defence are ex-ADF members or partners of ADF members.

Mr Richardson : Yes. About 20 per cent of APS staff in Defence are ex-ADF.

Senator CONROY: And partners?

Mr Richardson : I do not know. We do have statistics on that, but the key figure is the 20 per cent.

Senator CONROY: If that is easily available—the partners as well as—

Mr Richardson : Yes. We can provide that for you.

Senator CONROY: Are there any areas that are going to be exempt from your 'sculpturing'? You sort of indicated that the intelligence side is not to be lumped into the fat and happy group.

Mr Richardson : I do not want to get mixed up with the wording here. We have not yet made decisions, and obviously the first principles work needs to be done. My personal starting point would be to keep to a minimum the reductions on the intelligence side. That would, in my view, be cutting into capability. I believe we need to keep to a minimum the reductions on the policy side, as there are not many people employed there; however, there will need to be some. That means we have some hard decisions and hard work in terms of—

Senator CONROY: Just looking at the divisions, I see Defence Science and Technology Organisation, Defence Materiel, Defence People—

Mr Richardson : It will. On the intelligence side, self-evidently, we will not want to cut into capability, but if there is any room to manoeuvre in terms of shared services, then we will do that.

Senator CONROY: I note your point about cutting into capability in intelligence, but you have not reassured the committee that there will be no reductions in intelligence. I think your words were 'keeping to a minimum', but that is not the same as 'there will be no cutbacks in intelligence'.

Mr Richardson : That is right. I think it would be misleading to say there will be no reductions in advance of the work of the first principles group.

Proceedings suspended from 12:30 to 13:33

CHAIR: We will resume this hearing. Senator Conroy and I constitute a quorum. We are a legal meeting, so we might as well proceed.

Senator CONROY: We were just talking about the staffing situation. Does Defence pay retention allowances to keep people with required skills?

Mr Richardson : Unless it is paid in parts of DMO. It is certainly not paid in Defence generally. I am not aware of it. In the forces it is, but not the Defence APS.

Senator CONROY: In relation to the increased efficiency dividend of 0.25 per cent, according to table 1.3 at page 17 of the PBS, will result in cuts of $75.8 million over the forward estimates, can you rule out any further staff cuts to meet this imposition?

Mr Richardson : I do not believe we will require any further cuts over and above those which have been announced in the budget. I put to one side what might emerge from the first principles review, but not from the efficiency dividend per se.

Senator CONROY: We are still talking about 2,406, which is what is in table 8 on page 22 of the PBS?

Mr Richardson : Yes. Just to put that in context, over the last two years the Department of Defence APS has downsized by some 2,000. We have done that without any heroics, with anyone standing up making a hero of themselves. We have done that with the full cooperation of staff, who have responded in a very professional way to that. I think the Defence APS deserves some recognition for the way in which they have accommodated the pressure that has been on them.

Senator CONROY: Did Defence make a submission to the Commission of Audit?

Mr Richardson : Yes, we did. The Chief Financial Officer, Phillip Prior, and myself met with the Commission of Audit for about 45 minutes.

Senator CONROY: So, you did make a submission and then met?

Mr Richardson : We responded. We met with them and we responded to some queries that they had. I do not believe that we made an upfront submission.

Senator CONROY: You met with them?

Mr Richardson : Yes.

Senator CONROY: And in follow-up you provided information to them that they sought?

Mr Richardson : Yes. We responded to some questions that they asked.

Senator CONROY: Who met? How many personnel were involved in that?

Mr Richardson : It was Phillip Prior, the Chief Financial Officer, and myself.

Senator CONROY: Which of the recommendations from the commission's report has the department started working on? There are quite a few recommendations. There is the ASC privatisation, recommendation 57 on page 224.

Mr Richardson : We have not started to work on any of those recommendations.

Senator CONROY: None at all?

Mr Richardson : They are recommendations to government, and government has not yet considered all the recommendations. I note that the Commission of Audit recommended that we return back to numbers of 1998. I realise it was dealing at a very high level, and I am broadly supportive of where the Commission of Audit has come from, but that recommendation did surprise me a little.

Senator CONROY: Minister, is the ASC privatisation recommendation on the cabinet table? Is that on your menu of to do?

Senator Johnston: Given that I am not the minister responsible, that is not a matter for me.

Senator CONROY: Is that the same answer for the DHA?

Senator Johnston: I share that responsibility with the Finance Minister. We are doing a scoping study and I am sure that we will be very open and transparent about what we intend to do.

Senator CONROY: If you have started a scoping study, does that mean that you are definitely selling it or are you just considering it?

Senator Johnston: I think we are just considering it.

Senator CONROY: The independent property expert to oversee divestment process?

Mr Richardson : No, again, we have not started work on that. Again, they are matters for the government to consider and to provide direction in terms of where they may wish to go.

Senator CONROY: There was a recommendation to reassess the promise to spend two per cent of GDP within a decade. Minister, I assume that is one you can reject outright.

Senator Johnston: I think you will agree that we have made a reasonable start with this budget.

Senator CONROY: I am supportive of the steps taken, but it would calm a lot of nerves if you said, 'No, we don't accept the Commission of Audit's recommendation to reassess the two per cent.'

Senator Johnston: The Prime Minister has made a commitment, as have I and the Treasurer, and we have set about the task of living up to that electoral promise.

Senator CONROY: The new ministerial directive to separate some functions?

Mr Richardson : The draft ministerial directive that was in the Commission of Audit is very similar to the existing one and describes very accurately the way in which the CDF and the secretary currently work together.

Senator CONROY: That is a lot of money to spend to come up with exactly the same recommendation as we are already doing.

Mr Richardson : I think the Commission of Audit would point to the fact that it was simply one of many recommendations that it made.

Senator CONROY: Reduced staffing at Defence HQ, including senior staff to 1998 levels?

Mr Richardson : Firstly, I am quite supportive of the Commission of Audit in broad terms. That particular recommendation, allowing for the fact that it was a high-level recommendation, surprised me because it did not appear to take into account 9-11 and what followed from 9-11. It did not appear to take account of the extraordinarily high operational tempo that the ADF has had to deal with since 1999. It did not appear to take into account the fact that there is not a parallel jurisdiction anywhere in the world that includes numbers in intelligence agencies as simply part of the Defence total number.

Fourthly, it surprised me because as part of the deliberate reforms by the Howard government, 1,000 ADF positions were civilianised. It is a little bit frustrating when one government increases your numbers by 1,000 as part of a deliberate reform strategy to save money and then another government then tells you you have got too many people. If life was so perfect in 1998, it is therefore surprising that so many reviews and recommendations for change followed 1998, including the fact that for a number of years in the early 2000s the Defence financial statements were qualified by the ANAO. It was as a result of those qualifications by the ANAO that further changes were made in Defence.

I respect where the Commission of Audit was coming from. I respect the fact that the first principles review must look very rigorously at the Department of Defence, and that we should not have one more civilian in Defence than is absolutely necessary. At the same time, I am surprised that they overlooked some elements which I would have thought were pretty basic.

Senator CONROY: So, it is wrong in some cases?

Mr Richardson : I am not saying it is wrong. It is possible that, given that it was at such a high level, it did not see a need to pick up on some of the detail. I am just pointing out some of the detail which I think would be relevant to any serious consideration of that recommendation.

Senator CONROY: You will not be shocked to hear that many share your view that it overlooked many important facts. You mentioned that the Commission of Audit suggested the directive was very similar to the existing one. Were there any differences of note?

Mr Richardson : None that the CDF or I could see. There are a few changes in wording. Please do not get me wrong, we actually thought the draft recommended by the Commission of Audit was a very good one. We did not have any issue with it at all.

Senator CONROY: I have some other questions on that, but given that you have not started work on any and the minister has indicated that there is no work directly progressing yet, I might put them on notice. I wanted to obtain further clarification on the DMO. I think Mr King has just walked in, but I do not know whether it requires him to come to the table just yet. On page 139 of the PBS DMO's planned workforce figures are only expected to decline from about 5,243 between 2013-14 to 5,098 in 2017-18, which is a decline of about 2.7 per cent. It is certainly much less than the overall decline in APS numbers in Defence. Is that right?

Mr Richardson : Before Mr King answers, I might point out that the APS constitutes part of the DMO workforce, the predominant part but not the total part. Members of the ADF work in DMO and also contractors work in DMO, so the total workforce in DMO is somewhat greater than the APS workforce. I will hand over to Mr King.

Senator CONROY: I was seeking to clarify the PBS on page 139, which says you have got 5,243 in 2013-14 to 5,098 in 2017-18, which is a decline of only 2.7, but Mr Richardson was making the point that was pure APS staff rather than contractors. How many contractors are on top of that?

Mr King : We are down to 22 contractors or something of that order to support the DMO activities that are not involved in running projects. But our total workforce is a combination of APS and ADF. About 18 per cent is ADF.

Senator CONROY: Did you say 18?

Mr King : It is about 18 per cent. It varies a little bit. The way we work is a total workforce approval. As of May, our total workforce is 6,509, of which 5,124 are APS, but I should make the point that about 400 of those are filling ADF positions that the ADF are unable to fill at this time.

Senator CONROY: I will just seek some clarification. No-one is suggesting that the ADF personnel component of DMO is to be reduced?

Mr King : No.

Senator CONROY: We would not want less input from the uniforms into procurement. Is that too broad a sweeping statement? Can I get some clarification on that?

Mr Richardson : That is fair as a statement of principle, but you would need to be careful how far you took that statement of principle to a statement of firm numbers.

Senator CONROY: It seems an odd thing to do to reduce the number of uniforms giving advice on uniform procurement.

Mr Richardson : It is essential that the ADF be intimately involved in the DMO area.

Senator CONROY: When it comes to talking about the cuts, notwithstanding the point you make where I think Mr King said 18 per cent of ADF uniform positions—we are talking about 5,243 in 2013-14 reduced to 5,098 in 2017-18, which is about 2.7 per cent on those figures?

Mr King : That sort of figure.

Senator CONROY: That projection seems very much at odds with the sorts of claims, commentary and suggestions we have heard from the Commission of Audit, media reports, which have all pointed to much greater cuts to come from DMO.

Mr King : There are a few things around that have confused the discussion, including input from industry bodies that I would have expected better of that made observations, for example, that DMO was 2,500 people 10 years ago and now it is below 6,500. In fact, DMO's numbers now are about the same as when we were prescribed in 2005, give or take 100.

Senator CONROY: Where did people pull that 2,000 figure from? Is that from 30 years ago?

Mr King : I have no idea. It is an inaccurate number. To be frank, I am disappointed that an industry body would present that information to a commission without adequate checking. The truth is that DMO's level of real activity measured by cost has increased in the decade. Defence equipment is much more sophisticated. I have used evidence here before, for example, using the 1998 baseline, it is interesting to note that we were not entirely ready for Timor in 1999, and a uniform in 1999 for a soldier deploying cost just under $3,000 and a uniform and equipment for a soldier deploying to Afghanistan is now slightly under $30,000. It is a complex, integrated piece of equipment.

The truth is, as the Secretary said, our baseline is around that 6,500 number, but we need to find—and I have spoken about this quite often—more efficient ways to do our business, and that is what we are setting about doing. What I anticipate is that the first principles review, which incorporates the review of the DMO, will look at exactly that matter.

Mr Richardson : I might add that I personally believe the big question in respect of DMO is not numbers. It is where along the value chain do you want DMO. That will obviously depend upon where you come from philosophically, and that is a proper role for government decision making. At the moment, DMO is deeply involved in acquisition and also sustainment. There are other models that you could adopt in respect of an organisation like DMO. You could have DMO move more up the value chain in terms of project management with sustainment moving out more to the private sector.

Now, what mix of that you want, that may or may not save money, but it could be more efficient, I do not know. The question about the model that you have for DMO is as equally important as the numbers you might have for DMO, and they are matters for the first principles review.

Senator CONROY: I am glad you mentioned that, given all of the commentary that we have heard. Minister, are you aware of where the 2,000 number that Mr King has mentioned has come from? Have you seen any figures that back that up?

Senator Johnston: Not that I can think of, no.

Senator CONROY: I cannot find anyone, like Mr King, that can confirm where this number that is claimed, that is now used as a weapon to give a hard time—I cannot find any substance for it. My question is: given what is in the PBS, we have all these other pending reviews, so is there any expectation that, with these reviews you are describing, the numbers on page 139, of 5,200 down to 5,098, will be reduced further?

Mr Richardson : As for the departmental numbers overall, I think the numbers in the budget papers out to 2017-18 or whatever it is are a result of decisions taken both by the previous government and also by the government in the budget context. But given that there is a first principles review coming through, I do not think you can pre-empt the outcome of that review. That review may or may not lead to recommendations and decisions in relation to the civilian workforce. I think it would be wrong of us to be seeking to pre-empt that review, and it would be wrong of us to be talking too dogmatically about where numbers might be in three years time.

Senator CONROY: I am not talking about the whole department. I am talking about DMO for this purpose. What I am trying to understand is whether I should take these numbers seriously or are you indicating that there will be mass changes to this?

Mr Richardson : Firstly, you should take them seriously. Secondly, part of the first principles review, as stated by government, will be to review DMO and the relationship between the department and DMO. Thirdly, you cannot pre-empt the outcome of that review, and it is possible that the outcome could lead to further changes in respect of DMO, either in terms of the model which DMO follows and, secondly, its workforce composition and mix.

Senator CONROY: One of the ways to pretend that you have changed the numbers is an enormous shift to contractors. Is that on the agenda?

Mr Richardson : No. That is certainly not on anyone's agenda, as far as I am aware.

Senator CONROY: We had a substantial discussion on the future of the DMO at the February estimates. That is probably a couple of hours of your life you will never get back, Mr Richardson. The minister said, 'When talking about the future direction let us see what the Commission of Audit has to say' and then, 'Let us go forward with terms of reference which everyone can see quite transparently and come up with the recommendations.'

Mr Richardson : Yes.

Senator CONROY: The Commission of Audit has recommended: '… reintegrating DMO into DOD with the size of the Defence Materiel Organisation being significantly reduced and with a renewed focus on contract management as opposed to project management.' Is that the sort of ideological issue that you were talking about of where they are in the value chain?

Mr Richardson : It is not an ideological issue. I think it is a proper philosophical issue.

Senator CONROY: 'Philosophical' is the word I meant to borrow from you. Is that the sort of thing that you are considering, that reintegration?

Mr Richardson : It is not that I am considering it. That clearly will be a factor considered by the first principles review.

Senator CONROY: Do you have terms of reference for the review of DMO or is it wrapped up in the first principles and there is not a separate—

Mr Richardson : The draft terms of reference for the first principles review are currently with the government.

Senator CONROY: Does that cover the DMO?

Mr Richardson : Yes, it does.

Senator CONROY: Minister, are we far away from having terms of reference that are transparent to everyone?

Senator Johnston: I am hoping that they will be with you soon.

Senator CONROY: Any ballpark? Three or six months?

Senator Johnston: I do not six months, but shortly.

Senator CONROY: Will they be public, as you have committed?

Senator Johnston: I cannot see any reason why they would not be. We are transparent, as you say, but there might be some issues where we need to be careful and circumspect about. But at this stage I am pretty keen to have them—

Senator CONROY: So, you stand by letting us go forward with terms of reference that everyone can see quite transparently?

Senator Johnston: That is my preference, but let us wait and see how we go on that.

Senator CONROY: Is the development of a new Defence white paper under way? I think you made some comments, Mr Richardson.

Mr Richardson : Yes, it is.

Senator CONROY: Can you confirm the relevant people that are working on it?

Mr Richardson : Yes, I can.

Senator CONROY: Who will be writing it?

Mr Richardson : Firstly, the white paper is a government white paper, as it was under the previous government. It is not written by people who then own it. It is drafted.

Senator CONROY: If it makes it easier for you, who is drafting it?

Mr Richardson : It is being drafted within the Department of Defence with input from across the services, across the policy areas. Of course, there is the parallel Force Structure Review.

Senator CONROY: Is Mr Dupont writing it?

Mr Richardson : No.

Senator CONROY: I thought I read that he was going to be writing it.

Mr Richardson : No, he is not.

Senator CONROY: Who is writing it?

Mr Richardson : It is being written within the department. The head person is Deputy Secretary Peter Baxter.

Senator CONROY: Mr Baxter?

Mr Richardson : Yes.

Senator CONROY: Does he have a team?

Mr Richardson : Yes, he does.

Senator CONROY: Is there a panel?

Mr Richardson : There is an external panel. There is an internal team within the department working on it, and then there is an external panel chaired by Peter Jennings from ASPI. That external panel consists of a number of people who have been publicly announced from ANU, Lowy, ASPI and so on. That external panel provides input and oversight in respect of the white paper. Secondly, it provides independent advice to the government so it can rightly talk with the minister directly, talk to government directly, and can be tasked by the minister and government. It is not required to go through the department and I think that is a good thing. It is also responsible for the public consultation process, which is part of the white paper preparation.

Senator CONROY: Which website is the external panel on? Is it the Defence website?

Mr Richardson : Yes.

Senator CONROY: Who else will be contributing to it apart from the people on the panel? Is it open for public consultation?

Mr Richardson : Yes, it is open for public consultation. Industry can make contributions, as can members of the public, universities, think-tanks; in fact, anyone can.

Senator CONROY: So, all of the appointments have been finalised?

Mr Richardson : Yes, for the white paper.

Senator CONROY: Greg Sheridan keeps popping up in my notes here. According to a report he wrote on 27 February he says that the PM's office overruled Mr Dupont as an author. Is that correct?

Senator Johnston: No. Mr Dupont had other things to do and we have got our team. Our team comprises Peter Jennings from ASPI, James Goldrick—and it has all been quite reasonably set out—and Stephen Frawley from ANU, Mike Kalms from KPMG, and Rory Medcalf from Lowy. They are the external panel that are assisting in the department writing the white paper. Also, Andrew Davies from ASPI is assisting.

Senator CONROY: Are they paid? Can we get the rates, if they are being paid?

Senator Johnston: They are. I am not sure what the rate is.

Senator CONROY: I am happy for you to take it on notice.

Senator Johnston: Yes, I will. It is a standard—

Senator CONROY: I imagine they would—

Senator Johnston: It is a standard rate.

Senator CONROY: Whatever those fees are, if you could just take that on notice, that would be great.

Senator Johnston: I think you would agree that is a pretty good team.

Senator CONROY: That is a very impressive group of people, no question about that. What are the costs associated with the white paper?

Mr Richardson : Fairly minimal. There is the external panel. There will be the costs of the public consultation. I assume that some members of the external panel will move outside of Canberra. The costs within the department will be absorbed, and that will not be a cost over and above. There is the cost of the force structure review, but again that will be absorbed within the department. Indeed, the costs of the external panel will be absorbed within the department. There is not going to be a net cost to the budget for the white paper.

Senator CONROY: In the coalition's pre-election policy document they said that the Defence white paper would be produced within 18 months of coming to government. Is this still the timeline being worked towards?

Senator Johnston: Yes.

Senator CONROY: Is this still expected to be released by March 2015, within 18 months?

Senator Johnston: Yes.

Senator CONROY: You are being very firm, but I note that in the budget it says the white paper will be released in 2015; it does not have a month attached to it. I know what those Treasury officials are like. They have always got to be watched.

Senator Johnston: We said 18 months from the election and we want to stick to that. Let's be certain that that is our clear intention. That is what we have told all of the parties. The department has been informed of that. There might be some matters that occur strategically in the consideration that require further work. We will be open and up front about it, but that is what we intended to do.

Senator CONROY: That was a promise before the election.

Senator Johnston: Yes.

Senator CONROY: So, past March next year; that is a broken promise.

Senator Johnston: Yes.

Senator IAN MACDONALD: I have a question.

Senator CONROY: What area? Still 1.1?

Senator IAN MACDONALD: Yes.

Senator CONROY: If it is 1.1, I am happy to just finish. I have two more questions, but I am happy to pause and go to Senator Macdonald. That is not a problem. I can pause there. I still have a couple more 1.1 questions, but I am happy to pass to their 1.1 questions.

Senator IAN MACDONALD: Just a couple of points quickly. Mr Richardson, I have not been as diligent as I should have been. Can you tell me the difference between the force posture review, the white paper and a first principles review? Hopefully the shortened version.

Mr Richardson : The first principles review is focusing in on the department, DMO, its structure and its processes. The structure processes, the way it does business; it will look at numbers and all of that. The white paper is the broad strategic document that provides the strategic policy setting within which decisions are made about the Defence capability plan and the like. The force structure review goes back to basics and really sits beside the white paper, they interact together, and that is looking at the appropriate force structure for the ADF given the challenges that it may or may not face.

Senator IAN MACDONALD: You mentioned 'force structure review'. I actually said 'force posture review'.

Mr Richardson : Sorry.

Senator IAN MACDONALD: That is okay. How many other reviews are there? No wonder you need 20,000 public servants.

Mr Richardson : I can go through what they all do, if you like.

Senator IAN MACDONALD: You said 'force structure review'; just add 'force posture review' into this.

Mr Richardson : The 'force posture' is a term commonly now used in the respect of the rotational presence of US forces in northern Australia. We are not having a force posture review—

Senator IAN MACDONALD: US forces?

Mr Richardson : Yes. We are not having a force posture review. We are having a force structure review.

Senator IAN MACDONALD: You had one a little while ago, though.

Mr Richardson : Yes, but we have not had a force structure review since 2009. The last force posture review we had was associated with last year's white paper, which was looking at the posture of ADF around Australia. You will find the references to force posture more often associated with the US in northern Australia. We are not having another force posture review this year.

Senator IAN MACDONALD: I am pleased to hear that, but the one that I am talking about, and that I have here somewhere, is the one done a couple of years ago.

Mr Richardson : Ric Smith, Allan Hawke and the like.

Senator IAN MACDONALD: So, that was a—

Mr Richardson : That was 2012-13.

Senator IAN MACDONALD: Yes, that is right. So, you have another force posture review, but related to American forces?

Mr Richardson : No, it is not that we have another one. The term more often than not relates to the US rotational presence in northern Australia.

Senator Johnston: The force posture.

Mr Richardson : Yes, the force posture.

Senator IAN MACDONALD: Nothing turns on this, but the Australian Defence Force posture review, Hawke and Smith, May 2012—

Mr Richardson : That is it. We are not having another one.

Senator IAN MACDONALD: No, but is that the one that is looking at the US?

Mr Richardson : No. Nothing is looking at the US.

Senator IAN MACDONALD: You said before it was.

Mr Richardson : No, I said the term is most commonly used in respect of.

Senator IAN MACDONALD: Okay. It is all as clear as mud to me now. The white paper review, we had one in 2009 and 2012—

Mr Richardson : No. We call them white papers. We do not call them a white paper review.

Senator IAN MACDONALD: Well, white paper.

Mr Richardson : I am just being precise. We had a white paper last year in 2013 that was launched by the then government in May of 2013. We had a white paper before that which, I believe, was in 2009.

Senator IAN MACDONALD: White papers are supposed to look forward 20 years or so.

Mr Richardson : They do not have to. The 2009 looked ahead 20 years, but they do not have to.

Senator IAN MACDONALD: It looked ahead 20 years in 2009, but we had another one in 2013. That is old history, I will not go there. We are having one in 2015. You answered Senator Conroy that we have 20,000-odd non-uniform Defence bureaucrats in the service. Did I get that right?

Mr Richardson : No, the total number of Defence APS, as of a couple of weeks ago, was full-time equivalent, not a head count, 20,154.

Senator IAN MACDONALD: That is what I thought I said. That is what I thought I asked, but anyhow. Are they APS, Australian public servants?

Mr Richardson : They are APS.

Senator IAN MACDONALD: Do you have, on the top of your head, roughly where they are all based?

Mr Richardson : About 40 per cent of them are in Canberra and about 60 per cent of them are in capital cities and regional Australia.

