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Wednesday, 31 August 2016
Page: 221

Defence Procurement

Senator XENOPHON (South Australia) (14:24): My question is to the Minister for Defence representing the Minister for Defence Industry. What percentage of the Future Submarine build will take place in Australia and also what percentage of the value of this multibillion dollar contract will be spent in Australia—this being a key determinant of Australian industry participation and jobs? Further, what direction has the Minister for Defence Industry given to the Department of Defence to ensure the contract maximises Australian industry participation and jobs?

Senator PAYNE (New South WalesMinister for Defence) (14:24): I thank Senator Xenophon for his question and for some early indication that he would be pursuing this question. This is a very important question, because the objectives of the CEP that we put in place for the Future Submarine program were in particular to maximise Australian industry involvement. That is exactly what we intend to do as a government: we are going to maximise Australian industry involvement, engagement and capability throughout the entire Future Submarine program which, as you know, has been announced will be constructed in Australia—in fact, in Adelaide.

I am not going to stand here today—and I have had this discussion with our colleague Senator Conroy before—and put a percentage and, most particularly, put a floor on any particular level of Australian industry involvement because, frankly, it is my view, it is the government's view, that that would be a reckless thing to do during the Commonwealth's most important commercial negotiations ever. We just do not believe it is the right approach to this important negotiation. What we will do though is adopt a very ambitious, very positive approach in relation to the engagement of Australian industry and Australian content in order to maximise it.

Senator Xenophon, you have asked about directions to Defence in relation to this—let me be very clear: the entire National Security Committee of Cabinet, the Minister for Defence Industry and I have been absolutely explicit in our directions to Defence that their job in relation to these commercial negotiations is to maximise Australian industry involvement while obtaining the submarine capability that Australia needs, the regionally superior submarine capability that Australia needs.

These are not just words or promises; these have actually been backed up by this government. We have backed them up with the development of the Centre for Defence Industry Capability. We have backed them up with the other initiatives set out in our Defence industry policy statement, as you know, Senator Xenophon. (Time expired)

The PRESIDENT: Senator Xenophon, a supplementary question.

Senator XENOPHON (South Australia) (14:26): Given that French unions have been agitating to maximise French industry participation and jobs at the expense of Australian industry participation and jobs, can the government at least provide an assurance here and now that the contract will ensure no less than 70 per cent of the value of the project being spent in Australia on an Australian builder and supply chain using the Collins class project as a benchmark? Surely the very ambitious approach of the government must include some minimum baseline of Australian content.

Senator PAYNE (New South WalesMinister for Defence) (14:27): Notwithstanding the attractiveness of the proposition, I am not going to comment on agitating unions—I might leave that to my colleague Senator Cash. But, as I have just said, I am not going to stand here and set a floor or a particular percentage on Australia's detailed commercial negotiating position, and that is a consistent position which I have taken since the announcement of the Future Submarine program, as you know, and the decision in that regard.

What we will do—and what we have instructed the Department of Defence to do—is maximise that involvement, engagement and capability right throughout the Future Submarine process, and perhaps for the first time ever we have actually set up the necessary initiatives to do that in helping Australian industry become involved. We are not going to leave those SMEs out there on their own trying work it out for themselves in terms of winning those contracts. We have established the new Centre for Defence Industry Capability, which is going to help them right across the country to engage with DCNS and other major defence contractors to help them secure those contracts and create Australian jobs. In fact— (Time expired)

The PRESIDENT: Senator Xenophon, a final supplementary question.

Senator XENOPHON (South Australia) (14:28): So is the minister saying the local content could be as low as 40 per cent, 30 per cent, 20 per cent or less? Will the minister at least agree to establish a round table involving local industry, DCNS, state governments and unions to ensure maximum local industry participation, transparency of supplier, benchmarks and explicit project clauses maximising local industry participation and jobs?

Senator PAYNE (New South WalesMinister for Defence) (14:28): Even in recent months, Senator Xenophon, I have spent many hours involved in round tables, square tables and rectangular tables on these exact discussions with industry right across this nation in relation to the Future Submarine program. But I acknowledge and thank you for your suggestion. I recognise your interest in local industry and jobs but, again, I am not going to put a floor on the Australian level of engagement. It is all about absolutely maximising that but maximising our position in commercial negotiations at the same time.

This process will include the finalisation of a comprehensive naval shipbuilding plan, a plan which will help secure Australia's naval future and our national security. It will articulate how governments, state and federal, and key stakeholders interact and engage in this truly national endeavour. It is our intention to finalise that plan by late 2016, as you know, Senator Xenophon. It will be a truly national endeavour.

If there are any other issues in your questions that I have not responded to, I will take those up with the Minister for Defence Industry. (Time expired)