Senator IAN MACDONALD: Can you tell me on notice approximately where they are all based?

Mr Richardson : We can certainly provide that for you.

Senator IAN MACDONALD: Are you aware of the government's policy on developing northern Australia?

Mr Richardson : Yes.

Senator IAN MACDONALD: Has your department been consulted in relation to that?

Mr Richardson : Yes.

Senator IAN MACDONALD: I am not going to ask what you have been consulted about. Have you put in submissions to that?

Mr Richardson : I think we have. Certainly, I am going up to Cairns or Townsville in a few weeks time in relation to a big conference on northern Australia and all of that.

Senator IAN MACDONALD: This is the—

Mr Richardson : The Davos Connection.

Senator IAN MACDONALD: The one in Townsville?

Mr Richardson : Yes.

Senator IAN MACDONALD: Have you some big announcements to make when you go there? Again, I will not ask you what they are.

Mr Richardson : No. Any big announcements would be for the minister or for government.

Senator IAN MACDONALD: I hope the minister is going with you then.

Mr Richardson : But I am not aware of any big announcements coming up.

Senator IAN MACDONALD: Are you going to that, Minister?

Senator Johnston: I do not think I am, but that does not detract from the fact that we are very supportive of the government's initiatives to develop the north, given particularly the deployment of all of our people into the Northern Territory. We have quite a large number of Navy, Army and Air Force personnel in the Northern Territory, which is probably the biggest single cohort of employees in the Northern Territory. Defence personnel probably are the largest group of employees in the Northern Territory. All of this is very important to us. We are watching very closely what the government's initiatives are, and looking for opportunities for us to contribute to those initiatives.

Senator IAN MACDONALD: I am sure none of you would have wasted your time watching the Legal and Constitutional Legislation Committee estimates last week, but I did ask some questions about headquarters and training facilities in relation to the new border force. Does the Department of Defence have anything at all to do with that?

Mr Richardson : No. We work with it and we give people to it, et cetera. We have a lot to do with it in that sense, but it is not ours.

Senator IAN MACDONALD: Thanks for that. I think you would agree that of all the people paid by the taxpayers, by the Commonwealth government, the biggest cohort in northern Australia is the Department of Defence, with Australia's largest army base in Townsville, the second largest east coast navy base in Cairns—very substantial assets, as you rightly say, in Darwin and hopefully improving. Mr Richardson, you would be conscious of the impact that those deployment of troops have on local economies. I accept for one that we do not send our military people around the Australia for the benefit of local economies but more for strategic purposes. That is why I am very interested as to your department's input into the government's white paper on northern development. So, you are not the only ones that have white papers in the Defence department. That is due out in September of this year. Will that white paper, to a degree, involve decisions in either the Defence structure review, posture review, first principles review or white paper review, and will that guide the department in a whole-of-government approach to the September 2014 white paper on northern Australia?

Mr Richardson : It will be relevant, but that white paper is coming out too early and would be premature in terms of announcements of decisions in the context of the Defence white paper or the force structure review.

Senator IAN MACDONALD: No, but it would guide what is said in the—

Mr Richardson : It would be relevant to it.

Senator IAN MACDONALD: That is good to know. This is really an issue I had for 1.4 but it is germane to this question, so I might just sneak it in. It relates to a question I have been asking for some while now about the C-27J fleet, which replaced principally the Townsville based Caribou fleet. When this decision was first made it was to be established sensibly outside Sydney. Since then it has been decided to establish it outside Amberley. I have some answers to questions on notice indicating why it is important to have it in Amberley and that some $203.7 million is being spent to upgrade Amberley. Can someone tell me if that figure is correct? That is the first question in a rather long preamble.

Air Marshal Brown : That is correct. It is $203 million.

Senator IAN MACDONALD: Is that solely associated with the C-27J?

Air Marshal Brown : That is correct.

Senator IAN MACDONALD: How far along the track are we with planning and expenditure of that?

Air Marshal Brown : At this stage, a detailed business case has been done and it is to go before a parliamentary works committee.

Senator IAN MACDONALD: So, there has been no real money spent there yet except in planning?

Air Marshal Brown : Planning.

Senator IAN MACDONALD: I just noticed in the last force posture review—someone might like to comment on this, this is a 2012 one; this is my interpretation, of course—the thrust was that there was a recommendation to augment forces in northern Australia. I could, if we had time—and I do not want to waste your time—quote you any number of paragraphs from that. For example, 'Force 2030 requirements. These mostly relate to capacity of ADF bases, facilities and training areas to support current and future capabilities, particularly in Australia's north and west, and our ability to sustain high tempo operations in northern Australia.' There are many other references. That does not seem to fit with the decision to base what I would call the Townsville Caribou replacement in Amberley.

Vice Adm. Griggs : I think it is important to differentiate that that force posture review was not a force basing review. There is a distinct difference between posture and basing. Posture is about how you can deliver the effect, and so, from my perspective, whether you base and maintain the aircraft in Amberley does not detract from its ability to deliver the effect in the north. I think it is an important consideration, because it is equally relevant in the discussions we have about where the LHD is based, for example.

Senator IAN MACDONALD: Yes, I was going to—

Vice Adm. Griggs : I am sure we were going to get on to that at some point.

Senator IAN MACDONALD: I do not want to take the committee's time in the wrong spot. I certainly had questions about that, but seeing you have raised it. I remember the Defence posture review actually talked about putting the LHDs in Brisbane—a silly idea—and elsewhere. I thought that is what the Defence posture review did.

Vice Adm. Griggs : That was a particular outcome not driven by the delivery of the effect, but by the capacity at Garden Island, particularly in light of the Force 2030 plans. You recall there are 12 submarines in that plan. If you then start adding considerable numbers of ships to the fleet, you are going to have a capacity issue in Garden Island, and Brisbane was discussed as a potential option.

Senator IAN MACDONALD: Well, Brisbane and elsewhere. Brisbane was quite the wrong place. I am not sure that you are wanted there, anyhow, whereas you are wanted in many other places. I have read the answers to questions on notice about the C-27J, and I must say, with all due respect to whichever person—junior I suspect—completed the answers, it tends to lack any real seriousness about the placement of the new fleet in Amberley, when for 50 years the fleet that it replaces was based up where it would be most often needed, and that is in the north of Australia.

Should I be asking now about that or is this a decision that is still in flux? In view of all these other reviews that suggest that these assets should be in the north, is it appropriate now to ask why we are looking at somewhere below the Brisbane Line, I might say, for those of us who remember World War II history.

Senator CONROY: Paranoia creeping up.

Senator IAN MACDONALD: Well, it was relevant back then. Fortunately it was a Labor government that took over and insisted we defend Australia from the north, not on the Brisbane Line.

Senator CONROY: Thank you for acknowledging that.

Senator IAN MACDONALD: Credit where credit is due.

Air Marshal Brown : There were extensive studies done on comparisons between Richmond, Amberley and Townsville, and the conclusion was that Amberley was the best place. The difference between the Caribou and the C-27 is fundamentally speed, and we do not have the same number of C-27s as we did Caribous.

If you recall, when the Caribou was in operation we operated two squadrons, one out of Townsville and one out of Amberley. Fundamentally, the C-27 is probably two and a half times faster than the Caribou, which means that we can get to Townsville in less than two hours from Amberley. The studies were done on the additional fuel usage to deploy it up to Townsville. It will be deployed to Townsville, to Darwin and all around Australia. The difference in the infrastructure costs and establishing those infrastructure costs in Townsville so they were cyclone rated was considerably different.

One of the other issues that I would like to point out to you is with our aeroplanes based in Townsville, as soon as they are subject to any sort of cyclone warning, we normally move them out of Townsville. If there is anything to be done in the Townsville region, it is much better probably based south of the cyclone belt, in the same way that we have a squadron of F18s who are not based in Darwin but Tindal to keep them out of the cyclone belt.

Senator IAN MACDONALD: Air Marshal, one of your senior officers once raised that issue with me before, and I wonder what happened in the 50 years the Caribous were there. Did we not have any cyclones? What you do is turn the key, start the motors, fly them up to Charters Towers or Atherton or somewhere handy and away they go. The same as they do with civilian aircraft, ships, boats and planes.

Air Marshal Brown : As I pointed out, there was a detailed cost-benefit study done as to which was the better place to place them. Amberley came out as the winner.

Senator IAN MACDONALD: I wonder how much I could reasonably ask you on those studies and the calculations. Simple common sense, both for the LHDs and for some of the other Navy ships and of these aircrafts, the cost of flying them from the south of Australia to where they are most likely to be needed for humanitarian or defence purposes in the north must be a factor. If you have easily obtainable studies that can explain to me how that works, I would appreciate getting them.

Air Marshal Brown : I believe those studies are available. We could get a hold of them. The simple fact is these are low-density, high-value assets that need to be deployed not only to Townsville but they need to be deployed all over Australia.

Senator IAN MACDONALD: I have always accepted that, Air Marshal, as I do with the Vice Admiral. I often make the point that, unless we are expecting an attack from the New Zealanders or the penguins from Antarctica, why do we have our fleet in Sydney Harbour? I can never understand that. The Admiral keeps trying to explain that to me, and I am too dense to understand.

Vice Adm. Griggs : We can have another go in a minute.

Air Marshal Brown : If I could just give you one classic example with Cyclone Yasi. We actually deployed to evacuate hospital patients in less than three hours. Those aeroplanes were based at a combination of Amberley and Richmond. We are quite responsive from anywhere in Australia.

Senator IAN MACDONALD: Sure, but you could have done it in half an hour if they had been based in Townsville.

Air Marshal Brown : We did not need to do it in half an hour.

Senator IAN MACDONALD: Sorry?

Air Marshal Brown : It was not necessary to do it in half an hour. We could not have left the aircraft based there, anyway.

Senator IAN MACDONALD: As your meteorologists will tell you, cyclones are an issue of life. I often say, when we are at war I hope we don't stop war because there is a cyclone coming. Just say to the bad guys, 'Hang on. We will have a truce for two days while the cyclone comes through.'

As your meteorologists know and as you yourself know, if a cyclone hits fortunately it is in a fairly limited area. You have assets up there, and heavens knows where we would have been without Lavarack and, indeed, Garbutt and HMAS Cairns in past cyclones if they had not been on the spot there already.

Air Marshal Brown : One of the great things about an air force is speed. We can actually deploy quite quickly from anywhere in Australia with whatever is required. I think we have shown that not only inside Australia but overseas, whether it be the Philippines or anywhere. The fundamental thing with air assets is you have to look after your engineering and logistics base. It is important that that continues to operate no matter what goes on. For me, it is important to have those assets away from anywhere that can undergo environmental damage.

Senator IAN MACDONALD: Whenever I talk to the old Caribou pilots, air crew and ground crew, none of them seem to have ever had that sort of problem over the last 50 years. Perhaps it is the global warming that is—

Air Marshal Brown : I said at the start, the fundamental difference between the Caribou and the C-27 is there is quite a big difference in speed and range. It used to take the Caribou probably four and a half to five hours to transit from Amberley to Townsville. We are talking two hours. There is a significant difference.

Senator IAN MACDONALD: Well, that is two hours, 120 minutes. It could be crucial at some stage. Anyhow, I am perhaps starting to editorialise, which I know the chairman will not allow me to do in this committee. I think that is all that I had on the first section. Thanks.

CHAIR: The tail end of 1.1?

Senator KROGER: I know that Senator Edwards had some questions but he had to go to another committee between 2.30 and 3. Go to Senator Conroy.

Senator CONROY: I note that the PBS for 2014-15 makes no mention whatsoever of the Pacific Maritime Security Program. Defence became the lead agency in the development of PMSP under the previous government. Does Defence remain the lead agency?

Mr Richardson : Yes, it does.

Senator CONROY: How has it progressed since the change of government?

Mr Richardson : It has progressed. In fact, there are certain matters relevant to it which the government will be addressing over the next little while.

Senator CONROY: Does Senator Johnston, Mr Roberts or the parliamentary secretary have responsibility? Which area is it in?

Mr Richardson : It is for the minister to determine who has responsibility. It is not for me to say. It is the minister who has been—

Senator CONROY: Minister, who has got coverage of that one? I appreciate they have, I just assumed it was a decision that had been made.

Mr Richardson : We have been reporting to the minister on it.

Senator CONROY: Have you decided who is handling it?

Senator Johnston: I will probably be handling it at the first instance, but I have not decided whether it can go to the parliamentary secretary or the minister assisting.

Senator CONROY: Will you be making a decision soon?

Senator Johnston: Probably.

Senator CONROY: How much money did the department spend on PMSP in 2012-13?

Mr Richardson : We might have someone here who can answer that. I haven't got it.

Senator CONROY: I am sure it will come to the table in a moment. How much money has the department spent on PMSP in the financial year to date?

Mr Richardson : Again, I will need to take that on advice.

Senator CONROY: I think someone is coming to assist as we speak.

Mr Richardson : We have not yet spent money on it. We have had a straight-line development on this over the last 12 months and, as I said, there are certain matters which will be considered by government over the next—

Senator CONROY: We are 11 months into the financial year and we have not spent any money on it this year?

Mr Richardson : No, but it is not a matter on which we plan to spend money this year.

Senator CONROY: How much did the department spend in 2012-13? Do we have some assistance at the table?

Mr Birrer : I just wanted to clarify with you, are you discussing the current Pacific Patrol Boat Program or the potential future Pacific Maritime—

Senator CONROY: This is Maritime Security Program, PMSP.

Mr Birrer : As was discussed before, it has not yet been considered by the government.

Senator CONROY: We have agreed that we are not spending any money this financial year. We are eleven-twelfths of the way into it. I was just going back to the question: how much was spent on the previous financial year, 2012-13? I assume it should be in the budget papers.

Mr Birrer : I am not aware of anything, but we will take that on notice.

Senator CONROY: So, you do not think any money has been spent on it in the last two years?

Mr Richardson : Not directly. The Pacific patrol boats—money spend on that resustainment. Money has been spent on the defence cooperation programs we have in the Pacific. But in terms of what you describe as the Pacific maritime security, no money was spent on that either by the previous government nor yet currently.

Senator CONROY: Can you clarify for beginners like myself: are the patrol boats included in the Pacific Maritime Security Program?

Mr Richardson : Yes.

Senator CONROY: Somebody is nodding over here. When I say, 'Have you spent any money?' and you say, 'Yes, we spent money on keeping them going' that to me would seem to be a contradictory answer. So, help me out, please.

Mr Richardson : I think there is a confusion here in terms of terminology.

Senator CONROY: It is probably me so please me out here.

Mr Richardson : Currently we do not have the Pacific Maritime—

Senator CONROY: The Pacific Maritime Security Program.

Mr Richardson : Yes. We have the Patrol Boat Program. We have a DCP. There was consideration being given to a much bigger envelope, but that was never taken forward in any serious way. Basically, the money that has been spent was on the patrol boat sustainment. The patrol boats are due to be replaced over the next few years and then we have the ongoing DCP in the Pacific. They are the principal elements of the maritime security program.

Mr Birrer : We have the existing Pacific patrol boat program being funded from the Defence Cooperation Program. The Pacific Maritime Security Program, subject to government consideration, is considering replacement capability.

Senator CONROY: So that is replacement?

Mr Birrer : Of the current?

Senator CONROY: That is what I was seeking to ascertain. What I am getting to is where we are up to on that. I am sorry we have gone around in circles on the acronyms, but is it the intention of government to replace the Pacific patrol boats as they reach end of life?

Mr Richardson : Yes. There is an intention to replace the Pacific patrol boats, and there are some matters relevant to that which will be considered by government over the next little while.

Senator CONROY: For us complete beginners, could you identify which nations are part of this program?

Mr Richardson : I will start and Mr Birrer will correct me as I go. It is Papua New Guinea, Solomon Islands, Vanuatu and Fiji as part of the original—

Senator CONROY: Would it be back in now?

Mr Richardson : Subject to certain developments, et cetera. We would certainly hope so. Kiribati, Tonga, Tuvalu and Cook Islands are part of it.

Vice Adm. Griggs : FSM and—

Senator CONROY: What were those last two?

Vice Adm. Griggs : Federated States of Micronesia.

Senator CONROY: Our intention is to replace them. Where are they in their lifecycle?

Mr Richardson : They could be replaced out to around 2018-19 or 2019-20.

Senator Johnston: I will just interrupt for a moment. I think Samoa is also in. I do not want to offend anybody. I am trying to get this right and someone will no doubt correct me if I am wrong.

Senator CONROY: I am not going to hold you in any way accountable.

Senator Johnston: I just know people get offended when they are left out.

Senator CONROY: I appreciate that. If you need to update as we go, then jump in.

Senator Johnston: We might not have mentioned the Solomons.

Senator CONROY: Solomons was up there.

Mr Richardson : If Mr Birrer reads them out, we can give you a definitive list.

Senator CONROY: Yes.

Mr Birrer : Between 1987 and 1997 Australia built and gifted 22 patrol boats to 12 Pacific Island countries—Papua New Guinea, which operates four boats; Tonga; Fiji; the Federated States of Micronesia, three each to those countries; two to the Solomon Islands; Vanuatu; Samoa; Tuvalu; Kiribati; Cook Islands; and the Republic of Marshall Islands and Palau have one each. There were 22.

CHAIR: Are you supporting them for running costs and so on?

Mr Birrer : Yes.

Senator CONROY: Has the department commenced a capability study?

Mr Richardson : Yes, we have.

Senator CONROY: Has the department formed a view about how constructing these replacement patrol boats might assist the shipbuilding sector to bridge the valley of death?

Mr Richardson : There has been work done on that. That is ultimately, of course, a matter for government.

Senator CONROY: Minister, would this be a way for us to move forward and avoid the valley of death?

Senator Johnston: Obviously we have commercial considerations at play. I do not want to get people's expectations up, but it might be.

Mr Richardson : I think your question said 'avoid the valley of death'?

Senator CONROY: Yes.

Mr Richardson : I simply note that if the valley of death, as is popularly called, was to be avoided then certain decision needed to have been taken two years ago.

Senator CONROY: You have made that point consistently.

Mr Richardson : That is because it is important to make that.

Senator IAN MACDONALD: Can I just interpose, while we are on this, and ask where those original 22 were built?

Mr Birrer : They were built in Fremantle.

Senator IAN MACDONALD: All of them?

Mr Birrer : I believe so.

Senator CONROY: People are nodding.

Senator IAN MACDONALD: I thought some were built in Cairns.

Vice Adm. Jones : They were all built at the ASI facility in Western Australia.

Senator CONROY: I would like to get an update from you about the status of our relationship with various nations around our region starting with the three nations visited by the Prime Minister in his recent trip to Asia. I will start with Japan. Senator Johnston, I think you are probably even more up to date, given that you have just flown in this morning, from seeing many of the nations that we will probably talk about so you might be able to give us some hot goss.

Senator Johnston: I don't know about that.

Senator CONROY: Could you run me through what was in the Joint Declaration on Security Cooperation that we signed with Japan on that visit by the PM?

Senator Johnston: I would have to call on some of the officials to come forward and talk about that, because I do not have that at my fingertips.

Senator IAN MACDONALD: Is that in this section?

Senator CONROY: International Engagement and Defence Cooperation Program, 1.1. I have three more tabs to go. I was informally asked to go to 3 pm so that one of the other senators could get back, but these are actually my questions. Who would like to take up the response?

Mr Richardson : In terms of Japan, it is, one, increased exercising together. Secondly, it is an agreement in respect of science and technology in the particular areas there in which we might work together. It is possible that there will be considerations down the track depending upon what happens in terms of procurement. It is working as part of the trilateral arrangements with the United States and supporting a constructive and active role by Japan in the region.

Senator Johnston: We should caution that because Japan has a constitution that is quite specific about its capacity in all of these regards, we are very carefully and respectfully going forward such that the Japanese can be comfortable that they are adhering to their constitution.

Senator CONROY: I saw a report possibly late last week that the Japanese were preparing to sell us their engines from their submarines, which I know that you have eyed jealously, Minister, on the odd occasion. That seemed to be a fairly big step.

Mr Richardson : A premature report. We are certainly interested in exploring with the Japanese in terms of what might be possible in respect of submarines, but that report was a bit premature.

Senator CONROY: How would you characterise the current state of the relationship between the ADF and the Japanese self-defence forces?

Gen. Hurley : Very good. Again, with the sorts of frameworks that have been put in place, we have the two-plus-two ministerial talks, the Minister for Foreign Affairs and the Minister for Defence. That is the capstone arrangement.

I have about annual discussions with my counterpart on the nature of the relationship. The service chiefs certainly have very good working relationships with their counterparts, either in Japan or again at fora within the region. Slowly as the Japanese government and self-defence force evolves its thinking about the role it wishes to play, we are interacting with them.

Many of our activities come on the side of bilateral or trilateral activities with the US, though we are starting to have, for example, troops from the Japanese Ground Self-Defense Force come down and participate in our shooting competitions and those sorts of things. We will just build on those as we go through. It is a conservative but progressing approach.

Senator CONROY: Are the Japanese submarine engines a bargaining chip in any enhanced relationship, free trade or other?

Mr Richardson : No.

Senator CONROY: Any conspiracy theorists on there will be completely wrong?

Mr Richardson : Yes.

Senator CONROY: Is there any additional work that needs to be done in order to finalise the agreement that was signed from the Defence's perspective?

Mr Richardson : On what?

Senator CONROY: On the Joint Declaration on Security Cooperation. Has that finished as far as Defence is concerned? Is there any more work needed to be done on it?

Mr Richardson : The one outstanding element, from memory, was that there was to be some work done which would be reported to the two-plus-two meeting, that is, foreign and defence ministers meeting, and they would then make recommendations to the two Prime Ministers in terms of what more might be done in the relationship.

Senator CONROY: Just to come back to General Hurley's comments, I appreciate you say it is conservative, but would there be additional engagement between the ADF as a result of the Joint Declaration on Security Cooperation?

Gen. Hurley : That is an umbrella agreement that sets out a framework to allow us to explore what we are doing now.

Senator CONROY: We do not have anything finalised at this stage?

Gen. Hurley : It does not have a menu in it. It lays out the principles and the intent and then we work within that.

Senator CONROY: Would you be hoping to get any additional military exercises held with Japan as a result?

Gen. Hurley : I think so into the future. As I sat down I was picking up on the thread of where you were going. For example, we do some very concrete things. We have two officers from the ADF deployed in the South Sudan with the engineer battalion from the Japanese Self-Defense Force. We act as their interlocutors with their headquarters and help them to operate inside that UN environment.

Of course, when we were looking from MH370, the Japanese very quickly deployed aircraft down and were quite accepting of the command relationships and we worked with and so forth. They are all sort of indicative of how that framework creates the space for you to explore how you might want to go forward.

Senator CONROY: That sounds constructive and positive. Given the heightened sensitivity around the Senkaku Islands at the present time, would working more closely with Japan cause any concerns in our region?

Mr Richardson : That is for others to decide, but I do not believe the dispute in respect of those islands either affects negatively our cooperation with Japan or our cooperation with China. Just as we are seeking to enhance our defence relationship with Japan we are seeking to enhance our defence relationship with China. Admittedly, we are starting from a much higher base in respect of Japan, but we seek to take both forward and so far the dispute over those islands has not affected our capacity to in fact do that.

Senator CONROY: I would like to move on to Korea now. How would you characterise the relationship between the ADF and the Republic of Korea Armed Forces?

Gen. Hurley : They are positive and constructive. We have two-plus-two talks with the Republic of Korea and we have interaction at my level and the service chief level with the Koreans, but again the practical expression of that in terms of exercises is conservative and exploratory. You need to have value in these things as well as the symbolism of it. Again, incidental to other activities going on where we might provide an aircraft, for example, an AWSE, we will engage with the Republic of Korea to help in the direction of battle management and so forth. We are looking at those opportunities. We have had ground forces up to company level participate in exercises in South Korea with the US and the South Koreans, but again they are small steps as we come to that level of comfort and given the distances, other commitments and so forth, what would be the right balance in the relationship for us all.

Senator CONROY: Were any additional agreements between the defence forces signed during or as a result of the PM's recent visit to Korea?

Mr Richardson : No.

Senator CONROY: I understand there has been discussion mainly from AFC of working with South Korea to build replacement supply ships for the Australian Navy. Was that discussed on the recent visit?

Mr Richardson : Not in any detail.

Gen. Hurley : That is a tender process. It is not a special deal or anything like that.

Senator CONROY: Would we have to go through the free trade agreements?

Mr Richardson : No, it is not free trade.

Senator CONROY: So, we can exclude everybody else?

Mr Richardson : No. Any decision on that would not be within a free trade context. Any decision on that would be determined in the context of a tender, value for money and the like.

Senator CONROY: I understand that there has been discussion or possible discussion around additional engagement with the Republic of Korea Armed Forces, exchanges of exercise. Has that come from this or is that just naturally happening?

Gen. Hurley : I think the Prime Minister's discussions with President Park are more along the lines of taking the relationship further. Again, the framework is in place. It is now building within that the level of activities you want to conduct that are both meaningful, within our resources and add value to the relationship. Working our way through what that program might look like is part and parcel of the normal processes.

Senator CONROY: Are we concerned at all that others may view increased military engagement as an issue?

Mr Richardson : No.

Senator CONROY: Is that something that we take into account?

Mr Richardson : We believe at this point in time we are handling that relatively comfortably. To the extent that North Korea would be concerned would not worry us.

Senator CONROY: Just out of interest, do we have any relationship with the North Korean People's Army?

Mr Richardson : No. There would be no starting point.

Senator CONROY: I think you discussed a little earlier the Chinese military People's Liberation Army. Do we have increased military engagement with them?

Gen. Hurley : I will reiterate what I said this morning.

Senator CONROY: What sort of engagement do we currently have? That is probably the best place to start.

Gen. Hurley : We have a very constructive relationship with the PLA across all three services and at the senior level. As I mentioned this morning, our 16th annual strategic dialogue was conducted with the PLA in January this year. That dialogue normally either involves the secretary and I and our counterparts or sometimes we step down to the vice-chief and deputy secretary level. But on the whole it is at our level. That is where we look at working level exchanges, education and training opportunities, exercises, the work we do in the fora in the region, like ADMM-Plus, the working groups, and discussions on the Western Pacific Naval Symposium. All those sorts of issues are discussed at that period or between the relevant service chiefs.

We are slowly building up the practical expression of that in exercises. We have done HADR exercises, tabletop, a few troops together, and we will gradually build those interactions. We have done maritime exercises with the Chinese and look forward to the next opportunity. We were going to put a vessel at the International Fleet Review equivalent, but that was cancelled. All those normal day-to-day and annual activities are coming into place.

Senator CONROY: Indonesia. You mentioned last time we were talking, Gen. Hurley, that we are on a bit of a go-slow with Indonesia at the moment due to a range of issues, tow backs, et cetera, and Operation Sovereign Borders. Could you give us an update? I think 'go-slow' might have been a generous description, from all I have heard over the last six months. Are we back on track?

Gen. Hurley : No, we are not to where we were in, say, November last year when Indonesia put these temporary suspensions in place. But I think the relationship is still very constructive. There is still interaction, engagement and discussions. We look towards how we build out from where we are now to whenever the political signals are given that business as usual resumes. There is certainly no animosity. There is no angst at all. I think it is very professional. We understand what the government direction is and we work towards that. We can still have quite good interactions. In fact, the deputy chief of the Indonesian army was out here last week, and those sorts of engagements can continue.

We have a construct called the High Level Committee, which is chaired by Panglima and myself, which has four working groups underneath it. We have had two of those working groups with the two-star heads so far this year. Things keep moving along at a reasonable pace and a reasonable level.

Senator CONROY: Was defence cooperation suspended? Has it been unsuspended? Is that what you are indicating?

Gen. Hurley : The suspension is not total. Exercises we do not do, but what falls below exercises we can continue on doing by discussion and negotiation.

Senator CONROY: So you can—

Gen. Hurley : Some. It is not as good as it was, and not the same rhythm and so forth that it would have been before November. There is commercial interaction. The signing of the memorandum for the additional five C-130s, the handing over or the transfer of the C-130Hs and all those sorts of things continue as originally planned.

Senator CONROY: What military exercises were cancelled as part of the go-slow?

Gen. Hurley : I do not think I have a list on me at this estimates, but I can certainly find that for you fairly quickly.

Senator CONROY: I was recently at RAAF Base Richmond and I saw first-hand the C-130s which are soon to be gifted to the Indonesian government that you just mentioned. What do you think the benefits to the TNI will be of having access to these aircraft?

Gen. Hurley : It will give them the mobility within the archipelago that they need. When you look at the length and breadth of the archipelago, it is an enormous responsibility for them. I think it is more than just the aircraft package, though, because we have been investing quite heavily with the TNI Air Force in terms of their airworthiness capability, which is probably more important than the aeroplanes, and helping them to develop a system of airworthiness to manage their aircraft and get to the required safety standards. The platform is part and parcel of the overall engagement, but helping them to manage their fleets more effectively is just as important or even more so.

I should mention just in terms of engagement, the minister led a team up to Jakarta for the Jakarta International Defence Dialogue in March. He met with his counterpart and I met with my counterpart. We had industry with us. The Chief of Navy was there. It was a very positive engagement at that meeting.

Senator CONROY: I am happy to put the rest of my questions from that area on notice in terms of the other nations in the region, to speed things up. Senator Stephens, were you going to ask about Defence Export Control Office?

Senator STEPHENS: If you want me to.

Senator CONROY: I heard a rumour that you might have been seeking to ask those questions.

Senator IAN MACDONALD: I would like to ask a question very quickly on behalf of Senator Kroger. I understand that a senior advisor in the international area from the Prime Minister's office was included as a member in the recent defence related delegation to Japan. Can you tell me why that was and are there any precedents for staff from the PMO participating in similar delegations?

Mr Richardson : We sought the involvement of that particular senior advisor in the delegation. On the odd occasion where particular things are identified at head of government level it has not been unusual in the past, on a selective basis, for advisors from the Prime Minister's office to be involved in delegations of that kind. For instance, in 1989 following Prime Minister Hawke's initiation of APEC at his speech in Seoul in January of that year—

Senator CONROY: You have to go back 25 years to find a similar case?

Mr Richardson : No, I was working in PM&C at the time. I was closely involved in this.

Senator CONROY: Are you showing your age?

Mr Richardson : Yes, I am.

Senator IAN MACDONALD: Can you just ignore the interjections, Mr Richardson.

Mr Richardson : The then head of the Department of Foreign Affairs and Trade, Dick Woolcott, led a small group around the region to add substance to the then Prime Minister's statement and initiative in Seoul, and John Bowen, who was the then foreign policy advisor to Bob Hawke, accompanied that group because of the identification of the initiative with the Prime Minister personally.

I think you will find also in 1995-96 when a security treaty was being negotiated between Australia and Indonesia that Allan Gyngell, who was then in Prime Minister Keating's office, was personally involved. In this particular case, the high-level delegation that went to Japan was off the back of the Prime Minister's visit to Japan. There had been discussions between the Prime Minister and Prime Minister Abe, and we thought it was important for someone from the Prime Minister's office to be part of that delegation to add weight to it in terms of the Prime Minister's personal connection. That was done and I think it was to everyone's advantage.

Senator IAN MACDONALD: Thanks for that, Mr Richardson. I heard some murmurings about it and was just wanting some clarification about what happened.

CHAIR: Senator Edwards.

Senator EDWARDS: General Hurley, I thank you for your very distinguished service to this country over the many years that you have been involved in the ADF and I join with my colleagues in commending you for that. On behalf of the people of South Australia whom I represent, I would like to thank you sincerely.

Gen. Hurley : Thank you very much.

Senator EDWARDS: I just want to go to the issue of some of the things that Senator Conroy has touched on and I am trying to get an understanding of this myself. It is in relation to cuts, which gets a lot of discussion here. In the 2011-12 budget, can you confirm that there were 1,000 APS cuts in that year?

Mr Richardson : Whatever the figures say, there certainly would have been some reductions. I cannot confirm it was precisely 1,000.

Senator EDWARDS: Subsequent to that, in the 2012-13 year, another year in which Mr Conroy's government was in power, were there another 1, 000APS cuts?

Mr Richardson : Leaving aside who was in government, that is right. Over the last two years, since the middle of 2012, we have shed just over 2,000 APS staff.

Senator EDWARDS: And the budget for 2013-14 was a further 800?

Mr Richardson : That would be right.

Senator EDWARDS: In addition to that, there were 400 additional service providers as well to be cut?

Mr Richardson : That would be right.

Senator EDWARDS: So, in total 3,200 personnel under the previous government?

Mr Richardson : I do not think in terms of the previous government or this government, I am thinking in terms of the last two years, which take me up until May of this year. As I said, there was a reduction of about 2,000 full-time staff equivalent, which would equate to around the numbers that you are talking about. We have had downward pressure on the APS in Defence for a while.

Senator EDWARDS: Thank you for that clarification. I will just move to superannuation if I can—stay in the same personnel area. Do the changes in the superannuation schemes actually represent a cut to the Defence budget?

Mr Richardson : Not to the Defence budget. Over the forward estimates we have to make certain contributions, which are not a cut per se.

Senator EDWARDS: So, Defence is funded effectively to the level required for the revised employer contributions; is that right?

Mr Prior : That is correct. If you are referring to—and you may or may not be—page 17 of our portfolio budget statement in the budget measures section you will see in relation to the superannuation new arrangements there is a reduction in our budget. That is because we are, as you say, funded for the contributions we make. To the extent that the contributions are less, we are funded less. It is not a cut to our capacity or capability.

Senator EDWARDS: So, the purchasing power of Defence is not diminished by virtue of this in any way?

Mr Prior : That is absolutely correct.

Senator EDWARDS: The commentary in there around it suggests that the contributions will be grown by the market, and the inference of that is that it will not be a burden on the Future Fund. Can you just put a bit of a description about what you understand by 'grown by the market'?

Mr Prior : The new fund is an accumulation fund rather than a defined benefit fund. An accumulation fund is also a fund that will be provided by the market. Classically superannuation funds operate in the market. So, accordingly, contributions will be made to those funds in the market and then those funds will accrue benefits for their members in the same way that other newly appointed people in the Public Service have that sort of arrangement.

Senator EDWARDS: Will that eliminate the need for the Future Fund to provide?

Mr Prior : Correct. That is exactly right. The older funds, the existing funds, are funded by ultimately the Future Fund's investments to provide the defined benefits for those individuals who are party to those particular schemes.

Senator EDWARDS: How have the individuals met that policy decision? How has that been generally met with by people participating in that superannuation space or contributing with their hard earned?

Gen. Hurley : The new accumulated fund that was announced by the government in the budget does not come into effect until 1 July 2016, and only for members who enter from that time. So, for current members it does not have an impact unless on 1 July 2016 or some point thereafter they elect to move from their current system to the new system. It is only for new members essentially.

Senator EDWARDS: But generally it has been welcomed by the people in the Defence Force?

Gen. Hurley : I cannot say that; no, incorrect. I would say they are neutral.

Senator EDWARDS: I have not seen any press reports saying that they have vehemently—

Gen. Hurley : It does not have an impact on them.

Senator EDWARDS: As to some of the savings being talked about, the government has identified $1.2 billion in efficiencies within the Department of Defence, and that is over the forward estimates. I believe that is consistent with the election commitment that these funds will be reinvested in Defence capabilities. There has been no variation or deviation to that. My understanding of that $1.2 billion is that those savings are to be reinvested in Defence capabilities; do you want to expand on that?

Mr Richardson : Yes, that is right.

Senator EDWARDS: So, no variation to that?

Mr Prior : There is no variation to that. That is indeed what is going to occur.

Senator EDWARDS: Was this also a position taken by the Commission of Audit; that these funds be reinvested?

Mr Richardson : I do not know what position the Commission of Audit took on that issue.

Senator EDWARDS: Can you confirm that recommitment of those funds will be backed up by the government's white paper, the force structure review and the first principles review?

Mr Richardson : Yes, that is right.

Senator EDWARDS: In regard then to an area that I am a little concerned about, the future funding allocations—the Treasurer announced that the previous government left Defence with what could only be described as unsustainable growth in the new 2017-18 forward estimate year. As a result of that, $1.5 billion has been moved forward to meet those strategies under the previous administration in the earlier years, which includes $500 million into the current financial year, for which the previous administration left Defence substantially and significantly short of meeting its capital acquisition bills. Probably the $1 billion will be spent on capability requirements and then a further $520 million has been deferred from the 2017-18, with an increase of $260 million in 2019-20, and $2,060 million in 2020-21. There is now no net impact on Defence funding over the period 2013-14 to 2020-21 by virtue of the current administration's policies to turn that around in the time that they have been in government; is that correct?

Mr Richardson : You have made a commentary on the way through, which I cannot comment on. In terms of the facts embedded in your commentary, it is true that $1.5 billion from 2017-18 was brought forward into the forward estimates, and it is true that about half a billion was pushed out to the two following years, 2018-19 and 2019-20 and a little bit further. That bringing forward and pushing out is certainly a smoother trajectory in terms of the increase in Defence spending.

Senator EDWARDS: It is my understanding that the previous budget allocations were unworkable and now that we have a change in allocation of funding over that period over the next five years, the department will find it eminently better in terms of operational capacity and delivering what is expected of the Australian people.

Mr Richardson : I have never worked in a situation which has been unworkable.

Senator EDWARDS: You are very capable. That is why you are in the role that you are in. Thank you, Chair.

CHAIR: Thank you. Senator Stephens for 1.1.

Senator STEPHENS: Yes, 1.1, the Defence Export Control Office. Good afternoon, Mr Kirkwood, how are you today?

Mr Kirkwood : Well, thank you.

Senator STEPHENS: The committee has had a close involvement and interest in the progress of the Defence Export Control Office. Could you begin by actually bringing us up to speed in terms of, for example, how many applications have been received by the office so far in the 2013-14 financial year?

Mr Kirkwood : We actually have numbers by calendar year; is that suitable?

Senator STEPHENS: Let's go by calendar year. That is even more helpful.

Mr Kirkwood : For the 2013 year, a total of 2,983 applications were received for assessment against regulation 13E of the Customs (Prohibited Export) Regulations. Also in 2013 there were 112 proposed exports assessed against the military end-use provision, which is section 112BA of the Customs Act. There were 196 proposed exports assessed against the Weapons of Mass Destruction Act. I have an update for you this morning, but I am afraid it is not broken down between the three pieces of legislation. For the calendar year 2014 to date there have been 1,515 applications to the Export Control Office.

Senator STEPHENS: Thank you. That is a significant number of applications. Can you take the committee through the process of assessing the applications in each category, please?

Mr Kirkwood : There is a fairly standard process for all of the applications as they come in. They are now lodged through an electronic online system through our website. The first step in the Export Control Office is that a technical assessment is undertaken. That is a key part of the process, and we have experts there who manage the application of the control list in determining the control status of the goods. Depending on that outcome, it is assessed under the respective piece of legislation.

Once it is determined that the bulk of the cases are assessed against regulation 13E, they look at the goods, the destination, the end-users and they determine whether or not the case is considered a standard case or a sensitive case. There are standard processing timeframes that have been in place for a number of years now where if it is a standard case it has an assessment period of 15 working days. If it is considered to be a sensitive case, there is a 35-day assessment period.

If it is a standard case, it proceeds through the Export Control Office, mostly internally, and checks are done for compliance and other reasons, and then the permit is normally granted. If it is determined to be a sensitive case, it goes through a process called the Standing Interdepartmental Committee on Defence Exports. Depending on the nature of the case, that can refer it out to any number of experts across government for input against the government's policy criteria. The policy criteria in those cases are national security, regional security, international obligations, foreign policy and human rights.

So, depending on which aspects of the case are raised through the particular circumstances, we would, for example, go to the Department of Foreign Affairs and Trade for foreign policy advice. We might go out to the Services and Defence Capability Development Group for advice around our ADF military capabilities and seeing if there were national security impacts to export those into the region. We gather all that advice and then we finalise the case.

Senator STEPHENS: You said that for standard applications 15 days is the statutory period. How often do those applications actually extend beyond 15 days?

Mr Kirkwood : Just to clarify, I would not use the term 'statutory'. It is defined in the legislation as such, but it is the endorsed processing timeframe by government. We are very pleased. We have seen a significant increase in the processing timeframes against those standards. We are now seeing over 90 per cent of those cases being undertaken within a 15-day working period.

Senator STEPHENS: So, more than 90 per cent?

Mr Kirkwood : Just to be precise, in the last quarter of 2013, 92 per cent of routine applications were completed within 15 days, and 93 per cent of complex cases were completed within 35 working days.

Senator STEPHENS: This time last year Mr Sargeant advised us that the department was looking to simplify and streamline the applications process. Can you tell us what has changed in that year? You are using the online portal, for starters. What else has happened?

Mr Kirkwood : It is more than a portal, as such. It was the entire processing system in the office. That has really revolutionised the way that the assessments are done. It used to be a completely paper based system with handwritten comments, and I used to manage that system. I saw it day to day. It was a project started several years ago and it is quite a significant project in terms of IT. Behind the scenes, all of the case management is done electronically and that has really helped to improve the efficiency and consistency of decision making.

We are also, of course, undertaking a lot of work with the Strengthened Export Controls Steering Group in relation to new legislation. That process is also identifying ideas for ways in which reforms can be undertaken in the context of the new legislation, but of course while those ideas are coming up it is the same Export Control Office that is supporting both the existing and potentially new regimes, and so we are looking at how to apply those reforms to our day-to-day practices in the Export Control Office as well.

Senator STEPHENS: That sounds fantastic. The complaints and the feedback we have had from industry the last few years went, in many respects, to the timeliness and the clunkiness of the system. This system that has been put in place now, is that a purpose built system or were you able to buy some kind of contact management system?

Mr Kirkwood : It was done through our Chief Information Officer area in Defence using Defence supported technology, but the actual system itself had to be put together in a bespoke fashion, because it is the only one of its kind in the country. There is no other Export Control Office. We use a customer relations management tool as the foundation for it. All of the way it is put together and the application is quite bespoke, which is why it took so long.

Senator STEPHENS: Is it a system that is shared by other countries that are, for example, involved in the Defence export control measures?

Mr Kirkwood : I can talk quite personally to this. In standing up this project a few years ago, I was very interested in looking at what other countries had in place. It is the case that most countries have their own system. Even though most countries are implementing the same approach under the international export control regimes, they all have their own domestic legislation. They all have their own domestic agency responsibilities, so it is all slightly different. The United Kingdom has a very successful system that some countries are looking at. I know the United States, as part of its aid program, will actually assist some countries by giving them a system as well. We find that amongst most of the like-minded countries they all have different systems.

Senator STEPHENS: Minister, I noted that you have been critical of the Defence Export Control Office in the past in the sense of failing to be sensitive to commercial realities. Are you pleased with the way in which the process is now operating? Do you get regularly briefed on this?

Senator Johnston: It is quite an interesting and detailed story, and I am pleased Senator Faulkner is at the table. Some long time ago a Western Australian manufacturer was initially permitted and then not permitted to export a particular product. There were some tens of millions of dollars involved. On a constituent basis, I sought to have the decision reviewed. When there is classified information supporting the prohibition of an export it is very difficult for the government, and indeed for the exporter, to come to any clear understanding as to the reasoning and the factual basis for the decision. What we have attempted to do is to engage—and we have a relatively clear number of exporters who have products that would, on a regular basis—trigger the Defence Export Control Office's concern. What I have attempted to do, rather than put into place some large, clunky and expensive framework of reviews by approved lawyers and appeals by approved but constrained process, to preserve the security of the situation we have simply got the office to engage those exporters and rather inform them as to what the agreement is all about, what the defence export and munitions goods act is all about, our ITARs responsibilities and what our FMS acquisition responsibilities are.

We have sought to fill the gap by engagement rather than simply what would apparently be arbitrary decisions. They have to arbitrary, because we are relying on intelligence from our friends and allies and some of our own intelligence. We cannot disclose the sources and the detail of that. I think we have been reasonably successful. There is no doubt some people will be unhappy. You cannot please everybody all of the time, but I think engagement has defused a lot of the angst in there.

The other side of the coin is that we do have some up-and-coming exports that I think are potentially going to be very strong for Australia into the future. The Canberra developed phased array radar, for instance. What I have been saying to the department at every opportunity is, 'Let's not wait until we have an export application. Let's start assisting and preparing a tamper-proof version of that', as we did with Nulka, so that we are a little bit ahead of the curve and that there will not be a delay to the corporate entities that want to enter the export market.

Again, I think engagement and anticipation is the key to doing this for Defence industry. There are not a lot of products on the list that are going to burst onto the international scene, but we have a couple. I think those couple are reasonably obvious and I think we need to understand exactly what an export version, a tamper-proof version, of those products would look like and how we would deal with it so that we can get that particular manufacturer into the international market.

Senator STEPHENS: Does that mean that you or your officers or your department refer people to Mr Kirkwood's team? Or, Mr Kirkwood, do you identify projects that may perhaps be seeking to engage with your export office?

Senator Johnston: We all have an obligation where we see that there might be dual use, even in an intangible sense, of information acquired in research and development to refer that particular iteration, evolution, technology across to the Export Control Office. All of us who come across knowledge in that regard have an ongoing obligation. The committee will have before it Professor Chubb's report as to what has been going on for the last two years. I am told the stakeholders are pleased with the way we are going forward with the treaty legislation that has been before the committee for some two years now. The most difficult part is that dual use is very vague and often in the eye of the informed beholder.

The university sector initially was very concerned. I think we have allayed those concerns, but that does not mean we need to be vigilant in an ongoing way. Sometimes we may have to be arbitrary, to be perfectly blunt. We may have to be arbitrary to fulfil our international obligations. But as I say, we seek to do that from an engaging point of view and take those researchers and manufacturers with us rather than simply say, no, and not give them any real indication of our capacity to tell them why. I will hand over to the official and he can pick it up from there.

Senator STEPHENS: Thank you for that. Can you tell us if there have been any applications refused, Mr Kirkwood?

Mr Kirkwood : For this year?

Senator STEPHENS: For this year.

Mr Kirkwood : Yes, I can. Once again, broken down against the different categories of controls, I can tell you that in March 2014 there was a prohibited export under the military end-use provision. So, that is one for this year so far. In February 2014 there was a prohibition notice under the Weapons of Mass Destruction Act. So, that is one for 2014. Under regulation 13E there was one denied application as well—one for each.

Senator STEPHENS: In terms of the minister's previous comments, what is the recourse for those people who have made applications that have been rejected? Is there any?

Mr Kirkwood : In terms of administrative decision making, they have the standard recourse around that. In terms of the policy decision, the minister is the only person in this system who is able to deny an export and so we provide that advice to the minister. That is the significance of the decision. We consult with the company whenever we think we might be going towards a decision to recommend denial or prohibition. We engage with the company, we advise them of that, we offer them the opportunity to provide any further information that might help us to understand any extra context that might alleviate our concerns, and we gather all of that information together before going to the minister with our advice.

Senator STEPHENS: Thank you.

CHAIR: I think at this point we will break for afternoon tea and add a couple of minutes to the break period. Thank you.

Proceedings suspended from 15.33 to 15:46

CHAIR: We will resume the hearing.

Senator CONROY: According to question on notice 91, over the period 20 November 2013 to 28 February 2014 there were 140 graduate entrants to the department, and we were advised in answer to question on notice 11 from the November estimates that the total Defence graduate intakes for 2010-11 through to 2013-14 were 238, 262, 191 and 176. In light of the civilian cuts being imposed on APS staff, could you give us a reassurance that there will be no further reductions to graduate numbers?

Mr Richardson : I cannot give you a guarantee, but at present we are not planning any further reductions for next year.

Senator CONROY: You have managed to give me comfort on almost everything that I have asked you in that there are no plans at any stage to do this or not.

Mr Richardson : For next year we are looking at a graduate intake of just below 200. We have to go through certain processes of approval for that. I do not anticipate any difficulties, but I cannot give you a guarantee.

Senator CONROY: So about 200 is what you will be putting forward?

Mr Richardson : Just below 200.

Senator CONROY: But that is subject to the process itself?

Mr Richardson : That is right.

Senator CONROY: Could you include a breakdown by the different categories of intake as was set out in the answer to question on notice 11?

Mr Richardson : We do have that.

Ms Skinner : For the next calendar year we are anticipating 50 to 60 generalists, around 70 people for our Intelligence and Security program, around 65 or so for the Defence Materiel Organisation and about five or six for the Navy Engineering Development program.

Senator CONROY: I have some questions about the scoping study on the sale of the Defence Housing, but I will put them on notice. I think Senator Dastyari wants to close out 1.1.

Senator DASTYARI: Through the chair.

CHAIR: Yes, of course.

Senator DASTYARI: Mr Richardson, this is probably a question best placed to yourself but I am not sure if Senator Johnston could answer as well. I will just go back to some of the statements that were made earlier which I was following in my office. I am following on from a few questions that were asked this morning about the Singapore trip and obviously the media reports that are appearing in the paper today. I would like to take one step back to the first time that Australia really participated in this discussion in a formal sense, which was 4 October with the TSD that was done by Minister Bishop with the foreign ministers of the United States and Japan. You are obviously aware of what I am talking about there?

Mr Richardson : Is that the trilateral strategic dialogue?

Senator DASTYARI: Yes, and the communique that came out of that. My question is: this is obviously a DFAT matter so what is the participation or role of Defence in something like that?

Mr Richardson : It is not obviously a DFAT matter. It is a DFAT/Defence matter.

Senator DASTYARI: As I understand it, and correct me if I am wrong, the communique in that was prepared—and this has already come out in previous Senate estimates—prior to the arrival of the Prime Minister for the Bali event that he was there for, the name of which has suddenly escaped me. Minister Johnston, you were not there then, were you?

Senator Johnston: No.

Senator DASTYARI: Was there someone there from Defence?

Mr Richardson : I do not think so.

Senator DASTYARI: How does it work when a communique like that is prepared? Does DFAT talk to the department? How does the interaction work?

Senator CONROY: It gets to the destination.

Mr Richardson : Normally a communique of that kind is worked through at officials level in advance of the meeting. It goes through quite a number of iterations and the like. The department that is in the lead, whether that be DFAT, Defence or PM&C, would normally consult with other relevant departments. The final iteration of it might be done on the spot. It may or may not be practical to link back into all elements of Canberra.

Senator DASTYARI: In this case was the final iteration done? Obviously you are dealing with three different governments as well. Did the final iteration happen on the spot or was the final version that you were briefed on the same version that was presented on the day?

Mr Richardson : I would need to take that on notice.

Senator DASTYARI: If you could take that on notice.

Mr Richardson : Yes.

Senator DASTYARI: More specifically to the question that you took on notice, obviously at the time there were a lot of media reports that there were some last minute changes to the document. I just wanted an understanding of whether or not from your perspective that was true and, secondly, if you could take on notice what role your department played in the preparation of that document?

Mr Richardson : We will take that on notice.

Senator DASTYARI: Minister Johnston, I have one or two very quick questions following on from what you said earlier. I know you reiterated in the media report today—which I am assuming you are not broadly claiming is an incorrect reflection of what you said-is it fair to say it is a reasonably fair recollection?

Senator Johnston: Which one?

Senator DASTYARI: The David Wroe media article in today's Sydney Morning Herald.

Senator Johnston: I think that is pretty accurate.

Senator DASTYARI: You made reference in that—and you are paraphrased here—about Australia not taking sides in the territorial disputes between China and its neighbours. Is that fair?

Senator Johnston: That is true.

Senator DASTYARI: I would like your view on how you reconcile that with the argument that others put and that I have put through estimates before that says that our participation in a complicated dispute that is a long running dispute regarding territorial waters is itself the act of taking a side.

Senator Johnston: If it is, let us clarify that right here and now. We are not taking sides. If we can help facilitate the peaceful and stable resolution of these disputes and we can be useful in that end I think we would participate. We are not taking any sides. The three disputees need to understand that we are objective, judicious and we will not participate on behalf of any of the disputees. If we can assist in any way that is meaningful towards stability and a peaceful negotiated settlement we will.

Mr Richardson : I would like to add to that.

Senator DASTYARI: I would like to get your view, Mr Richardson.

Mr Richardson : There is a difference between having a view and taking sides. It is very different. Successive Australian governments have had a view that in respect of the disputes in the East China Sea and South China Seas that they should be resolved peacefully and in accordance with international law. That is not taking sides. We have a national interest in those disputes. They are not some far distant dispute unconnected to us. Fifty-two per cent of our merchandise export shipping trade passes through the South China Seas so we have a national interest in how those disputes might be resolved. Successive Australian governments have expressed a view on that.

Senator DASTYARI: Just to summarise, as I know the Chair is very keen to move on. I have two questions from that. Firstly, Minister, is it fair to say that you see our role as playing the role of a peacemaker in the region between Japan and China?

Senator Johnston: No, I do not see us unilaterally involving ourselves as peacemaker. We have our position and we have stated it. We do not take sides. We want international law and the resolution of matters to prevail. We have said that if there is any assistance that is meaningful and useful that the disputees see that we can play then I think we would open to that, but we do not inject ourselves into the process.

Senator DASTYARI: At this stage we obviously have not been asked to play that kind of role?

Senator Johnston: No, we have not, to the best of my knowledge. Bear in mind I think that Defence would not be the first port of call in terms of engaging the Australian government. The Foreign Affairs Department would be.

Senator DASTYARI: Finally, you make reference to this and obviously Mr Hagel had very strong words about it and I would like to get Mr Richardson's views on how significant a threat—and 'threat' is perhaps the wrong word—an issue for Australia, from a Defence perspective, is this dispute and how serious and significant is it or can it be? What is the potential here?

Senator Johnston: Instability in an area where, as the secretary has said, we have a very large proportion of our export earnings flowing through to market is very serious. It is very serious indeed.

Senator DASTYARI: Is that your view as well, Mr Richardson?

Mr Richardson : Yes, absolutely.

Senator DASTYARI: Is there a threat of actual conflict breaking out over this?

Mr Richardson : No-one wants conflict. I do not believe that either China, Japan or the countries of Asian want conflict. However, there is always the risk of an accident or a miscalculation. It is that concern about miscalculation that could lead unexpectedly to something.

Senator DASTYARI: I assume you are going to tell me that you are not going to play hypotheticals, but if there was a miscalculation dispute then obviously Australia's role would change?

Mr Richardson : We do not go there.

Senator Johnston: There are so many nuances here. I think we need to stick to what we have said so that we are consistent. I think consistency is an important part of the role and the commentary that we put into what is potentially a difficult situation. I will say Indonesia has successfully negotiated and resolved disputation with the Philippines. Taiwan and Japan have settled their fishing disputes. There are models of resolution pursuant to negotiation and international law and they are the sorts of models that we point to as being the sorts of things that we think are helpful.

Senator DASTYARI: Following the intensity of language chosen by Mr Hagel, who would have chosen his words obviously fairly carefully in that kind of formal environment—they were not offhand comments; they were prepared statements—I actually agree with part of what you are saying, that there is a risk that in fact when you are dealing with China and others they actually view that as saying, 'No, these people aren't being impartial. They are actually taking one side or another' and that there is a risk with things like doing a joint communique on the issue with the US and Japan there can be the perception that we are taking sides as well.

Senator Johnston: You need to read the communique.

Senator DASTYARI: I have it here.

Mr Richardson : That is not the first time Australia, Japan and the United States have made comments on that issue, nor is it the first time that we have made statements bilaterally with the US or bilaterally with Japan. Successive Australian governments have done that.

Senator DASTYARI: But the political context has changed.

Mr Richardson : Our national interests have not changed. It was not the United States that took an oil drilling platform into disputed areas with a flotilla of ships, and also bear in mind that in relation to the East China Seas the United States has stated publicly that its alliance obligations in respect of Japan would be activated in the event of certain action.

Senator DASTYARI: This is probably something where the people here would know much more about this than myself, so this may be a simple question and I apologise but would our alliance treaties with the US and Japan be activated? Is that a matter of fact?

Mr Richardson : That is a hypothetical which we do not go to.

Senator DASTYARI: But as a matter of fact?

Mr Richardson : It is a hypothetical which we do not go to.

Senator DASTYARI: Mr Richardson, obviously the ANZUS agreement is an agreement. If it was activated in the way in which the Americans have clearly said it would, is there a dispute whether or not our agreements with the US would necessarily involve our involvement or not?

Mr Richardson : I would suggest that you read the ANZUS Treaty.

Senator DASTYARI: Would the Joint Declaration of Security Cooperation we signed with Japan necessitate our involvement?

Mr Richardson : No. That is not a treaty.

Senator DASTYARI: But the treaty with the US, the ANZUS Treaty--I am asking a question, Mr Richardson. Is there any dispute? Is there a matter of fact? If there are different opinions, then there are different opinions.

Mr Richardson : I am sorry, but I will not give any answers above which I have already given.

Senator Johnston: This discussion is not in our national interest to telegraph what might happen in a speculative environment.

Senator DASTYARI: I do not think that it is unfair at Senate estimates to be asking whether or not the ANZUS Treaty—

Senator Johnston: I think it is.

CHAIR: I think you should listen to what is being said because you are treading into rather sensitive areas.

Senator DASTYARI: I am not sure what is sensitive about asking questions about what our obligations are or are not. I think that is a very fair question for the Senate to be asking the Department of Defence. We are talking about various serious matters. We have the defence minister say quite clearly that he thinks this is a cause of concern and the fair question that if there was an involvement, as the Americans have telegraphed, whether or not that would necessitate Australia's involvement under the ANZUS agreement. This is surely a question that General Hurley and others have looked at. This is not a new thing.

Mr Richardson : It is your prerogative to ask the question and our prerogative to answer it. We have answered it. We are not going further.

Senator FAWCETT: I have a question on 1.1.

CHAIR: Yes. Senator Fawcett.

Senator FAWCETT: Can I ask you a question in the area of Audit and Fraud Control Division?

Mr Richardson : Yes.

Senator FAWCETT: Would you be able to outline Defence's policy in terms of a register of pecuniary interests for senior officers?

Mr Richardson : There is a register of pecuniary interests in respect of senior officers and that is updated annually.

Senator FAWCETT: So that applies to all senior officers?

Mr Richardson : It applies to all senior officers.

Senator FAWCETT: Regardless of whether they are in uniform or the Public Service, work in DMO or Defence, it applies to all?

Mr Richardson : Yes.

Gen. Hurley : Those by uniformed officers will come across my desk as they update.

Mr Richardson : And the civilian come across my desk.

Senator FAWCETT: Is there a register required to be kept for gifts that are given for all officers or all members of the Defence Force?

Mr Richardson : Yes, there is, consistent with one. The department has a policy on that in writing and that policy is consistent with government guidelines.

Senator FAWCETT: For people who are working particularly in the procurement or capability development area, are there restrictions on employment post-separation from Defence?

Mr Richardson : Yes, there are.

Senator FAWCETT: Could you outline those for us?

Mr Richardson : There is a restriction on what you can do over a certain period of time. I think it is in the first 12 months.

Senator FAWCETT: So that would go to, for example, not working for a company that you had been dealing with in your role within DMO?

Mr Richardson : That is right.

CHAIR: I now call the officers from programs covered under 1.2.

[16:05]

Senator STEPHENS: Chair, just on Senator Fawcett's question, I wonder if Mr Richardson could provide written advice of that particular issue about employment after working with the Department of Defence?

Mr Richardson : We can provide something.

Senator STEPHENS: Thank you.

Senator FAWCETT: Are you happy for me to proceed?

CHAIR: Yes.

Senator FAWCETT: I would like to take you to Rizzo. In estimates in February I asked some questions which you agreed to take on notice in looking at Rizzo in terms of rebuilding Navy's engineering and technical workforce. You gave a fairly comprehensive answer but there are a few things that I would like to follow up on that. In the answer it talks about the professionalisation of the engineering officers' skill set being part of improved training in an education continuum and the pilots of training courses commenced in early 2014. I was wondering if you could outline briefly what pilots they were and what the success rate is in terms of attracting people, graduation rates and retention as appropriate?

Vice Adm. Griggs : I would have to take that on notice.

Senator FAWCETT: Would one of your officers have that?

Vice Adm. Griggs : No. We do not have that level of detail.

Senator FAWCETT: If you recall, the whole point of the question last time was that I was trying to ascertain where Navy was at in terms of progressing with the recommendations of Rizzo, where gaps existed and how significant they were. One of the answers that came back was looking at sustainable workforce development and it is all in the future tense, 'The management plans will integrate' and 'Different weigh points may include specific roles or outplacements'. I am wondering if you could inform the committee as to what is actually in place in terms of pathways to engage, grow and retain engineering skill and what, at this point some years after Rizzo, is still actually just in the planning phase, because certainly with the way that this answer is written it is all in the future tense.

Vice Adm. Griggs : I do not have the response with me. The reason that it is in the future tense is because it is talking about the entirety of the engineering workforce. I think that one of the points that I have consistently made in the last three years is trying to understand the scale and enormity of what we are trying to deal with in Rizzo. I know you do because we have had many discussions about that. I think that is why the answer is written that way.

There are a number of outplacement programs that we already have in place with some of our key propulsion OEMs, like MTU, for example. We have things like the Ford Performance Racing issue, which is giving some of our people some excellent skills in modern diagnostic tools and test equipment. There are a number of things that are already underway in that regard.

We have streamlined some of the engineering training continuums, the Marine Technician 2010 for example. We have changed the way that has been structured to try to take out some of the wrinkles that were in that when it came in about four years ago, which was in a pre-Rizzo environment. Those sorts of activities are definitely underway. Are they underway on a large scale? No, but they are underway.

What we have been putting the time and effort into is getting our engineering blueprint and the functions of our engineering personnel understood, because one of the problems that we had leading up to Rizzo is that I do not think we had a very clear understanding. If you asked the question, 'What do you want a naval engineer to do?', you got about 15 different answers to the question; it was not very clear. That is the work that has been done over the last couple years. It has literally come right back to ground zero, starting again and rebuilding our understanding of the functions that we want our engineers to do. What are the educational implications of that? Of course, that is not something that is fixed in quick order.

The other aspect, as I mentioned before, is the overall workforce piece. We are still working through the 400 or so people that Mr Rizzo identified that we were short of. That really is tied up with the first-principles review. The secretary and I have had extensive discussions about how to best manage that because, again, that is not something that it is an add water and you have the capabilities solution. As you well know, it is going to take about 10 to 12 years to grow the capability, certainly in uniform. As to what we can buy in in terms of APS engineering support, we will obviously do that once we work out what the complexion is of that 400.

In the interim we have extensively used contractor support to make sure that we are making an impact on the waterfront, particularly in the groups that are dealing in the day-to-day business of making the seaworthiness and seaworthiness management system a reality. We know that we have got to grow the capability into the future. We are using contractors to support the improvement of our sustained business from an engineering perspective in the short term.

Senator FAWCETT: Can you explain to me what the answer here talks about with the establishment of a number of in-house specialist technical bureaus? It does not explain whether they exist within the Navy, the SPO or whether they are joint industry/Navy bureaus. Can you talk a little bit about what they are?

Vice Adm. Griggs : With the concept of the bureau service, I do not know if you recall that in the Rizzo report there was a diagram which was like a spaghetti diagram about engineering. It went to the fragmentation of the way the engineering function was done, not just in Navy but in DMO and the entire maritime sphere. What we are trying to do with the technical bureaus is to aggregate the skill sets around certain issues and put them in one place so that, in effect, there is a shared service in terms of that particular engineering function or maintenance or sustainment function. My vision of this is that they will integrated. They will certainly be uniformed and APS, both Navy and DMO, and in certain instances they will clearly have contractor support for particular expertise.

Senator FAWCETT: What is the target number of those technical bureaus?

Vice Adm. Griggs : I would have to take that on notice. Head of Naval Engineering is still working out what the exact scope of that will be.

Senator FAWCETT: Can I clarify when Navy received the final Rizzo report, if you like the go ahead from government, to implement his recommendations?

Vice Adm. Griggs : We started implementing in about August 2011. We only have four recommendations left. There are some that are long-term. Rebuild naval engineering, for example, is one of the recommendations.

Senator FAWCETT: I am cognisant that you just said that the first-principles review and other things occurring are beyond your control but essentially it is three years and it does not sound as though you have come to a definition of the target that you are seeking to achieve in terms of the nature of your engineering workforce. Do you have an end point where you are aiming to have that defined or at least to a point where you are confident with moving ahead?

Vice Adm. Griggs : We understand where we want to go to. The only reason that I am being a little unclear here is that until the complexion of that 400 that Mr Rizzo raised in his review, until we have the uniformed, APS and contractor complexion, I cannot give you a firm number.

Senator FAWCETT: Let us put what they wear aside and who their pay cheque comes from. Can I take it from that 400 that you have a breakdown of the competencies that are required?

Vice Adm. Griggs : We have a pretty clear idea of all of the positions within that 400. It is not that we do not know what we want those people to do. As I said, we have contract support in the highest priority areas within that 400 already working on that.

Senator FAWCETT: What percentage of your workforce does that contractor support comprise?

Vice Adm. Griggs : At the moment I think it is around 200 contractors across both DMO and Navy.

Senator FAWCETT: You have written 208 in your answer.

Vice Adm. Griggs : Yes, it is 208.

Senator FAWCETT: Is that 208 out of the 400, so about 50 per cent, or is that 208 out of a much larger number?

Vice Adm. Griggs : No, that is 208 out of the 400. They are working on the highest priority tasks within that 400.

Senator FAWCETT: Do you feel as though the current constraints around remuneration and conditions of employment within the Defence framework is a contributing factor to what you say are the challenges in the recruitment of engineering officers and the retention of technical sailors? Is that something that the government should be looking to work with Defence to give you more flexibility, or do you have the tools in your toolkit to attract and retain the right people; it is just a matter of finding them?

Vice Adm. Griggs : I think there is a bit of both, to be honest. You know what the resource boom did to us in terms of our Western Australian based workforce in the latter part of the last decade. You are always going to be subject to those sorts of market pressures where people are paying three or four times what we can afford to pay. That is just part of the cycle that we have to deal with. That is why we have put so much emphasis, particularly on the cultural change program within Navy and, since 2011, in reinvigorating where engineering stands within the organisation, because I think it was pretty clear that leading up to the Rizzo report engineering had become viewed as somewhat of an overhead and not an enabler of a high technology organisation. That is why we have done a number of things in terms of the outplacements in some of these programs, including our engineering challenge, which we now run annually across the electrical, marine technician and aviation technicians to try to reinvigorate an interest and enthusiasm in that technical workforce in what they do, reinforcing how important we see that role in sustaining the broader capability.

We are working very hard on those intangibles. We have got a strong program in terms of lateral recruitment from overseas, which is another way that we can chip away at the time that it takes to build that mid-level experience that we need in many of the engineering disciplines. We have reactivated our rejoiner team, which is again cold calling people who have left to see what their interest is in returning to the organisation. That has yielded some success, I must say, particularly from the resource sector where people have started to tire of wearing a day-glow suit in an airport lounge. They are starting to see some attraction to coming back and working in the organisation. We have loosened up our re-entry process. We have been more flexible in terms of recognising what they do outside of the organisation, rather than just taking away rank seniority or rank levels, which is what we used to do a few years ago. There is a whole range of ways that we are trying to attack this problem.

I am using individual retention bonuses in certain particular areas of the technical workforce, particularly in submarines, patrol boats and the ANZAC class and across our most senior sailor technical in the marine technician area. They are targeted and they have been quite effective in stabilising the separation rates, and in some cases in the submarine area, which was absolutely critical for me, reducing marine engineering officers separation. At the moment it has been reduced to zero. Weapons electrical engineering officers in submarines has been reduced to about three per cent separation rate, so they have had a considerable impact on the retention of people.

Senator FAWCETT: I look forward to getting the answers on notice about Rizzo but I will say, obviously with respect to submarines, according to the Coles report many of those measures have been very successful. It is a very positive report with Coles so I commend Navy for their work and DMO for their work on that.

I would like to go to the subject of submarines. In the 2009 white paper the IOC that was proposed for SEA1000 was 25-26 and by 2013 the IOC was 29-30. Can you give us a sense of where we are at at the moment, particularly as it pertains to our service life extension of Collins, just to understand whether we are seeing that IOC, hence potential capability gaps, moving even further?

Vice Adm. Griggs : I do not think that we have seen any further movement on the IOC. Obviously, in the end, that will depend on the option that is chosen by government. Until we go further down the path I do think that it is useful to speculate on that. We have not seen any further shift in the IOC. I think we discussed at the last estimates that the work that was done on the service life extension has shown that there are no major stoppers in terms of doing one if it is required. The issue will be how long it is required for and when it happens. Again, that will depend on the option that the government chooses in terms of the future submarine.

Senator FAWCETT: I would like to take you, as the capability manager for submarines, to the most recent of the US DOT&E reports where they talk about the APB program and the IG1 combat system. They highlight that for yet another round of reporting the capability of the system has not improved, relative to the previous iteration that was tested, in a number of key areas. I am interested to know what we contributed last financial year in terms of our contribution to the APB program.

Vice Adm. Griggs : I will have Mr Gould answer that.

Mr Gould : Our contribution to that program is about $20 million annually.

Senator FAWCETT: With the areas where there have been identified problems, does it concern you as the capability manager, Admiral Griggs, that there has been no improvement in areas such as high density contact management?

Vice Adm. Griggs : We have had this discussion before as well.

Senator FAWCETT: We have, which is why I am looking to see what actions you have put in place.

Vice Adm. Griggs : Part of this is the OT&E methodology that is adopted by the US. Even the US Navy has the same view. The CNO has the same view as I do, that we have far more real world data to look at than the OT&E process that is conducted in this program, so in terms of the high density contact issue, we remain satisfied with the performance of the BYG-1.

Senator FAWCETT: The US admirals that come out to Australia and have seen the solution that has been integrated with APB-07 and trialled on Collins for 18 months believe that that would be a substantial increase in capability and are keen to see that in the system, so I am just wondering if we have a solution here that has been proven to be integrated, functional and works and the US Navy operators have indicated they would like it, there seems to be a mismatch then between that message that says that everything is good and the fact that we have seen fit to fund and install it; the US Navy have seen it and said they like it and yet there still does not appear to be action to actually move that forward in the APB program.

Vice Adm. Griggs : I did not say everything was good. I said that we are satisfied with the performance. There can be improvements made, of course, but I really need to throw to Mr Gould in terms of the program.

Mr Gould : I am not aware of which US admirals say that they would like this. They clearly do not like it enough to have it inserted into the US set of requirements for the APB version that is now being deployed, which is APB-11 coming into Rankin in the case of Australia. That has not caught their attention sufficiently positively to make them want to actually insert that particular solution into the APB program. They will be here in a couple of weeks time, the submarines, so we will take it up with them.

Senator FAWCETT: You may be aware from many previous estimates that the now minister and myself have raised around this that the commercial construct of this APB program works for the US model of defence industry and government ownership of IP but, unless there is more proactive engagement of the Australian government in terms of developing and owning IP, there are roadblocks to our industry being engaged. I think tracing back through the history that is the real reason for that roadblock, so yet again I am asking what is Defence planning to do to put in place a framework that enables our industry to compete on a level playing field with the US, given that we put $20 million of taxpayers' money into this program every year?

Mr Gould : What we get for the $20 million is the continuous upgrade of the system. I am very much aware of the previous discussions that have taken place, but there are three things that I would point to. We have someone now in Washington whose specific job it is to make sure that opportunities for Australian industry are actually brought to the attention of the US. We have our own requirements. In addition to having observer status on the US requirements group we have our own requirements group that feeds directly into PEO subs there, which is a fairly recent innovation. We also started a seed com process by which we can actually fund promising developments in Australian industry, so that gives them a chance to overcome some of the IP restraints that they previously had because there is a very different model for IP management in the US and in Australia. Those are three things which, perhaps rather late in the day, we are now doing to hopefully produce some improvement there.

Senator FAWCETT: On the second point could you let the committee know—and I am happy for you to take it on notice—how many meetings that requirements group has actually attended and how many submissions they have made?

Mr Gould : I will take that on notice. They have met but I will take it on notice for a precise answer.

Senator FAWCETT: You are probably aware that framework has existed previously. We have discovered through this process of estimates that for a number of years there were no requirements actually put forward, even though the framework existed, so I am keen to know how many meetings they have attended and what requirements have been put forward.

Mr Gould : That is fairly recent, but I will get you the answer.

Senator FAWCETT: That would be good. I am very encouraged to hear that. On the third point you mentioned the program about trying to put a framework in to support our SMEs and our industry to develop. What takers have there been? Have there been any contracts? How is that structured? Do you put a tender out? Do you seek unsolicited proposals? What funding is attached to it?

Mr Gould : We put a tender out. There is funding attached. It is quite low-level research funding and I would say the take up has been mixed. Some people have said that this is a good step forward, but one or two people have said they think it is too little too late; that is the way that I would summarise it.

Senator FAWCETT: What is the quantum of funding that has been attached to it?

Mr Gould : I would have to take that on notice. It is fairly low-level funding but I will come back to you on that.

Senator FAWCETT: Some of the tasks, could I say also, that have been offered to our industry are also fairly low level. A couple of them have been assessed as being about a half a day's work for a high school student in tasks that have come out.

Mr Gould : I am aware of some of those reactions and I am aware of other reactions which are more positive.

Mr King : In response to those various questions we have taken this up at all levels. The Chief of Navy has taken it up, I have taken it up at my level and the General Manager of Subs. We have reinvigorated this process. I just want to say that there is an element here where industry has to stand up. There has been a lot of assessments from industry about certain capabilities and certain processes which is their view and is not the wider view of the community that is sharing this development. So, apart from all the actions we are taking there also has to be, in my opinion, a slight shift in the way Australian industry engages in this process and engages against the reinvigorated process that we have put in place. They have an obligation in this area as well.

Senator FAWCETT: I understand that and as we discussed earlier around MH370, where industry is given a real opportunity to step up, and in this case it was Atlas Sonartech, they did. They delivered a capability for Defence that was innovative and new in under a week, but they are the kind of company that unless Defence finds ways to consistently engage them they will leave our shores because much of their work is already export. If there is not a reason for them to be here it will be more cost effective for them to operate elsewhere and we will lose that capability to respond to new requirements with innovation.

Mr King : That is very true. I am just making the point, having been on both sides of the fence, that we have reinvigorated the process. We have put in place seed money here. We have put in place our participation in the selection programs. There is a need for a slight shift in the hunger from Australian industry to get involved in the programs that we can implement for them. I just make that point.

Senator FAWCETT: Thank you.

CHAIR: Senator Xenophon.

Senator XENOPHON: I will just follow on from Senator Fawcett's line of questioning. If these questions have been asked, forgive me, because I can only be in one set of estimates at a time. The government is to replace the HMAS Sirius and the HMAS Success in due course. What is the government's view on when a decision needs to be made and who will provide those ships? Is there an approximate time frame at this stage?

Senator Johnston: We are still working through that. In line with what the secretary and myself have been saying, in order to bring forward these program decisions needed to be made some two years ago. The requirement for replenishment ships is an urgent one and we are currently working that through as best and as fast as we can, given the financial constraints that Defence is confronting. We cannot do everything immediately but, rest assured, we are working those through. It may be that there can be some announcements regarding those sorts of things within the next several months.

Senator XENOPHON: I know the term of 'valley of death' is an awful term—and I think it has been raised previously today—but will the government's considerations in terms of the timing of that decision take into account the issues of capability and a drop-off in other work.

Senator Johnston: Well, the first thing to be made, and the secretary quite rightly prompts me to say, there will always be, given the circumstances confronting this government, some constriction. It is unavoidable. The decisions to avoid the constriction should have been made a long time ago.

Defence is not an industry-support institution. We must focus on design, capability and what we need, having been properly identified, is to match what we seek to acquire to those needs. That is the process we are in and it is often a very laborious, tedious process because we have issues of interoperability in our region; we have manning levels we need to plan for; the designs are quite extensive across a whole host of producers. So, working plans up does not take just months, it actually takes years in some respects to absorb and to give the taxpayer adequate security in terms of, if I can use a colloquial, the bang for the buck that the taxpayer gives us.

Senator XENOPHON: In relation to that, is a process of the government is following to determine the best way to go about replacing the ships, is it a competitive tender? Does the government have a position on that?

Senator Johnston: I am not in a position to talk about that yet because government has not made that determination finally.

Senator XENOPHON: I am happy for you to take this on notice, but in terms of what assurances can you give about industry consultation of the plan, whether it is the government, the ADF, the DMO or your office working with industry in terms of consultation about progressing this?

Senator Johnston: We do consult widely, but when we have got commercial-in-confidence considerations and competitive situations, and we do seek to have competitive tendering and competitions to yield value for money, but we cannot consult widely in those circumstances, so we are constrained in some respects. I think later this year you will see exactly what the government is intending to do.

Senator XENOPHON: Will that be before the end of this year?

Senator Johnston: I believe so.

Senator XENOPHON: Can I just go to the issue of the current time frame for making a decision on future submarines; is it likely to be this year or next year?

Mr Richardson : It certainly will not be this year. That was neither the time frame for the previous government and it cannot be the time frame for this one.

Senator XENOPHON: I was just optimistic. I thought this government might have accelerated the time frame.

Mr Richardson : No, it would not be possible to make a decision this year.

Senator Johnston: We would like to take the time frame for future submarines further in the white paper with some description, but let me tell you that this program is a very difficult one. There is a lot of things that are changing, and you will have seen some litigation and some argy-bargy between TKMS AB and the Swedish government, or acquisition agencies of the Swedish government. We are scoping that out as to what effect that has on our option 3.

Bear with us on this, but at the same time we are looking to see how we can sustain Collins for longer if we need to. That is not a simple task, either. We have what many people have described as an orphan submarine and so we are seeking to look at and understand exactly what we need to do to extend the life of Collins to accommodate the initial operating commissioning of the new submarine. It is a difficult task. I am optimistic that towards the time of the white paper we will have some tangible solutions to those issues.

Senator XENOPHON: So, you are not in a position to give an estimate on the number of jobs in South Australia, for instance, that would be necessary to deliver the future submarines and over a particular time frame?

Senator Johnston: No.

Senator XENOPHON: Okay, so is it too premature?

Senator Johnston: It is too premature.

Senator XENOPHON: In general terms, does Defence or the DMO have an estimate of the jobs multiplier effect in terms of subcontracts and supplier contracts for every direct construction job in Australia?

Senator Johnston: I will hand over to the experts on this.

Mr King : We did work some work quite some years ago on that. It is a fairly contentious piece of economic modelling but it suggests that there might be a 2.5 times multiplier. There is a lot of questions and the economic specialists argue around the degree of that.

Senator XENOPHON: Can I just ask the minister: what guidance can you give to the Australian defence industry, and I understand the constraints you have set out previously, as to the time frame and the process followed in arriving at a decision on future ship building activity? Would it be auxiliary ships or future submarines? Are you able to say which would be the priority in the short to medium term?

Senator Johnston: I can tell you that the government is struggling with all of those matters. It is in the constraints that the current financial circumstances put us under. I am not in a position to tie down as to when we will announce those matters. We are working them through. They are difficult; they are complex. With great respect to the previous government, we have virtually started with a clean sheet because the funding issue is the principal issue that is of concern to us.

Senator XENOPHON: Can I just go further to that? Can I just know whether you have a view of the importance of retaining a strategic asset of Australia's ship building capacity and intellectual and organisational knowhow in Australia and in my home state in particular in respect of that?

Senator Johnston: Ship building is a strategic industry capability as identified by the government. So, it is important.

Senator XENOPHON: Once you have lost that, presumably you have lost it in the long term?

Senator Johnston: History and the examples overseas indicate that when you stop manufacturing, and we are now moving towards talking about enterprise, the green issues of starting up again are very prohibitive and, indeed, when I was at AUKMIN, the British government and its representatives told me that it would be very difficult to start the Astute program from scratch again, and they regret having stopped a continuous production after Trafalgar.

Senator XENOPHON: Presumably that regret is something you would like to avoid here in Australia?

Senator Johnston: Well, they said it was extraordinarily expensive and the initial commencement of the program for Astute was very difficult. You will note that there was a lot of budgetary issues and a lot of schedule issues. In contrast, the Germans and the Japanese both appear to continually sustain an enterprise build, which I think is a very good example. The question is: government has to address whether we are going to commit to the long term for that particular industry. This is a very big question.

Senator XENOPHON: I have just got an issue of submarine crew shortages, if they have been covered previously—

Senator FAWCETT: I have a follow-up question before you do that. Vice Admiral Griggs, given that, again, your role as capability manager and industry has an important input to your capability, could you talk to us, if ship building is in sync, what consideration was given to making opportunity for Australian industry to bid into the proposed aviation training ship?

Vice Adm. Griggs : The proposed aviation training ship is managed under the FMSC, the Fleet Maritime Support Contract, and vessels required under that contract are actually owned by the National Australia Bank. This is something the previous government agreed to as a value for money way to do business. We do not get involved in the commercial decision of how the ship is acquired because it is actually owned by the NAB. They make a commercial decision that is best suited for them that delivers the capability that we require.

Senator FAWCETT: I understand the relationship with Serco and DMS and the decision that was made for best value for money, but that comes back to the kind of comments that were made in this place in 1993 about a number of commercial things that were done to save money, and they directly lead to Rizzo. As we have explored before, those decisions, whilst saving money in the short term, have cost Defence in terms of capability, and the taxpayer in terms of dollars, considerably down the track.

My question is: as capability manager, have you sought to question the decision that was made by the previous government and to look to see whether we would be better served to at least consider what options—I am aware, for example, that Defence did receive an unsolicited proposal from an Australian ship builder for an aviation training ship, probably two years ago. So clearly, there is an interest and a capability. Was that ever considered to question the decision of the previous government that the cost saving measure is not in the long-term interests of Australia?

Vice Adm. Griggs : I am not sure about the link you have drawn between building ships under the FMSC and Rizzo. I do not see the connection about where the ship is built.

Senator FAWCETT: The connection is the government agreed that it was a cost-saving measure. Minister Ray, back in 1993, highlighted that the decision that led to the demise of the Navy's engineering capability, which was the whole CSP program, was driven by a cost-saving measure. He said, 'This is to save money to do it as cheaply as we possibly can.' That decision, some years later, and Defence even highlighted at the time—there is a parliamentary document that details what Defence said about the decline that would lead to in its ability to maintain capability. That is the link: that a decision that makes a short-term saving can have a long-term cost impact.

In this case, as we just heard from the minister, shutting down and restarting a ship building capability is an expensive thing, so the ability for local industry to at least have the opportunity to bid on something like that may in fact be a far more cost-effective option for Defence and the nation in the medium term. I am just asking, was that explored at all or was the default option just to give essentially a sole-source contract to Serco?

Vice Adm. Griggs : It is not a sole-source contract. It is the NAB who manages the financing of the acquisition, and they manage it in the most commercially effective way. I am interested in getting the capability and we have been very happy with what we have been getting under that contract. I am not challenging the way the FMSC is structured or the way vessels are being acquired. There are about 155 vessels that are being acquired under that program and they go from RHIBs right through to the MATV and the submarine rescue ship. About 115 of those have been built in Australia. Admittedly, they are the smaller vessels.

Senator FAWCETT: I take it the answer to the question is no, there was no consideration given to questioning or seeking approval to take an alternative path to that which was decided by the previous government?

Vice Adm. Griggs : We actually support this methodology.

Senator FAWCETT: Yes, with medium-term impacts. Thanks.

Senator XENOPHON: I just wanted to go with issues of submarines. Minister, I think in your speech that you said that the Coles review into submarine sustainment has resulted in significant improvement in the serviceability and availability of Australia's Collins-class submarine fleet, which is unambiguously good news; however my understanding is that Navy may be likely to struggle to find sufficient crews for submarines, in common with other western countries, such as Great Britain. I wonder, and I am happy to ask this generally of the panel, what progress has been made on the problem of crewing Australia's Collins-class submarines? Is the Navy currently able to fully crew the submarines that are serviceable right now?

Senator Johnston: I will always defer such a technical question to the Chief of Navy.

Vice Adm. Griggs : Yes.

Senator XENOPHON: So, is there no issue about it?

Vice Adm. Griggs : There is still pressure and fragility in the submarine workforce, but the question you asked was can we crew operational submarines. The answer is yes. I have four operational submarine crews. We have had about six or seven per cent net growth in the submarine workforce this year through a range of actions that we have taken to streamline the qualification of people.

I think we are planning on around qualifying 90 submariners this year, which is the highest number for many years. We have qualified 76 already and we have the remaining 14 who will be qualified between now and the end of the financial year. That is the target. I think we will come in fairly close to that.

In the last four years we have had two years of six to seven per cent growth; we have had a couple of years of a couple of per cent growth. I think what it shows is that with a bit of focused effort and commitment, we can get a decent growth in the submarine workforce.

Now, availability of boats is always going to be the key drama. Last year was a very good year; we had three boats available nearly all the time. That certainly helps in the generation of qualified submariners going through the training pipeline. We have a full training pipeline. We have about 115 people in the training pipeline. So, we do not have any trouble attracting people into submarines. The challenge we have is retaining our skilled submariners, and that is why we have a range of individual retention bonuses in place for a number of key categories within the submarine workforce. As I mentioned earlier to Senator Fawcett, we have seen some very good results from that in terms of reduction in separation rates.

Senator XENOPHON: Can I just ask further to that, basically the number of Australian submarine crews is increasing in trend terms, is that right?

Vice Adm. Griggs : We went from three crews to four crews at the end of 2012. The next goal is to build the fifth crew, and that will take a couple of years. We are still around 200 people short in the total workforce. The total submarine workforce should be around 710, somewhere around there, and we are sitting at around 528 at the moment.

Senator XENOPHON: So, given that 200 short in the workforce, and I understand that this is a problem that other countries, for instance, Great Britain—

Vice Adm. Griggs : Just about all countries.

Senator XENOPHON: Can you say for how many days in the past year, or since the beginning of 2013 or some other measure of availability, have limitations in available crews prevented an Australian submarine or submarines from putting to sea?

Vice Adm. Griggs : Zero.

Senator XENOPHON: So, it has not had any effect at all?

Vice Adm. Griggs : No.

Senator Johnston: If I can just interrupt, the qualifying of 90 people this year is no mean feat.

Senator XENOPHON: No, I understand that.

Senator Johnston: This is a significant evolution that Navy has really put its back into. I want to just pause to say when you qualify as a submariner it is not a matter of just turning up for a couple of hours or a couple of days, it is a significant evolution to get the qualifications to go to sea.

Senator XENOPHON: I am not suggesting it is a correspondence course you can do online for a couple of hours. I am not suggesting that. So, basically, there is still a shortage but in terms of the 200 people short, Vice Admiral, what time frame are you looking at to get to that full complement of the 710?

Vice Adm. Griggs : That will largely depend on boat availability in terms of platforms for qualification. It will also, in part, depend on how well we can control the separation rate. If we are looking at net growth rates at 30 to 40 submariners a year, you can see it is still going to take four to five years to achieve the full manning.

Senator XENOPHON: Thank you.

CHAIR: Senator Ludwig, would you like to proceed?

Senator LUDWIG: Yes, thanks. I think these are in this area, but if they are not then I will hold them for another time. Is the Navy currently doing any scoping work or development work for HMAS Cairns? Senator McLucas and I have an interest in Queensland and what work you are doing in that northern region.

Vice Adm. Griggs : In what respect? In terms of infrastructure development or—

Senator LUDWIG: Infrastructure expansion, placement of ships. Whereabouts is HMAS Choules? What is its destination to be?

Vice Adm. Griggs : It is unlikely to be Cairns, in terms of basing. This is something we touched on this morning with Senator MacDonald, and I would not mind if you would indulge me—

Senator LUDWIG: By all means, now is your opportunity. The Cairns people are listening.

Vice Adm. Griggs : There is a lot of talk about the need to base the LHDs and Choules in Townsville because that is where they would launch from for an operation and therefore that is where they should be. There are a couple of factors. I know Senator MacDonald disagrees about the concept of it being inside the cyclone belt, but for our large—

Senator LUDWIG: That is alright. You have an opportunity of giving your view. I will give you the opportunity of doing that.

Vice Adm. Griggs : For a large ship to be based inside the cyclone belt is highly problematic. All ships have to undergo maintenance and you cannot spend over six months of the year not having maintenance. If you have got a ship that is in maintenance that cannot move within its normal notice for sea; so, if it is at extended notice for sea it might be a week, or it might be two weeks before it could be put back together and moved. You clearly do not have that warning in somewhere like Townsville or Cairns.

Now, what do we do with the smaller ships in Cairns? We put them up on the river. Some ships can go and beach up onto the river bank, and that is what our cyclone strategy is. Wherever possible we get them to sea. Others can go up onto the hard stand and be strapped down for the duration of the cyclone. You cannot do that with a 16,000 tonne ship like Choules and you cannot do it with a 27,000-tonne ship like the LHD. I think the whole discussion around basing the LHD and Choules in Townsville or Cairns has some really serious flaws just based on that. You then have the industrial support base issue, which you currently do not have for a number of the technologies in those ships, particularly the electric propulsion plant, the command and control and communication systems. That is another factor.

The other issue that is often brought out is that it takes you three days to get there. In terms of the amphibious fleet, there has not been one occasion that I can recall in 35 years where the fact that the ship was coming from Sydney delayed anything in terms of launching the operation out of Townsville. Load planning takes a considerable amount of time—it is quite complex—and often the ship has arrived in Townsville from the south and then waited for at least another day or two before loading has started. That is not a criticism of anyone. It is a very complex activity to work out the load and often in these sorts of circumstances you do not actually know what you need to load until the picture becomes clearer, particularly in a humanitarian assistance and disaster relief scenario where you know there has been a cyclone offshore, for example, but you do not actually know what the full extent of the damage is or what the capabilities are that you need to take with you. Again, I think the argument about being based in the south and that transit time issue is actually a fairly specious argument.

Senator LUDWIG: Have you made a decision as to where HMAS Choules will be based?

Vice Adm. Griggs : The current plan is to continue to base Choules and the LHDs at Garden Island in Sydney.

Senator LUDWIG: Is that the OCVs as well?

Vice Adm. Griggs : The OCV is a different issue because that is at least another 15 years away in terms of bringing that project to fruition. How big they will be, what the infrastructure implications are for Cairns and Darwin, in particular, will be key issues that we have to consider as we work towards that program.

Senator CONROY: Regarding the new LHDs, a couple of weeks ago The Australian reported that the Prime Minister has, 'Instructed planners working on his Defence white paper to examine the possibility of putting a squadron of 12 of the short take-off and vertical landing version of the JSFs—the F-35B—on to the ships.' Are you familiar with that article, Vice Admiral Griggs?

Vice Adm. Griggs : I am.

Senator CONROY: Has the Navy been asked to provide any input to this possibility?

Vice Adm. Griggs : What is happening is that the whole issue of short or vertical take-off aircraft is being considered as part of the force structure review and the white paper process. We will participate in that, as will Air Force. I welcome that.

Senator CONROY: Thanks for coming to the table. How much modification will be needed to modify the LHDs to launch, land and carry the JSF B variants? Air Marshal Brown might want to comment on—

Vice Adm. Griggs : No, he probably does not.

Air Marshal Brown : Depends on your answer.

Vice Adm. Griggs : There has been some work already done, and it was done during the 2008-09 force structure review white paper process, to understand what the implications would be. It largely revolves around ablative coating on the flight deck because of the heat generated from the F35-B. It relates to fuel storage and fuel lines. It relates to amendments or modifications we would have to make to magazines on the ships to take the weapons that support the F35-B, and there are other aspects like some of the classified compartments that we would need to make sure existed to support the mission system for the F35-B. I think I have covered most of the issues.

Senator CONROY: You mentioned storage, planes equipment, fuel, munitions and support crew. Can you just outline what those changes would need to be? Where are we up to with the LHDs? Where are they being put together?

Vice Adm. Griggs : In Williamstown.

Senator CONROY: I thought so. I saw it on the weekend. I live in Williamstown, as you probably remember. What sort of changes in storage for the actual planes, or the equipment, fuel, munitions, and support crew would you need to make? Because for being put together they seem to be a fairly long way down the track right now.

Vice Adm. Griggs : The ship—

Senator CONROY: Yes.

Vice Adm. Griggs : Canberra will deliver some time in the third quarter of this year, probably around September.

Senator CONROY: It looked in pretty good shape.

Vice Adm. Griggs : So, it is not that far away. We have to, obviously, do some more work on this, because I would say this has been a fairly superficial examination up until now because there has not been a serious consideration of this capability going into the ship.

Senator CONROY: Air Marshal Brown, did you ask for this capability? Did the Air Force request this?

Air Marshal Brown : Like all things, when you have a new white paper you should always examine all sorts of options. It was not something that Air Force has particularly pushed. I would just like to add to Vice Admiral Griggs's modifications required to the ship. One of the big issues with having fixed wing aeroplanes come back onto a ship is you have actually got to get them back in poor weather. So, there would be new radars required on the ship as well as instrument landing systems. So, there will be some extensive modifications around that.

Gen. Hurley : I think the start point of this, as Vice Admiral Griggs has pointed out, is there is the need—if we look at the phases we go through, there are needs and then requirements. We are starting at what are the requirements, that is, how do we adapt the ship and what does a ship that launches vertical take-off aircraft look like. There are two parts to the Prime Minister's request. One is to drive it back to see how would this fit into the force structure of the future, how would it meet the needs of the future and so forth, and then we would do the prioritisation, stack it up against other needs and so forth into the future—they come out of the white paper. Once you have gone through all that, if you were to say, 'Okay we need to have this type of capability and we are going to now go through what that would cost and then what the opportunity costs are', then we will go down and say, 'Okay, how would you modify a ship to put this capability in?' That would be part of that costing process. It is a number of steps to actually get to that detailed questioning you are asking at the moment.

Senator CONROY: I appreciate that, General Hurley. I am simply going on a newspaper article that bobbed up and seeking to establish for the committee an understanding of what would be involved in making that sort of change right now. We are a fair way down getting the strike fighters, we are a fair way down of—last time I looked on the weekend, it was getting more impressively large and to suddenly throw a curveball in like this at relatively the last minute—I appreciate we do have things in the pipeline—it just seemed like an odd thing to do.

Mr Richardson : Could I just add—

Senator CONROY: Mr Richardson, join us.

Mr Richardson : It is a reasonable question about that option, and it is being examined in the context of the force structure review.

Senator CONROY: Are you able to take this on notice? Air Marshal Brown indicated radars would be an extensive change. Vice Admiral Griggs described some. Are there any other changes to the structure of the ship? You mentioned the deck; obviously that makes sense.

Air Marshal Brown : I will just defer to the secretary, I think there is a lot.

Senator CONROY: Does the deck need to be reinforced or is it just a paint job?

Air Marshal Brown : There is a lot of—

Senator CONROY: A special paint, but an application.

Air Marshal Brown : There is a lot of work to be done conceptually before we get to that stage, so it would be a little speculative to just give you a list of modifications to the ship at this stage.

Vice Adm. Griggs : I think we have given you a sense of the sort of things that we have—

Senator CONROY: Would there be different personnel, training, aircraft maintenance or pilots needed in the circumstance? I see you are nodding there. Is there anything that you can tell us on that?

Air Marshal Brown : I think it is early days as to how much. There certainly would be differences in training as to how much that would require. There would be issues that we would have to go through. There would be a different logistics system as well for that aeroplane so, again, a fair bit of work to go through.

Senator CONROY: It has been a long time since the Navy had a ship capable of launching aircraft. What sort of organisational changes would you need to make to carry that capability out today? Would they be operated by Navy pilots or Air Force pilots? Who would own them?

Gen. Hurley : I would own them.

Senator CONROY: That goes without saying that the CDF would own them. I am just interested if there was going to be a dogfight there, no pun intended.

Gen. Hurley : No, I am trying to stop one. We need to go back to the processes that we have in place with the white paper force structure review and look at the place of a capability in this. Those types of questions that you are asking are long-term questions. For us to speculate whether we have a new fleet air arm that is bigger which now has fixed wing capabilities to strike off a carrier looking aeroplane, frankly it is just too early. We are not anywhere near that mode. Although they are interesting and intriguing questions and will keep our younger people very busy around the coffee table at the moment, they are pure speculation.

Senator CONROY: Our Prime Minister is tricky like that. You have got to watch him.

Gen. Hurley : It is pure speculation.

Senator CONROY: I am quoting the Prime Minister's leak to The Australian. I have not double-checked but I am willing to bet it said exclusively.

Gen. Hurley : I think we are in the situation where new governments come in. There has been a white paper evolving for a while. We have had a platform that is about to come into the service which is essentially based around delivering an amphibious capability built around ship-to-shore, which is helicopter borne and the small boats from the well of the ship. The Prime Minister has a view about a capability that he thinks might be relevant to the ADF. He has asked us to look at that. We have a process in place at the moment that will allow us to have a look at that and, depending where we come out on that process, we would then go into all of those technical decisions about the nature of ship and force structure implications for the ADF. I do not want to touch it yet until I know whether I am going to have one.

Senator CONROY: Minister, you just cannot take your eye off that Prime Minister, can you? He is just full of good ideas.

Senator Johnston: I think you might concede the Prime Minister is interested in exploring options. He wants a versatile, capable ADF and there is no harm in exploring with the experts what the options are. I think that is perfectly normal and natural and he should certainly not be criticised for it.

Senator CONROY: I was just saying that you have got to keep your eye on him every minute. He keeps jumping in there on you. Can I just clarify—and I appreciate the point you are making, General Hurley, that no-one has actually made a decision about it, but just for the purpose of the committee understanding what it would mean if you were to go down that path, without going into too much detail—the discussion relates to the fourth operational squadron of JSFs purchased in addition to the existing 72 which are already on order. When is the last of those 72 expected to be delivered to Australia?

Air Marshal Brown : We expect the last of the JSFs in that tranche in 2022.

Senator CONROY: When is the second LHD expected to enter service?

Vice Adm. Griggs : 2016.

Senator CONROY: So if we were to choose to proceed with the purchase of any B-variant JSFs as a fourth operational squadron they would likely come into service well after both of the current LHDs enter service. Is that correct?

Gen. Hurley : That would be correct.

Senator CONROY: That would seem to be the case?

Senator Johnston: You would think so.

Senator CONROY: I was at Forgacs in Newcastle recently and I had the 1-3-8 rule explained to me. It was said that if something cost $1 to build on the workshop floor at a facility like Forgacs that it would cost $3 to build once these blocks have been combined and it would cost $8 to do it once you are working inside the whole of a commissioned Navy vessel. Does that sound about right?

Vice Adm. Griggs : There is no doubt it costs more to modify them to design and to build, yes.

Senator IAN MACDONALD: I thought it was 1-2-5.

Senator CONROY: Maybe they are already gilding the lily on me. They are buttering me up in advance. With that in mind, does it seem like a sensible financial decision to make significant alterations to the LHDs once they are well into their operational lives within the Navy fleet?

Mr Richardson : We are not at that point.

Senator CONROY: But if you were to make that decision? They are in the water in 2016.

Mr Richardson : We are not at that point. The first step is part of the force structure review. Anything beyond that is speculative at this point.

Senator CONROY: This is just like two plus two equals four. If the ships are already in the water it costs more to adapt them to a new Air Force purchase if we make a new Air Force purchase.

Mr Richardson : Of course it does.

Senator CONROY: Depending on whether it is an Air Force or a Navy purchase in that sense?

Mr Richardson : Yes.

Senator CONROY: That is just maths?

Mr Richardson : That is right.

Senator CONROY: It is not about the high level. That is what you would be thinking about when you would be having a conversation in the Defence white paper?

Mr Richardson : Yes, that is right.

Senator CONROY: Would it make more sense to buy or build a purpose built light aircraft carrier to act as a platform for any future JSF B-variants? This is not just a backdoor way to sneak an aircraft carrier into the game, is it?

Senator IAN MACDONALD: That is certainly hypothetical.

Mr Richardson : It is.

Senator CONROY: I am saying that it is going to cost a lot more to make the changes. You would be the first vice admiral to have an aircraft carrier on your watch for a while.

Mr Richardson : You are getting way ahead of where we are at.

Mr King : The ships are in service for 35 years. In the course of their life, requirements of them change and all the matters that have been raised like costs and amount of change, the national interest is considered in doing that. It is true that there is a different cost after you enter service, but if it is in the national interest and that is a cheaper way to get a capability—and I am referring to the general ship modifications—then that is what a country does, but it is a long way off such a decision.

Senator CONROY: How much do you think it would cost to modify the LHDs to accommodate the variant?

Mr Richardson : We are not prepared to speculate on anything like that in advance of having done the work.

Senator CONROY: The Prime Minister's office has put that into the public domain.

Mr Richardson : We are not prepared to speculate. The Prime Minister has not speculated on that.

Senator CONROY: I said that the Prime Minister's office has put that into the public domain.

Mr Richardson : I do not believe the Prime Minister's office speculated on costs. You are asking us to speculate on costs before we have done any work, and it would be inappropriate for us to do so.

Senator CONROY: I will ask you a technical question rather than a cost question. Would an LHD modified to operate as a launching platform for the JSF also be able to operate as an amphibious vessel as well?

Vice Adm. Griggs : Yes, but there are trade-offs that you would have to make.

Senator CONROY: Would it still be possible to load the same number of helicopters and landing craft that are planned for the existing LHDs?

Gen. Hurley : It is just impossible to answer that question because we do not know whether (a) we will have the platform, (b) what modifications are actually required and (c) what would be the change to capabilities to the ship.

Senator CONROY: We do know a few things, though.

Gen. Hurley : To be very honest, we cannot answer questions of that nature. That is just asking us to do the impossible.

Senator IAN MACDONALD: The better question might be whether there are any other LHD type vessels around the world that have been built by Spain or anyone else that have a fixed wing aircraft take-off capability?

Vice Adm. Griggs : The LHD that we have?

Senator IAN MACDONALD: Yes. Is any other navy using it as an aircraft carrier?

Vice Adm. Griggs : The Spanish do.

Senator IAN MACDONALD: Do they?

Vice Adm. Griggs : They use it as part of the mix of their aircraft that they have.

Senator IAN MACDONALD: What sort of aircraft do they run off?

Vice Adm. Griggs : AV-8B Harriers.

Senator IAN MACDONALD: The English jump jet?

Vice Adm. Griggs : The jump jet.

Senator IAN MACDONALD: Do they jump them off or do they fly them off?

Vice Adm. Griggs : They ramp them off the ramp.

Senator CONROY: Thank you, Senator MacDonald. With all due respect, General Hurley, there are some things that are fixed and, as Vice Admiral Griggs indicated, there are trade-offs so the question is: is it possible to load the same number of helicopters and landing craft if you have joint strike fighters on board? That is short of doubling the size which you cannot do because it is a fixed size—

Gen. Hurley : I do not know. No-one at the table knows and no-one at the table should be asked to speculate on it. I do not know.

Senator IAN MACDONALD: That is purely hypothetical and not under the rules of estimates.

Senator CONROY: You are not actually chairing it, Senator MacDonald.

CHAIR: Can we have some order?

Gen. Hurley : I do not even know. It depends what sort of mix of helicopters. Do you want CH-47s and Tigers and MRH-90s? What does the mix look like? What are you going to substitute? What are you going to carry for a particular mission?

Senator CONROY: Perhaps you did not hear the end of my question. I talked about being planned, so you actually know what you have planned for the existing—

Gen. Hurley : We know what mixes are possible but we do not know what changes to the ship would be required; therefore, how would we know which helicopters we cannot carry and what impact that would have on the operation?

Senator CONROY: We can play a sillier game and say: could you squeeze some joint strike fighters in with all of the existing material that you have planned to be on them at the moment?

Gen. Hurley : I do not know because I do not know what is required to put a STOVL onto the LHD.

Senator CONROY: I am sure that Vice Admiral Griggs could help us. Could you squeeze a joint strike fighter—

Gen. Hurley : Vice Admiral Griggs will not answer the question. I will answer the question, Senator. You are asking us to speculate on something we have no idea about.

CHAIR: Senator Conroy, the witnesses have made it very clear several times that they are not prepared to speculate, and I think you should respect that.

Gen. Hurley : Frankly, you are asking me who is going to be in the grand final of the VFL this year.

Senator CONROY: That is easy. It will be Collingwood and it does not matter who else. It is very simple to answer that one.

Gen. Hurley : I do not follow the sport.

Senator IAN MACDONALD: I have a question, Chair.

CHAIR: Senator Conroy, we need to move on so let us stick to substantial questions.

Senator CONROY: I have many substantial questions and those ones were also substantial, based on information that has been leaked by the Prime Minister's office.

CHAIR: Senator Macdonald has questions.

Senator CONROY: I would like to ask some questions about the current use of the LHDs. Within the Amphibious Ready Group can you explain to me the activities such as ship to objective manoeuvres and distributed manoeuvres? Can you explain what is involved in those?

Vice Adm. Griggs : You are using US doctrinal terms.

Senator CONROY: Apologies.

Vice Adm. Griggs : I am sure the Chief of Army will talk about the land warfare aspects of this.

Lt Gen. Morrison : I would characterise our knowledge of amphibious operations at the moment as suitable for what the ADF is currently asked to do primarily in relation to humanitarian assistance or disaster relief and operations up to perhaps service protected evacuation in relatively benign circumstances. We have managed to get to that point with Army and Navy working with the platforms that the Navy has had to date, the LPAs and HMAS Tobruk. The formation of an amphibious capability within Army is a process that is now underway, but we are only in the early days of it. I have designated one of our seven battalions as the force that will build our knowledge in that regard.

At the moment, however, there are only two naval platforms that they are capable of working with; that is, HMAS Tobruk and HMAS Choules. It is not until we see the landing helicopter docks, the LHDs, actually in service that I think we will really start to build more rapidly an amphibious capability within the ADF.

So at the moment, while we understand a number of points around doctrine and indeed current world's best practice because we have allies such as the United States and particularly the US Marine Corp sharing detailed information with us, I think we are not at a point where we could put a hand on our heart and say that we are well down the path now of a true amphibious capability within the ADF beyond that that we have been operating over the last two decades.

Senator CONROY: Admiral Griggs mentioned that I was using American terms. What are our terms for that?

Lt Gen. Morrison : Terminology is all well and good.

Senator CONROY: It is just so that I can use the right language in the future.

Lt Gen. Morrison : If you are interested we could provide a briefing for you.

Senator CONROY: What would be the alternative to ship to objective manoeuvres and distributed manoeuvres which Admiral Griggs indicated were American terms?

Lt Gen. Morrison : The American amphibious capability is well beyond whatever we are aiming at now or into the future. The US Marine Corp, the US Navy and the US Air Force, supported by other US military assets, are capable of conducting amphibious operations at a considerable size and capacity that the ADF will never have. Their terminology refers very specifically to what is intrinsic to the US military.

I am loathe to start getting into descriptions of doctrine or terminology at this point with you because I think it would actually be confusing. It may point to a capability currently resident in the US forces that we are not going to have, so I do not think it is helpful. As I said, we could provide you with a briefing on this and take you through it to show you what we mean by various terms as they apply to amphibious operations with the necessary explanations and diagrams if that would be useful at any time that you may wish, provided the minister is happy.

Senator CONROY: You mentioned doctrine before. I was going to ask who is responsible within Defence for developing our doctrine around this area.

Lt Gen. Morrison : It is a shared capability between the Chief of Navy and myself. We have groups within both services that work together to develop joint doctrine, joint tactics and procedures. They are also supporting a great deal of the work that will actually have to be done as we start to operate at a level of amphibious capability that we have not been at before, and both Admiral Griggs and I have responsibility for that to the CDF.

Senator CONROY: Taking on board your very valid point that we will not be reaching the capability of the US—and no-one suggests that we are going to and we have no intention to try to—when we compare what we are planning to do with our LHDs here in Australia—and this may be too early for you to be able to give us a fulsome answer—are we proposing that the second RAR will be seeking to achieve a specialisation in amphibious operations perhaps comparable to the Royal Marines or the US Marines? I am just looking for a general but if you are not that far down the track, then just say so.

Lt Gen. Morrison : I think that is a fair characterisation of the path that we are on at the moment. Certainly there was a recognition within Army that we needed to commit a major unit to developing a complete understanding of what an ADF or an Australian amphibious capability actually will require in the future and 2 RAR has been designated as that unit.

At the moment, as I said in answer to an earlier question, they have been able to work with HMAS Tobruk and HMAS Choules, but as yet they have not been able to work with HMAS Canberra, the first of the LHDs. They have had personnel attend courses here in Australia and also courses conducted by the US Marine Corp to deepen their level of expertise, but until the LHD is in service and indeed, until both LHDs are in service, I really think that at the moment what level of capability we will be able to reach is probably speculative.

Senator CONROY: Do we have the infrastructure? It may be because it has not hit the water yet. It has hit the water but has not been completed. Do we have the infrastructure that surrounds these LHDs which would allow that level of specialisation? Are you confident where its specs are that you will be able to move in this direction?

Lt Gen. Morrison : Yes, without doubt.

Senator CONROY: When would you hope that the Amphibious Ready Group would be available for operations?

Lt Gen. Morrison : Again, I think that will be dependent on a variety of factors; firstly, bringing the ships into service and then there will be other elements of both the Army and the Navy that will need to be worked up to a level of capability. I would not like to give you a definitive time on that because there are so many variables that come into play, but it is certainly something that both Navy and Army, indeed the ADF, are working towards and I am confident that we will reach it in an acceptable time frame.

Vice Adm. Griggs : I can say that it will take around 12 months from the date the ship is delivered until we reach the initial operating capability. That is not the full operating capability. The initial operating capability will be about 12 months after delivery. We are anticipating delivery in late quarter 3 of this year, so late quarter 3 of next year would be the initial operating capability.

I think it is really important that people understand what is involved in getting to that point. First of all the ship's crew have to learn how to operate the ship. We then need to do the work with the organic landing craft, integrate them into the ship and do the trials that we need to do. Then we need to bring the aviation piece into play and relearn multi-spot deck operations. Then we need to bring 2 RAR into play and put it all together for the initial operating capability, so it is actually quite a complex process.

Senator IAN MACDONALD: It is on the water now, is it not?

Vice Adm. Griggs : Yes, but it has not been delivered to the Commonwealth.

Senator CONROY: They are still putting bits on each. I watch it grow each week.

Vice Adm. Griggs : The point I am trying to make is that as soon as it is commissioned, which will be shortly after it is delivered, there will be expectations that the ship will be able to go and do all of these things. It will not. It will take 12 months post-delivery before it is available to meet its initial operating capability.

Senator CONROY: General Morrison indicated that you really would not be able to get to the stage of that amphibious ready until we had both. Were you saying that you needed both?

Vice Adm. Griggs : You would need both ships for the Amphibious Ready Group, which is different to the Amphibious Ready Element.

Senator CONROY: Am I allowed to split a hair and ask what is the difference between the element and the group?

Vice Adm. Griggs : One is a company size.

Lt Gen. Morrison : I think that is certainly doable. The ARE, the Amphibious Ready Element, is a component part of the ARG, the Amphibious Ready Group. The ready group is made up of the whole battalion of around 600 to 700 personnel—

Senator CONROY: You need both for all of that to be ready?

Lt Gen. Morrison : plus its logistic elements or logistic support, helicopter support and whatever other assets would be made available to it for whatever the mission may be. The Amphibious Ready Element is a smaller part of the ARG. From a 2 RAR perspective it is based on one of the rifle companies that comprise the overall battalion. Of three rifle companies, this would be one of them and it would have smaller logistics elements in it with smaller helicopter assets and smaller enabling support. It is the ARE, of course, that we are aiming at first, as you would expect. As Chief of Navy has said, it is a very complex task getting this capability up and running.

Senator CONROY: How important is this capability to our strategic interests?

Lt Gen. Morrison : It has been a major feature of every white paper that I can recall certainly in the last 15 years. Australia is an island continent. It has a role in our region and our world and it affects military endeavours through a variety of means, but one of them is transit by sea in an amphibious way.

Senator CONROY: It sounds like not just over 15 years that you have indicated we have been seeking this capability. It sounds like there is an awful lot of normal, sensible processes being put in place to bring us up to speed.

Lt Gen. Morrison : Yes.

Senator CONROY: Are you looking forward to having a joint strike fighter plonked in the middle of it?

Lt Gen. Morrison : I think that all of the answers that you have been given from this side of the estimates table about joint strike fighters do not need any additions from me.

Senator CONROY: It sounds like it might get in the way of your group. It is not like you have asked for it. Air Marshal indicated they did not ask for it; Admiral Griggs has indicated that he has not asked for it and from the sound of it you have not asked for it. 'Abbott aims for aircraft carriers' is the headline. I am just trying to get an understanding of what is involved in that. Thank you for that. I am happy to pass over to someone else, Chair, if there is anyone else. I have more questions in this area but if someone else wanted to jump in; Senator MacDonald is always keen.

Senator IAN MACDONALD: I have a couple of questions. I understand Senator Ludwig also raised some issues about the LHD, so please stop me if these have been asked. Admiral, you just mentioned the Adelaide is in the harbour in Melbourne?

Vice Adm. Griggs : Both ships are in Melbourne.

Senator IAN MACDONALD: But Adelaide has been steaming up for some months.

Vice Adm. Griggs : That was the Canberra. Canberra is the first one.

Senator IAN MACDONALD: What is the state of the game with Canberra?

Vice Adm. Griggs : It has completed its first set of sea trials. It has another set of sea trials to go. As I said, it is anticipated to be delivered around late quarter 3 of this year, so late September, I suspect.

Senator IAN MACDONALD: Are the sea trials being done with Navy personnel on board or someone else?

Vice Adm. Griggs : It is a combination. It is run by the ship builder because it is still the ship builder's ship at the moment. We have some Navy people. Some of the initial crew are embarked on the ship for sea trials.

Senator IAN MACDONALD: If you can remind me, who do we class as the ship builder now? Is it Navanti?

Vice Adm. Griggs : It is essentially BAE.

Senator IAN MACDONALD: So they have the initial crew on board?

Vice Adm. Griggs : Yes.

Senator IAN MACDONALD: Are you confident that when the two of them come on board you will have enough personnel to man both ships?

Vice Adm. Griggs : We are at the moment. It is tight; there is no doubt about that, particularly since we are retaining Choules. That is an additional 85 people over and above what we were planning on. It is tight, but we are comfortable at this stage.

Senator IAN MACDONALD: Is Choules operating under a full Navy crew at the moment?

Vice Adm. Griggs : Yes, it is.

Senator IAN MACDONALD: It was originally intended it would go out of service when the LHDs came in, but has that been changed?

Vice Adm. Griggs : That is right. It was originally going to complete its service in 2016 when Adelaide completed its introduction into service. There has always been in this particular joint project the requirement for a third ship, and the decision was taken during the last white paper process that Choules would act as that third ship and we would continue to run Choules on in service.

Senator IAN MACDONALD: By the necessary date you are confident that you will have enough crew for all three ships?

Vice Adm. Griggs : Yes. As I said, it is tight and we are obviously managing it very carefully, but we are comfortable at the moment.

Senator IAN MACDONALD: Will the establishment of the Australian Border Force impact on your (a) staffing and (b) recruitment at all?

Vice Adm. Griggs : I hope not.

Senator IAN MACDONALD: That is not something you are planning on?

Vice Adm. Griggs : There is always a lot of talk about that and there has been a lot of talk about the introduction of the Cape class even before the Border Force was announced. That would have an impact on our patrol boat force, for example, but we have not seen any great evidence of that.

Senator IAN MACDONALD: That is good. Just moving on to my other question, can you update me on the new capital work being done at Garden Island?

Vice Adm. Griggs : I think I might get Mr Grzeskowiak to come in and do that.

Mr Grzeskowiak : We are engaged in project work at Garden Island for both the air warfare destroyer and the LHD. Those projects commenced build around mid-13. Both are running on track and both are due for completion towards the end of 2015.

Senator IAN MACDONALD: We have asked this at previous estimates but, just by way of background, can you briefly say what is being done to accommodate the AWDs and the LHDs?

Mr Grzeskowiak : There is a range of works required to enable shore side support to the vessels with things like electrical power and the like. We are also building training facilities in the Sydney area. We are building office accommodation for the teams that need to be based in Garden Island to support those vessels.

Senator IAN MACDONALD: So training facilities?

Mr Grzeskowiak : Yes, some training facilities at Randwick.

Senator IAN MACDONALD: Can you tell me what is involved in physical infrastructure for the training facilities?

Mr Grzeskowiak : I am not close to the detail, but I believe it is building a facility that Navy can use to train its operators.

Senator IAN MACDONALD: Like a big shed or a warehouse?

Mr Grzeskowiak : Yes. It will be buildings with classrooms and training facilities.

Senator IAN MACDONALD: Is that a facility that was not there for the other Navy ships that we have?

Mr Grzeskowiak : That is as I understand it.

Senator IAN MACDONALD: Could you explain that, Admiral?

Vice Adm. Griggs : It is to allow us to use the simulation training system, particularly for the engineering plant, which is a new technology for us with the electric drive and the whole engineering monitoring system around that, that is part of the training facility, and different pieces of equipment as well. It is just getting it all into one place because what we have traditionally done is sprinkle these things around the place, which it is not a very efficient way to train people. We have one LHD training centre in the home port of the ship. It is all there.

Senator IAN MACDONALD: So there is a training facility and you said some office accommodation?

Mr Grzeskowiak : Yes. I understand there is some office accommodation within Garden Island precinct.

Senator IAN MACDONALD: What does that involve?

Mr Grzeskowiak : It is office accommodation. I am not sure what you are asking.

Senator IAN MACDONALD: Is it a 10-storey high glass building or is it a ground-level building?

Mr Grzeskowiak : I do not have the detail of the building, but it would be a low-level building with offices and workshops as required for those people that need to support those ships.

Senator IAN MACDONALD: And this is new positions that nothing else on Garden Island ever had?

Mr Grzeskowiak : I think we are replacing existing facilities that are old. They are either being refurbished or rebuilt to suit the work that is required for the new vessels and the support of them.

Senator IAN MACDONALD: Are they being used with other ships of the Australian Navy as well or is it purely for the AWDs and the—

Mr Grzeskowiak : I cannot answer that question.

Senator IAN MACDONALD: Admiral?

Vice Adm. Griggs : I think they are purely for the purpose of the two new classes of ship. You will be aware that real estate in Garden Island, particularly for office accommodation, is extremely tight.

Senator IAN MACDONALD: Which makes me wonder why we are building it there, just as an aside.

Vice Adm. Griggs : I went through all of that with Senator Ludwig earlier.

Senator IAN MACDONALD: I will read the Hansard but we had mentioned it before. Mr Grzeskowiak, when was the decision made in relation to the new office block and the training facilities?

Mr Grzeskowiak : These facilities would have been initially approved by government as part of the overall approval for the two acquisition projects concerned.

Senator IAN MACDONALD: Are you saying back in 2005?

Mr King : The initial concepts were 2007.

Mr Grzeskowiak : As with all facility projects that are over $15 million, there is an extra level of approval through the Parliamentary Committee on Public Works and these projects would have both been through that committee probably in the order of two years ago.

Senator IAN MACDONALD: I will not make any comment on that.

Gen. Hurley : In 2007 when we were looking at bringing this capability into play and decisions were made of where to base the ships which was in Sydney it makes, I think, great sense to centralise around where the ships are based and going to be maintained, where the crews are going to live primarily, the major training centres and support centres to support the capability. You recall that Garden Island is still seeing off the FFGs. We still have FFHs to maintain. We still have the auxiliary ships that operate out of Garden Island and the current amphibious capability, so that space is being used and then there is the reuse of space to adapt to the AWD and the LHD coming in.

Randwick Barracks is centrally located in Sydney. It is a base that Defence already owns. It is not too far away from the port at Garden Island and it makes eminent sense to use space we already know to turn into a state-of-the art training centre for two new capabilities with accommodation and all of that sort of thing that is available to personnel who come to train there, so I think the linkage is quite neat. We have the platform. We have the industry support, engineering support and so forth that it is going to be needed at the port, at Garden Island at the base, and then we have a nearby training facility, and a training facility that meets the needs of both ships. Whereas in the past we would have built a training facility for our AWD and a training facility for LHD, we have capitalised and brought it together. They have similar systems on board, so their performance monitoring systems and all the engineering equipment is similar. They can all train in the same place. There are the electrical systems. There are so many systems that are in common that having a common centre located near where the ships are going to be based makes sense.

Senator IAN MACDONALD: Thank you. I appreciate the answer. It is no good rehashing an argument over something that was decided five, six or seven years ago. Minister, are you happy with the fact that in Australia's most congested harbour with Australia's most expensive real estate we are again developing these new facilities for a Navy that will mainly operate around the north of Australia?

Senator Johnston: To some extent we have had this argument during the heat and height of the last election. Particularly Navy has a very substantial footprint in probably one of the most strategic and best geographically constructed harbours for navies in the world in Sydney Harbour. We have the dry dock there. We have the technical expertise from industry there. We have a very large footprint at Garden Island with the accommodation of all of our crew, as you have heard from CDF. We have training going on in Sydney. It is accessible. You can hit open water very quickly and reasonably from the Garden Island docks straight out through the heads.

Senator IAN MACDONALD: Which will be good for stopping the New Zealanders when they attack; I appreciate that.

Senator Johnston: The way large vessels move and the speed of them these days, we are talking a couple of days to get to anywhere really. I think that this argument was canvassed during the election and I think the experts came down on the side of the fact that this is the home of the Royal Australian Navy. Sydney is the home of the Royal Australian Navy. That does not mean that we do not deploy from time to time to Townsville. I do not think that Cairns would accommodate an LHD but Townsville—

Senator IAN MACDONALD: It will.

Senator Johnston: If it does, that is good, but I know it will be tight. Townsville and Darwin are obviously where the soldiers are that are going to go on board these 28,000 tonne ships, but the sustainment of these vessels, the loading of them and the planning to put things on them—and there is a world of difference between a military exercise and a humanitarian disaster relief—so I am on the side of CDF here in that their basing should be where we see the sustainment is best and most effectively carried out, and that is Sydney Harbour.

Senator IAN MACDONALD: If you never have any sustainment facilities anywhere else but Sydney Harbour then, yes, you will always go there.

Senator Johnston: As you know, we have a very good wharf. I think it is berth 11.

Senator IAN MACDONALD: 10.

Senator Johnston: I stand corrected, berth 10 at Townsville which has some capacity to carry out sustainment as we would expect, but not the length and breadth of what is technically required for these very large ships. We did not have the LHDs around for the force posture review. This is a matter that I think we will take on consideration for the white paper as to where these vessels go, but I will say that in listening to the arguments put forward by the Chief of Navy and the CDF, I think it is very clear that there is a strong argument to keep them in Sydney.

Senator IAN MACDONALD: There certainly is, and I have had the discussions socially with both over the years. I can well appreciate if things are there it is easier to keep them there.

Senator Johnston: Let me clarify that.

Senator IAN MACDONALD: But you are looking at the most expensive real estate and the most congested harbour in the world and space that the tourist industry would desperately love to get its hands on.

Senator Johnston: What I should say is to home port them in Sydney; I think that is a more accurate description.

Mr King : I also make the point that it is not just a matter of where you choose to home port them and that industry will follow. When you look at the degree of complexity on the AWD and the LHD, the very highly technical systems, the early work that we did certainly indicated that you needed a very strong industrial base not just dependent on the military work, otherwise if you put 100 people in some remote location or a less highly industrialised location a few people leave it and you do not have the broad industrial base to support those ships. We did quite a lot of work on that. The other work we did was the proximity, of course, to the homes of the sailors, which was very important. We did look at all of those matters.

Senator IAN MACDONALD: The sailors only live there because they are based there.

Mr King : Yes.

Senator IAN MACDONALD: If Broome was the base for them, then most of the sailors would live in Broome. That is a silly argument, with respect.

Senator Johnston: Broome would not have the infrastructure to carry that level of sailors. What we have got is that Defence Housing owns a very large number of assets in Sydney and has owned them for a very long time. That ownership is extremely cost effective in the sustainment of retention of sailors relevant to that base.

Senator IAN MACDONALD: I am wasting the time of the committee but forever and a day if we do not think beyond the square we will always remain with our Navy in the most congested port in Australia and the most expensive real estate when there are dozens of other places around Australia where that can be achieved.

Vice Adm. Griggs : It is not the most congested port.

Senator IAN MACDONALD: Which is?

Vice Adm. Griggs : It is not Sydney because Sydney is split between Botany Bay, which is the working port and there is not a great deal in terms of merchant traffic movement in the port of Sydney itself.

Senator IAN MACDONALD: Every time that I fly over it I see hundreds of ferries and big boats.

Vice Adm. Griggs : There are recreational craft.

Senator IAN MACDONALD: It is a congested port.

Vice Adm. Griggs : It does not impact getting in and out of the harbour. Sydney is a whole lot easier to get in and out of than it is out of Townsville or Cairns. That is just a fact.

CHAIR: We might leave it there and go to Senator Edwards.

Senator EDWARDS: I have three questions in the area of Operation Sovereign Borders. I will be very succinct. Minister, has the government stopped the boats?

Senator Johnston: I think it has and the next question as to what that means for Navy particularly, I am anticipating. I trust you want an answer to that. It may mean that the operational tempo from a Navy perspective begins to decline, but these are operational matters that are not my responsibility. You and I both know that the portfolio responsible for that is the Border Protection portfolio.

Senator EDWARDS: I understand where we will go with that and it will obviously be into that portfolio so I will not labour that. Just in relation to the Work Health and Safety Act, there is a lot of banter around the place about who is responsible for that. Why is it that you do not take responsibility for the duties under the Work Health and Safety Act 2011?

Gen. Hurley : I am not quite sure I understand the full import of your question.

Senator EDWARDS: I believe it is you that has to take responsibility for carrying out the role.

Gen. Hurley : And I do.

Senator EDWARDS: Why is that so and not the minister?

Gen. Hurley : Because the act requires that of myself and not the minister.

Senator EDWARDS: The sharing of Australian Defence Force resources is brought up a lot and it is obviously implied in a lot of commentary with regard to the various activities of the ADF, so under the policy control of the Minister for Immigration is there a sense of abandonment on the part of the minister here in relation to the Minister for Immigration and his control over ADF?

Senator Johnston: No. We have a discrete policy initiative wherein Defence provides support and assistance in the nature of personnel and assets to assist and underwrite the operations that are undertaken by Border Protection Command. Now, that mix, doctrine and methodology in the last six months has proved particularly successful by all accounts. Operationally I have nothing to do with the Sovereign Borders Operation other than to ensure that the ADF participants are suitably employed. I am concerned and want to talk to them about morale issues. I want to visit them and tell them what a good job they have done and I want to congratulate them on the difficult tasks that they have had to endure for some long time prior to these six months.

That is fundamentally the Defence minister's role in terms of Operation Sovereign Borders. It is not operational and not operationally involved. It is not a command situation from our point of view but, nevertheless, I am a barracker for our people in that operation, if I can say that.

Senator EDWARDS: Thank you for the clarification on those matters.

Senator CONROY: I refer to the cost summary for program 1.2, Navy Capabilities, in table 14 that is on page 33 of the PBS. When comparing the 2013-14 PBS to the 2014-15 PBS, could you explain the $200 million increase for Navy suppliers? What does that refer to?

Senator Johnston: The Chief of Navy might know the answer to that, but we have people on the accounting side that are familiar with all of these line items.

Vice Adm. Griggs : Out of the 2012-13 budget there was additional money to Navy sustainment which was one of the outcomes of the whole Rizzo process totalling around $1.5 billion over the forward estimates.

Mr Prior : Correct.

Vice Adm. Griggs : About $1 billion of that went to submarines and $500 million to the remainder of the Navy sustainment folk. So 2014-15 is the first year that that funding kicks in.

Senator CONROY: The $1 billion decrease in write-down of assets and impairment of assets?

Mr Prior : That reduction is due to a decrease in the assets held. I do not have the details of which assets they are but I could get those.

Senator CONROY: If you could take that on notice.

Mr Prior : Yes. I can get those to you.

Vice Adm. Griggs : You have three landing craft heavies decommissioning at the end of this year. Tobruk was planned to decommission at the end of this year, as was HMAS Sydney. Now, some of that might slip a little bit and that would account for most of that.

Senator CONROY: How has Navy been able to increase revenue from $98,403 to $138,736? What is happening?

Mr Prior : Navy revenue often relates to recovery of fuel when they provide fuel to other navies.

Vice Adm. Griggs : 2013-14 was a big year in terms of Talisman Sabre. It was a big year in terms of the international fleet review. We had a lot of replenishment of foreign ships and we recovered that. That would account for the increase.

Senator CONROY: And the difference in the reversal of previous asset write-downs; it was at $30,000 and now it is up to $114,000.

Mr Prior : That is usually due to the extensive inventory holders that we have. It is an accounting adjustment that comes in and out every year.

Senator CONROY: So it is a timing issue?

Mr Prior : It is timing issues and inventories in different locations and so on.

Senator CONROY: Has there been any change to the CDF preparedness directive that affects Navy since the change in government?

Vice Adm. Griggs : Not that I am aware.

Senator CONROY: Minister, you said in opposition that one of your objectives was to increase the readiness of the ADF.

Senator Johnston: When I took on the job and I asked around and had discussions and meetings with Chief of Navy and CDF I was reasonably impressed by the level of readiness. I must say I have not seen any urgency in readdressing that. I will say that MH370 was, to put it in my parlance, not a technical term, a turnkey operation. We mounted one of the greatest and biggest maritime exercises that we have done for many years seamlessly and almost instantaneously with four P3s and I think we had five ships on the water. That was all in very short order in terms of time. That said to me that our readiness levels were adequate and appropriate.

Senator CONROY: I am just drawing on commentary before the election. That was all that I was interested in.

Gen. Hurley : There is a CDF preparedness directive. It is reviewed annually and we are in the process of doing that now, so it will work its way through if there are any adjustments that are required.

Senator CONROY: From the sound of it the minister is comfortable with it.

Senator Johnston: I think that was about Cyclone Yasi and some of the things that were underlined in Rizzo about sustainment and the flow through to Navy's readiness. I actually think we have got a handle on a lot of that and, indeed, the capacity for Navy to respond and put those five vessels on the water I think was very impressive. Accordingly, what I said prior to the election might not have been entirely accurate, with the benefit of hindsight.

Vice Adm. Griggs : I can just make the point that during Southern Indian Ocean we had 15 operational ship tasks where we had to provide 15 ships every day. To sustain a one-ship task is a ratio of around 3.2 to 1, so 15 by 3.2. The fleet is only 52 ships. If you take out the submarines that were not involved and then you start taking out ships that were in maintenance and in upgrade; I think it was a pretty impressive effort.

Senator CONROY: I was never under any doubt that you were ready.

Vice Adm. Griggs : I just needed to get that in.

Senator CONROY: You get every plug you can. Can you explain why unit ready days for major combatants in table 15 on page 34 has fallen from 3,491 to 2,986 in 2014-15?

Vice Adm. Griggs : That is because of the reduction or the decommissioning of those ships that I spoke about.

Senator CONROY: I note that unit ready days for our major combatants do not reach that plan by the former government until 2017-18. What is happening there? Is this just an anomaly caused by that decommissioning?

Vice Adm. Griggs : It is decommissioning and it is also the upgrade program that is going on for the Anzac class. We are now really into the guts of that program. We have got three in upgrade at any one stage, so that obviously reduces the number of unit ready days that we can achieve.

Senator CONROY: I just wanted to be reassured that this will not affect our frigates participating in civilian deployments such as MEAR or RIMPAC.

Vice Adm. Griggs : You can only work with what you have got. We knew that during the upgrade program things were going to be tight, and they will be tight, but we believe we can continue to meet our core preparedness requirements that the government has set for us.

Senator CONROY: Again, our unit ready days for amphibious and afloat support in 2014-15 have fallen from 1,871 to 1,508 and from 1,447 to 965 in 2015-16. What is impacting there?

Vice Adm. Griggs : The major impact there is the reduction of the landing craft heavy. There are three of those in service. They average about 300 each. That will obviously have a major impact.

Senator CONROY: I note that unit ready days for minor combatants has risen to 4,837 from 4,568. Does this reflect the requirements of Operation Sovereign Borders on the Navy?

Vice Adm. Griggs : No. It reflects that we have had some issues with the Armidale class over the last couple of years and we have had a lower than expected number of unit ready days. What we are projecting there is a return to the 3,500 availability days for Operation Resolute, which has been a longstanding commitment. The minor combatants is not just patrol boats, but they are a large component of that number so any variation in achievement in unit ready days for patrol boats has an impact on that overall number.

Senator CONROY: The unit ready days for our hydrographic force has been increased from 2,220 to 2,810. What is happening there?

Vice Adm. Griggs : I think it has actually gone down from 2013-14 of 3,035 to 2,810. Is this table 15?

Senator CONROY: I think that is the one I have been working on. Yes, it is table 15.

Gen. Hurley : It is the bottom line in that table.

Senator CONROY: It could be a typo on my part, but I will come back to you very shortly on that one. Can you please detail to the committee the changes in reporting from unit ready days to unit availability days?

Vice Adm. Griggs : I can, with pleasure. I had been concerned over my time as Chief of Navy that the unit ready day system was not really providing an accurate picture of availability. A ship could be in a three-week maintenance period, not able to go to sea quickly but still be accruing unit ready days under the old system. What we have tried to do is to take out all of that extraneous data, if you like, and make this a much more accurate reflection of unit availability. You will see that clearly that means there is a reduction in the days. If you compare major combatants you will see that the reduction is about 150 or 160 days.

Senator CONROY: That is what I wanted to come to. How would a platform in minor maintenance defects or training be reported in unit availability days as opposed to unit ready days? I am trying to get that.

Vice Adm. Griggs : It will not be, basically. We are taking it out. I think for everybody that gives a much better picture of actual availability, so that is why we did it.

Senator CONROY: I appreciate that you are probably moving from one definition to the other, but we have got both table 15 and 16 in there at the moment.

Vice Adm. Griggs : That is a deliberate—

Senator CONROY: Because if it were just dropped people would have said, 'Hey, you are trying to dodge your figures. You are being very transparent.'

Vice Adm. Griggs : First of all the UAD is a more transparent measure in my view. Secondly, we are trying to be transparent through a transition period so we do not get graphs from ASPI that show a 500-day drop, for example, from one year to another and then say that Navy is dropping the ball. We are just trying to make sure that everyone gets used to the concept over a couple of years.

Senator CONROY: Yes, so do you envisage dropping the other table into the future?

Vice Adm. Griggs : I think we are going to run this for two or three years.

Senator CONROY: So, for a couple a years and then when people have got used to it, get a more relevant one—

Vice Adm. Griggs : That is the plan.

Senator CONROY: and you just drop the other one off the end?

Vice Adm. Griggs : That is the plan.

Senator CONROY: I refer to table 17 on page 35 about Navy deliverable products. Can you please explain to the committee why the number of charting projects has fallen from 110 under the previous government to just 20 for the 2014-15, 2015-16 financial years and from 140 to just 20 in the 2016-17 financial year.

Vice Adm. Griggs : I will have to take that on notice.

Senator CONROY: Now, table 18, Navy Deliverables—Flying Hours, page 35, why was the decision made to only report the operation of the MRH90s only under Army Aviation deliverables?

Vice Adm. Griggs : I think it is just frankly too complicated to do anything else. The Army is the capability manager for that aircraft, so it is appropriate that it is reported under the Army program.

Senator CONROY: In relation to the changeover between the Seahawk helicopters and the MH-60R I note that there is only a combined total of 4,200 hours flying time this year and that is building up to 6,350 in 2017-18. How is the transition between the two platforms going?

Vice Adm. Griggs : It is going very well. We have taken delivery of four Romeos at this stage and they are flying in Jacksonville in Florida for the rest of the year. We will be adding more aircraft. The squadron will return early next year or late this year. That will be the training squadron, 725 squadron; that will be the first tranche of the aircraft; then we will have continual delivery of further aircraft and we will reduce the number of the classic Seahawks as that—

Senator CONROY: Okay, so you are confident that the budgeted flying hours are sufficient to develop the new capability while ensuring there is not a capability gap with the existing Seahawks?

Vice Adm. Griggs : Absolutely.

Senator CONROY: Are you confident there are enough resources to manage the training programs for both platforms simultaneously?

Vice Adm. Griggs : I think we are in reasonable shape there. The key issue for us is what happens with the Squirrel because some of the maintainers who are maintaining the Squirrels need to transition to Romeo at the end of the process.

Senator CONROY: Page 33 takes one of the deliverables of outcome 1.2. It is to deliver reforms and savings. What savings are in the budget in relation to Navy capability? How much has been saved from these programs? You might want to take these on notice; I understand if you want to. What savings are currently being considered within Navy capability? How much would be saved as a result of those decisions?

Vice Adm. Griggs : We will take the specifics on notice, but what I would say is since 2009 we have been running a continuous improvement program which has looked at a number of different areas of Navy business, including in the aviation arena where we have made considerable savings in terms of the servicing regime of the Seahawk. I will take the detail on notice.

Senator CONROY: When does Navy believe that our Armidale-class patrol boats will reach their end of life?

Vice Adm. Griggs : They were originally designed for a 15-year life with an option for a five-year extension. So that would mean around 2020-21 for the 15 years.

Senator CONROY: The 15 is 2021 or the plus five?

Vice Adm. Griggs : No, the 15 is 2021.

Senator CONROY: How recent was that assessment?

Vice Adm. Griggs : That was the design of the boat.

Senator CONROY: Are we reviewing that at all given recent commentary?

Vice Adm. Griggs : I think we are reviewing where the patrol boat replacement fits in, in a time sense, with the DCP. I have no doubt that the Armidales can get through to 15 years. I have no doubt about that. It is just the amount of effort that we need to put into achieving that.

Senator CONROY: I know you have made comments on this publically. There have been much publicised issues with the Armidale class in recent months, including hull cracking and warping necessitating significant maintenance. What impact has this had on unit availability days?

Vice Adm. Griggs : As you saw in the minor combatant table, it has been a problem. We normally try to achieve 9.6 boats a day on average over the year available to me. We have been sitting at around 7.8, 7.9 over the last six months or so. That is the scale of the impact that it has had. What that means is it just reduces my flexibility, because obviously my first priority is to be able to assign a required number of ships to Operation RESOLUTE and also to have ships available to train the crews to keep them current to go into the operation.

Senator CONROY: Just to go back to that hydrographic unit question I was asking, just to clarify the question I am asking is about the hydrographic unit ready days relates to the growth from the prediction from page 31 of last year's PBS in table 14, which was 200 for 2014-15 to the prediction in this year's budget PBS, which is 2,800 in table 14. We are asking why that increased—

Vice Adm. Griggs : I see.

Senator CONROY: in last year's prediction.

Vice Adm. Griggs : I will take the detail on notice, but I suspect what that is is a result of the variable speed drive maintenance that we are doing right now on HMAS Leeuwin; in fact Leeuwin has just completed that; she is on her way to Cairns now. Melville is about to go into that, so we think that will go into better availability for the HSs as a result of that maintenance. I will give the detail on notice.

Senator CONROY: Can you give the committee an update on the performance of the Defence Maritime Service's sustainment contract? How many employees does DMS currently have working on this contract?

Vice Adm. Griggs : Are you talking about the contract for the sustainment—

Senator CONROY: Sustainment contract, yes.

Vice Adm. Griggs : For Armidale sustainment?

Senator CONROY: Yes, we are just in the Armidale—

Vice Adm. Griggs : I do not have the exact number. I know they have increased the size of their workforce significantly in the last 12 months or so. Unless Rear Admiral Purcell has an exact number, I do not.

Rear Adm. Purcell : The Armidale in service support sustainment contract is an outcome based contract. It is a contract for availability. The Commonwealth does not actually control the number of personnel that the company employs. It is really up to the company to determine the appropriate number of personnel. That said, we have been in discussions with the company. We understand that their workforce is currently over and above 100, but that they do employ additional personnel at other shipyards around the country.

Senator CONROY: Are there lessons that the Navy has learned from the DMS contract and the sustainment of the Armidale-class vessels?

Rear Adm. Purcell : There is a range of lessons that we have identified and we would fly those into any future ship contracts or support contracts.

Senator CONROY: I am happy for you to not take us through all those. If you could just give us a broad brush outline on notice on that issue, that would be great.

Rear Adm. Purcell : Certainly.

Senator CONROY: I understand that Austal and Babcock have partnered in Darwin to offer an alternative sustainment model for Armidale patrol boats. Are you aware of this?

Vice Adm. Griggs : I am aware that they have partnered. I am not aware of the specifics of any proposal.

Senator CONROY: Is Navy currently considering changing the contract for the sustainment of the Armidale-class vessels?

Vice Adm. Griggs : It is not Navy's contract, it is the DMO's contract.

Senator CONROY: DMO, is—

Rear Adm. Purcell : Yes, I am responsible for the management of that contract. At the moment we are working with the contractor in terms of—

Senator CONROY: Is that the existing contractor?

Rear Adm. Purcell : Yes, with the existing contractor and that contract, as the Chief of Navy identified, is a 15-year contract.

Senator CONROY: So, we are not looking at changing the contractor, looking at the Australand Babcock offering?

Rear Adm. Purcell : At this stage we have got a 15-year contract and we obviously continue to update ourselves in capabilities across the market.

Senator CONROY: Mr King, you have rushed to the table. I do not want to deny you the spotlight.

Mr King : I only rushed there if you need it. I do not seek the spotlight. I think the question has been answered properly.

Senator CONROY: I wanted to give you an opportunity, and I think you may have actually done it once or twice already but I am sure you will not mind doing it again, Vice Admiral Griggs. I have heard some in the ship building industry suggest that the aluminium hulls are simply unable to manage the sea states and operational tempo required of a Navy patrol boat. Does Defence agree with this?

Vice Adm. Griggs : It is very easy for people to just point at one aspect. I have consistently said that the challenges that we are having in Armidale are a combination of factors. There is definitely a design element. There is definitely a materials element; that is, it is aluminium and aluminium behaves differently. We do not have a lot of experience other than the Armidales in driving aluminium ships. There are things you need to do differently. There is certainly a maintenance performance aspect to it. It is not just simply about it being aluminium, it is about all those three in this particular ship. There is no doubt that the performance that we contracted to get at the start of the program we are not getting at the moment in terms of the operating envelope that we are operating in.

Senator CONROY: Are options for a steel hull being considered for the replacement of the Armidale-class?

Vice Adm. Griggs : I think when that comes up for consideration everything will be on the table.

Senator CONROY: But as Mr Richardson keeps telling us, you have got to plan these things well in advance. So, you must be giving some early thinking given the timeline you have described.

Vice Adm. Griggs : Yes, but we do not dictate the material. That will be up to industry to propose a range of options for consideration.

Senator CONROY: But if I was playing the devil's advocate and said one of the reasons—and it is not, as you continually made clear—is the issue of aluminium, surely you would be saying to DMO or the government, 'Actually, we think the steel hull would be a more serviceable hull than an aluminium hull.' That is the learnings that you are getting, the learnings from maintenance. Is that not what goes into these decisions? Help me, I am new to this.

Vice Adm. Griggs : We can have preferences but I think the worst thing we can do is, at a very early stage like this, to dictate an outcome. I think you have got to let the market put the offerings up and for them to be considered against the request for tender and that process to be followed.

Senator CONROY: Have you been asked to prepare any advice about bringing forward the replacement of the Armidale-class vessels yet?

Vice Adm. Griggs : No, I do not believe so.

Senator CONROY: What is the current status of the replacements of the program to replace HMAS Success and Sirius? I know you have had some discussions already, but where are we at?

Vice Adm. Griggs : I think the minister explained this morning that there will be some discussion from government on that in the near future.

Senator CONROY: Is it still the intention of government to achieve the IOC for replacement supply ships in 2020-21 minister?

Senator Johnston: I would like to hope that is at the latest, but you know, in this business you do not get too optimistic and tied down to schedules. We seriously need some more replenishment ships.

Senator CONROY: Is an option for a direct to build, which would assist to bridge the valley of death on the table?

Senator Johnston: I do not want to get into that because it creates anticipation and it is something government is yet to consider. Just getting the right design is a major step forward. All of this is in the mix. We are working towards having a viable, cost-effective solution to the problem but we are some distance from it yet, so you are just going to have to bear with us I am afraid.

Senator CONROY: Now, the industry has been calling for this to be one of the options on the table. Have you responded to the industry yet?

Senator Johnston: I am sorry, say that again.

Senator CONROY: The industry has been calling for this to be one of the options on the table.

Senator Johnston: Industry, I know, is going through a contraction. We have already addressed the fact that if there was to be no contraction at all we would have been required to make decisions long, long ago—two years ago. We did not make them and, accordingly, there is a difficulty. I have not got a magic wand that can simply manufacture, design, money and contractual obligations that suddenly extinguish the difficulties. We are working towards doing the best we can. I do not want to create expectations, but we will work through these things and I anticipate that later this year there will be some detailed policy initiatives.

Senator CONROY: Can I just seek from you, what are the risks of adopting a direct to build approach? You have got to balance these things. What are the risks?

Senator Johnston: I do not want to get into that because everyone is hanging on my every word in terms of starting to clear the decks to try and compete for these things. Let us just wait and see what the government's approach is, please.

Senator CONROY: Now the Australian ship building industry has asserted that it would be difficult, if not impossible, to bridge the so called valley of death if the replacement supply ships are subjected to the usual first pass approval tendering and market solicitation processes. Is that a fair comment from them?

Senator Johnston: It may be; it may not be. But the question is what do you want to build, what your time frame for that build is, how you want to have a methodology for the construction of those vessels and where you want to do it. These are all very big questions that impact upon the sort of speculation that you have put forward and postulated in your question.

Senator CONROY: So, is Defence investigating methods to fast track such a process while retaining a competitive tendering approach? I appreciate the point you are making.

Senator Johnston: Fundamentally, we are always doing that as best we can. We are always seeking to get the capability online as quickly and cost effectively as possible. When you are talking large ships with an expected life of 25 years plus, it is simply not as easy as saying, 'Well, you were elected in September; here we are in June; what is the answer?' It is just not that simple.

Senator CONROY: What designs or replacement supply ships are being considered by Navy and DMO?

Senator Johnston: Of course, that is commercial in confidence. If there are considerations, I am not about to broadcast them and have the winners and the losers either happy or sad. Let us just not go down that path.

Senator CONROY: I am just asking the question. You can give all of the necessary responses. I am assuming that the Cantabria class, designed by Navantia, would be one of the ones on the table?

Senator Johnston: I think I have answered the question.

Senator CONROY: I saw a report in the Adelaide Advertiser on 8 May indicating that the ASC was working with a South Korean ship builder on a plan to replace the supply ships. Is this proposal under consideration from the government?

Senator Johnston: I am not going to be drawn on what proposals are under consideration. If you will bear with me, there are commercial considerations here and I do not think some of these things are in the Commonwealth's best interests to canvass. I share your concern though. I am pleased you are interested.

Senator CONROY: One concern I have is there have been those conspiracy theories—you know, they run in many portfolios—that this is all tied up with the Korean Free Trade Agreement, that we have done some side deal to buy their ships. Can you give us a guarantee there are no side deals here around Korean Free Trade Agreements?

Senator Johnston: I am not going to guarantee or tell you what the future holds in any shape or form because these are matters the government has not resolved and when the government has resolved them, you, like every other person that is interested in this space, will be informed publically as to what we perceive the policy initiatives that we want to bring forward are.

Senator CONROY: I am not asking about a commercial-in-confidence tender here, what I am asking is for you to guarantee that there is a level playing field and that there have been no side deals or deals at all around the Korean Free Trade Agreement that commit us to any particular outcome. They will just be one of the tenderers in the mix with everybody else.

Senator Johnston: There have been no side deals and we always seek a level playing field.

Senator CONROY: I am sure people will be very reassured by that. I did ask some of these questions in Operation Sovereign Borders and they sent me back to you, General Hurley. Apologies if you have already heard these questions. Have any Australian personnel involved in border protection command been injured or have there been any reported near misses since September last year, a near miss being under the definition of OH&S and, if so, how many and what were the cause and nature of these occurrences?

Gen. Hurley : I am not aware of any under those categories.

Senator CONROY: Any other categories?

Gen. Hurley : None have been brought to my attention, and Chief of Navy's. We can do a double check, but they have not been brought to my attention, no.

Senator CONROY: Have any personnel involved in border protection command asked to be transferred to another role outside Operation Sovereign Borders for health related reasons?

Gen. Hurley : Not reported to me. Capability managers might be able to help.

Senator IAN MACDONALD: I thought General Campbell at the other committee actually said they were operational matters that they would not respond to.

Senator CONROY: I think there are no national secrets being spilled here. If the officers at the table are comfortable answering—

Vice Adm. Griggs : I am sure there are people who have been medically recategorised through an injury or an illness, but when you say requested to be transferred—

Senator CONROY: Yes, to request, rather than that they have had an injury and they need to be transferred.

Interjector: Not to our knowledge.

Senator CONROY: Have any border protection command personnel sought to take unscheduled breaks or leave from OSB duties for health related reasons?

Gen. Hurley : That is a level of detail that we would not have with us here.

Senator CONROY: Could you take that on notice?

Gen. Hurley : It may not appear in the way these things are written down, but we will take it on notice, yes.

Senator CONROY: Thanks. Are there any health and safety risks which you had not originally envisaged that are now being managed as part of OSB? I am trying to stay generic so that we do not get the normal, 'We cannot talk about it', response.

Gen. Hurley : Not that I am aware of.

Senator CONROY: Have any asylum seekers or crew been treated for injuries by Australian personnel as part of border protection commands since September?

Gen. Hurley : Now we are treading into the water of operational issues, I would believe. I am not at liberty to respond.

Senator CONROY: I thought he indicated that Vice Admiral Griggs would be sitting in for him. I meant we finish at 6.30, but CDF indicated that he had to leave earlier in the day for a function.

Gen. Hurley : Yes, we have NSC.

Senator CONROY: Yes, but I thought that he indicated that Vice Admiral Griggs would sit in your chair, that was all.

CHAIR: If that is the case and you are happy with that—

Senator CONROY: Yes, I am happy with that.

CHAIR: Mr Richardson.

Mr Richardson : Chair, we have to be at the NSC at 6.30, so—

Senator CONROY: I am happy to break early now to facilitate that.

Mr Richardson : we have really got to get there literally within one minute. I would think, Chair, if the questioning is to go to the Operation Sovereign Borders aspect, best not while the Chief of Navy is in the chair because he is not responsible for operations in the—

CHAIR: We could break—

Senator CONROY: There are three to go, I will read them out and you can take them on notice because I understand you need to get to—

Mr Richardson : It is nearly 25 past—yes, please.

CHAIR: Should we let you go?

Mr Richardson : I might advise that in the event that the NSC is still going at 7.30 when you resume, I will be represented by Brendan Sargeant, the Chief Operating Officer.

Senator CONROY: Not a problem at all.

CHAIR: I think we will adjourn now then so the relevant people can—

Senator CONROY: I will put them on notice.

CHAIR: Thank you. We will resume at 7.30.

Proceedings suspended from 18:26 to 19:32

CHAIR: We will resume this hearing. We are still on 1.2. I believe that the other witnesses are going to be a little bit late. Is that correct? They will be here in about half an hour. If you are happy to proceed, we will do so.

Senator McEWEN: I am sure Admiral Griggs could answer my questions. I want to ask about the recent success of HMAS Darwin in the drug bust in April. Was there also one in May, or was it the same one?

Vice Adm. Griggs : There were two, I am pretty sure.

Senator McEWEN: Can you tell us what you can about what happened there and is the Darwin still on deployment in the Gulf region?

Vice Adm. Griggs : It is still on deployment.

Senator McEWEN: How much longer is it going to be there?

Vice Adm. Griggs : I think it is another two to three months. It is about half way through at the moment.

Senator McEWEN: Will it be replaced by another frigate?

Vice Adm. Griggs : HMAS Toowoomba will replace it.

Senator McEWEN: Is this part of Operation Slipper?

Vice Adm. Griggs : It is part of Operation Slipper at the moment. On 1 July it will transition to the new operational construct which the CDF outlined, I think, at the last estimates. So the maritime piece will be conducted under Operation Manitou with a new name for the operation.

Senator McEWEN: Is the intention to continue a similar kind of operation in the same area?

Vice Adm. Griggs : There will continue to be a major fleet unit presence. Whether it is a frigate or not all the time depends on ship availability, but there will be a major fleet unit presence.

Senator McEWEN: The other question I wanted to ask was about what naval presence there will be for the ANZAC centenary celebrations, both the event in November off the coast of Albany and the one next year in Gallipoli.

Vice Adm. Griggs : In Albany, it will depend on ship availability, but two to three ships is what we are looking at currently. For Gallipoli, there will be a frigate.

Senator McEWEN: Just one?

Vice Adm. Griggs : At the moment. It is a significant commitment, as you can imagine.

Senator McEWEN: Is there any intention to have any civilians staying on the frigate at Gallipoli?

Vice Adm. Griggs : Not that I am aware of. It is not going to be an accommodation platform. It is going there to provide a presence and represent the ADF at the event.

Senator McEWEN: It will be going via Greece?

Vice Adm. Griggs : It will. We are still in the process of finalising the plan, but the ship will go to Greece first. It will go to Lemnos for the commemoration there. That is where the field hospital was and the evacuation station for Gallipoli. It will then go to Gallipoli itself. After that, it will come back and do some work around Crete. There is a NATO school there that we want to put the ship through. It will then proceed across to Europe and then probably come home via Cape Town.

Senator McEWEN: The cost of doing that will be met within the normal naval budget or is there additional funding for the Centenary of Anzac?

Vice Adm. Griggs : The ship deployment will be funded from the naval budget.

Senator McEWEN: Does that mean other operations will be curtailed?

Vice Adm. Griggs : No. Every five years we try to get a ship into Europe. We try to do some benchmarking with the Royal Navy and put the ship through the sea training organisation that the UK have. Whether we do that this time is not certain, because we are going to do some work in the NATO Maritime Interdiction Operational Training Centre in Crete. We are still finalising the program, but that is the rationale behind it. We plan on that every five years.

Senator McEWEN: I have some questions about the wreck of the HMAS Perth. Can you please provide the committee with an update of efforts to work with the Indonesian government to protect the wreck of the HMAS Perth?

Vice Adm. Griggs : It is important to say, first up, that Defence does not have the government lead on this. That is the Department of the Environment. We are the coordinating department at the moment for our efforts there. That is something that the other departments, including Attorney-General's, DFAT and the Department of the Environment, are quite comfortable with us doing. I have had continuing discussions with my Indonesian counterpart to ensure that we keep this issue at the forefront of our considerations. There have been some representations made on the non-military side, mainly through the National Maritime Museum and their connections in the maritime museum in Indonesia. That is the primary vehicle we are working through at the moment. There is a plan to do a dive on the wreck. I think it is in August this year. Again, that is on the civil side. What we are trying to achieve there is to baseline the state of the ship in terms of salvage activity. The work is continuing in that respect. We are taking a coordination role. We do not have lead responsibility, but that is the update.

Senator McEWEN: Where does the funding come from for this endeavour?

Vice Adm. Griggs : For the dive?

Senator McEWEN: No, for the whole project to remove and repatriate the wreck.

Vice Adm. Griggs : That is not the intention.

Senator McEWEN: Is the intention to keep it there?

Vice Adm. Griggs : The intention is to get the wreck appropriately protected under Indonesian law so that we can have some confidence that salvage operations on the ship will not occur again. That is what we are aiming to do at the moment.

Senator McEWEN: Are you confident that there is no further imminent threat?

Vice Adm. Griggs : We have not had any reports recently of any salvage operations. The mere fact that this is in the public domain now is probably quite helpful, in and of itself.

Senator McEWEN: So you are not requiring any additional funding to continue this work?

Vice Adm. Griggs : Not at this stage.

Senator McEWEN: When do you think you might know whether you do need additional support?

Vice Adm. Griggs : I think it is unlikely, from a Defence perspective. I would not want to be definitive at the moment because in the future we may want to do a combined dive with the Indonesian navy, for example. That would probably still be funded from within our current operating budget.

Senator McEWEN: Thank you for that. What about the wreck of the AE1? Are there any plans afoot, given the proximity of—

Vice Adm. Griggs : Indeed, there are. Subject to the agreement of the government of Papua New Guinea we intend to deploy one of our minehunters in September. We have been working with the AE1 Incorporated, who have done a lot of work in refining and narrowing down the potential search area. This is, of course, not the first time that the Navy has committed assets to look for AE1, but AE1 Incorporated are confident that they have, over the last six years or so, done a lot of work in terms of refining the search area. We will be supporting that through the minehunter deployment in September, which is around the time of the centenary of the loss of the boat.

Senator McEWEN: What is the nature of the agreement you have to reach with PNG? Is it with the PNG navy or the PNG government?

Vice Adm. Griggs : It is a diplomatic clearance issue in that it is in PNG territory and we obviously have to tell the PNG government what we would like to do and get their agreement to do it. They have been very accommodating in the past. I would not expect there to be a problem but I am not going to assume that. That is why I said that it was subject to the government of PNG's agreement.

Senator McEWEN: When are you anticipating getting that agreement?

Vice Adm. Griggs : We normally get that a couple of months before in terms of diplomatic clearance for these sorts of things.

Senator McEWEN: So that will happen possibly in the next month or so. Is there anything allocated in your budget for the attempt to locate the AE1?

Vice Adm. Griggs : No additional funding.

Senator McEWEN: So the minehunter that you will deploy will just be doing it as part of its normal operation work.

Vice Adm. Griggs : It is very good training for the team to operate in those sorts of waters. They do not get the opportunity to do that very often. So it will be encompassed by their normal activities.

Senator McEWEN: If it is located, what are the plans for it? Will it be another dive site or—

Vice Adm. Griggs : I think we have to take it one step at a time. First of all we have to find it. I think we have to be realistic about our chances of finding it. It has eluded us before. If you compare it to AE2, AE2 went down in cold water—it was not tropical waters—and in this case you are going to have coral incrustation and a whole bunch of things. In fact, last time we looked, we thought for a brief period of time that we might have found something, but it was actually a submarine shaped coral outcrop, so we have that to contend with in those waters. While I would love for us to find it, I think you have to be realistic about the potential here.

Senator McEWEN: Thank you for that.

CHAIR: I have questions under 1.2, Patrol boat capabilities. How many patrol boats are operational at any one time and what is the total number of patrol boats?

Vice Adm. Griggs : We have 14 patrol boats in the fleet. Under the availability contract, we aim for 3,500 days of availability a year, which, when you divide that by 365, comes out at about 9.6 boats a day. That is the number that I work on. If I have between nine and 10 boats a day, I am pretty ecstatic. I actually have not had that very much lately, but that is where the target is. Of that 9.6, seven are required for assignment to Operation Resolute and the remaining two to three do the training piece to keep crews certified and any international engagement that we may do either in the Pacific or up into South-East Asia. Obviously, as that number of available boats comes down, the priority remains on operations and I have to trade off the international engagement piece and things like that.

CHAIR: I have read or heard that, because of their increased usage in the protection of our borders and that sort of thing, the patrol boats have had a higher than previously encountered level of breakdown and so on. Do you wish to comment on that?

Vice Adm. Griggs : What I can say is essentially what I said earlier. I do not think there is a single factor that you can point to in terms of the performance of the boats. We have had design issues. We have material issues with the fact that the boat is aluminium and the way that behaves with cracking—it has different characteristics to a steel boat. There are operational issues around the way that we drive the boats, and then there is also the maintenance performance in maintaining these boats. Of course, there is the operational usage. They are not being used outside of their planned usage—that is not the case. Their operating cycle is as designed.

CHAIR: That is an important point, I guess. Nevertheless, we read that they have had a lot of wear and tear.

Vice Adm. Griggs : They have, and there is no doubt there are aspects of the operational profile that have not helped.

CHAIR: A couple of years ago there was a defence posture review, which recommended that there should be an increased patrol boat presence along the north-west coast and maybe even a patrol boat based in Broome. Is there any progress on that? Is there an increased frequency of patrol boat sorties along the north-west coast?

Vice Adm. Griggs : If you recall, when the Armidales were first delivered, there was a support base. That is probably too strong a term—there was a facility in Dampier that was opened.

CHAIR: That was proposed, yes.

Vice Adm. Griggs : That was to support visits to Dampier by the patrol boats. I think we had two people there permanently posted to run that facility. In the end, we shut that down just because the frequency of visits to Dampier did not support it. That is because the operational focus had shifted up to the Christmas Island-Ashmore corridor. We simply did not get as many available boats to come down to the North West Shelf, which is why in 2011 I started a process of transiting ships, deliberately detouring and going through the North West Shelf and making sure that the rigs in particular knew we were there. We have done a number of patrols through there and we have had a couple of exercises through there. In fact, the ADF will have a joint exercise later this year in that region.

CHAIR: Off the Pilbara coast?

Vice Adm. Griggs : Yes.

CHAIR: That is very interesting. I did not know about that. Where is the home port of the patrol boat fleet? Is it Darwin or Cairns?

Vice Adm. Griggs : Darwin and Cairns.

CHAIR: So it is both.

Vice Adm. Griggs : We have three boats in Cairns and the remainder in Darwin.

CHAIR: What sorts of facilities do you have in Darwin?

Vice Adm. Griggs : Darwin has two wharfs. It has a ship lift and that can bring the boats out of the water. There is a covered maintenance berth, which is very useful obviously in the wet season, and there is a hard stand where you can put other boats to undergo maintenance.

CHAIR: Are you aware that there is a proposal to put a common user facility into the south-east end of the Port Hedland harbour, which will be in due course something similar to the Henderson facility on Cockburn Sound?

Vice Adm. Griggs : I am. I have had a brief on that proposal.

CHAIR: Do you think that will be useful to the Navy? It will obviously be useful to the oil and gas industry.

Vice Adm. Griggs : It depends on the shape and form it eventually takes—what the capacity of things like ship lifts are. I am sure they will be a reasonable size if they are going to service the oil and gas industry. But, to be frank, I think our biggest challenge, if we were to use it, would be getting in the queue, because, as you know, that industry is booming on the North West Shelf. It would give us another option and, frankly, options are good for us in terms of maintenance opportunities.

CHAIR: Yes, there is a queue to get in and out of Port Hedland harbour. It is all computerised. It will be interesting to see how that facility develops. That area is seen as an alternative to both Henderson and Singapore, so big tenders and so on would not need to go so far to be serviced.

Vice Adm. Griggs : From our perspective, it gives us an opportunity. If we need an emergency docking or something like that and we are in that vicinity, then clearly we do not have a four- or five-day transit to another facility. There are certainly good points out of it if it comes to pass.

CHAIR: The indications are that it probably will come to pass, but we will have to wait for final decisions. Thank you very much. We will now move on to program 1.3 on Army capabilities.

[19:53]

Senator CONROY: I refer to the cost summary for program 1.3, Army capabilities, in table 19 on page 37 of the PBS. When comparing the 2013-14 PBS to the 2014-15 PBS, could you take us through the following: the write-down of assets and impairment of assets being halved from 126,000 to 63,000.

Mr Prior : Those are accrual numbers that only the very silly get involved in, being me! You are referring to the write-down of assets and impairments. In Defence we have a very large asset base, as you would appreciate. The write-down of assets and impairment of assets is an accounting requirement, as you would appreciate. Equally, if you look at the bottom of table 19 you will see reversals of previous asset write-downs as a line.

Senator CONROY: Yes. I was going to come to the reversal of previous asset write-downs next, so if they are tied together that is good.

Mr Prior : They tie them together. Defence, as you know, has had qualified financial statements for many, many years. We have been working very hard over the years; we have removed those qualifications and we have our asset accounting in better shape. For many years we were writing down, or writing off, and reversing the write-off of assets that had actually just moved from one part of the business to another part. As an asset might move from one warehouse to another warehouse, or from one area to another area, that movement was treated as an asset write-down and a reversal once it was moved to where it got to. Over the past year or so we have our systems in place such that we do not count that as an asset write-down and then write it back on—we net those two amounts off. As a result, our asset write-down and asset reversal have both declined in response to that better accounting treatment. Does that make sense, Senator?

Senator CONROY: Thank you.

Mr Prior : That will apply throughout all the various tables you will see, particularly in the military services—

Senator CONROY: I may come back to you just in case there is something different but I am happy for you to give that same answer.

Mr Prior : That is the same story throughout. Lieutenant General, is that—

Lt Gen. Morrison : I have to say I am pretty satisfied with the CFO's answer.

Senator CONROY: There is no air cover coming. Can Army confirm that the cap providing for the number of Army personnel has not changed?

Lt Gen. Morrison : I am sorry, Senator, the—

Senator CONROY: The cap for the number of Army personnel.

Lt Gen. Morrison : No, it has not changed.

Senator CONROY: In outcome 1.2 there was a deliverable to achieve savings. Is that a requirement under outcome 1.3 as well?

Lt Gen. Morrison : All the services and groups within the department have signed up to various measures that result in savings under both what was called the Strategic Reform Program and also efficiencies that have been required of the department, along with other departments, by this government and previous governments.

Senator CONROY: How much is saved from programs 1.2 and 1.3? I am happy for you to take that on notice.

Mr Prior : That needs to be taken on notice. Regarding the amount of savings from the various years that are now displayed in the PBS you need to go back many, many years to accumulate the various savings that have been accumulated over time. Does that make sense?