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Monday, 30 May 2011
Page: 5180


Mr GIBBONS (Bendigo) (16:39): During a time of global economic uncertainty when many Western countries are battling against low or negative economic growth and a large national debt, this budget is all about getting the settings right. It is about getting the settings right for a strong, secure and sustainable economy that will benefit all Australians in the years to come. As Craig James, chief economist at CommSec, has said:

Overall, it is a smart budget, and a budget right for the times and challenges ahead.

There is much talk about our economy today being resourced based—indeed, our resources industries do make a huge contribution to our national output—but, as the Treasurer pointed out in his post-budget speech to the National Press Club, this is as much an oversimplification as thinking Australia was just an agricultural economy during the last century. We are not simply a resource economy and the time of our manufacturers has not passed. Indeed, our manufacturers have innovated and moved with the times and they will continue to do so.

I take the opportunity today to talk about one innovating manufacturing sector in my electorate: defence manufacturing, its importance to the region's economy and jobs and how this sector has been responsible for making or breaking the aspirations of several political candidates and in some cases political careers. It is worth spending some time going through a brief history of defence manufacturing in Bendigo. Seventy years ago the Commonwealth government announced plans to build a Commonwealth ordnance factory in north Bendigo to manufacture and refurbish heavy gun barrels for the Australian Navy, produce munitions and a range of other heavy engineering tasks for the war effort. Between 1942 and 1981, the factory not only manufactured and refurbished defence equipment for Australia's requirements but also completed several large export contracts including some for the United States navy. At its peak of operations the factory employed well in excess of a thousand people.

The announcement in 1981 by then Treasurer Phillip Lynch that the Fraser government would sell or close the Commonwealth Ordnance Factory with a loss of hundreds of jobs produced an angry reaction in the Bendigo community. A study of the impact of the proposed closure on Bendigo's economy was undertaken and an intensive lobbying campaign got underway. In fact, three Bendigo councillors got together and nominated as legislative assembly candidates in the 1982 Victorian election on a cross-party 'Save the Commonwealth Ordnance Factory' ticket. The idea was that those electors who would normally vote Liberal but wanted to register a protest about the factory sale or closure could vote for Councillor Joe Pearce and direct their second preference to the Liberals, Labor voters could vote for Councillor Dick Turner and direct preferences to Labor and those supporting other parties could vote for Councillor Chris Stoltz and then preference one of the minor parties or candidates. In the event, sitting Liberal member Darrell McClure was dumped and Labor's official candidate, David Kennedy, who campaigned extensively on the Commonwealth Ordnance Factory issue, was elected.

The proposed closure claimed another political victim in the following year's federal election when sitting Liberal member and then Chief Government Whip John Bouchier was defeated by Labor's John Brumby. The future of the Commonwealth Ordnance Factory was once more a major issue in the local campaign.

In the late 1980s the Commonwealth government restructured several government owned defence manufacturers, including the Commonwealth Ordnance Factory and the Commonwealth Clothing Factory which had been manufacturing defence uniforms and combat clothing since 1912. In 1989, then Minister for Defence Kim Beazley announced that a new government owned entity, Australian Defence Industries or ADI, would bring these organisations together to create Australia's largest defence manufacturer.

Another reorganisation in 1992 saw ADI consolidate its defence clothing manufacturing operations in one location at McGoldrick Court in Bendigo. Three years later, this was established as a separate business and subsequently sold to the private sector and became Australian Defence Apparel. This company has a track record of innovation in the manufacture of combat clothing and associated equipment. It continues to operate today, producing high-value personal body armour as well as a range of military and combat uniforms, and currently employs about 300 people.

The future of the remaining ADI operations was again an issue in the run-up to the 1996 federal election. The then Leader of the Opposition, John Howard, visited Bendigo and promised not to privatise ADI. He told a press conference, including the Bendigo Advertiser, on 14 February 1996, 'No, no and no; we have no plans to privatise ADI.' The coalition won the election and John Howard became Prime Minister on 2 March 1996. Bruce Reid, who had defeated Labor's John Brumby in the 1990 election, was re-elected as the federal member for Bendigo with an expectation that the government would keep its promise not to privatise ADI. In early 1997, the government selected ADI's Bushmaster protected mobility vehicle as a preferred option over the ASVS Taipan alternative. Then in February Liberal Minister for Defence, Ian McLachlan, announced the government's decision to fully privatise ADI, despite John Howard's campaign promise to Bendigo not to do so. The Howard government was re-elected in 1998, but I successfully defeated the new Liberal candidate for Bendigo, Max Turner—Bruce Reid having announced his decision to retire—with the ADI privatisations betrayal and the future of the Bushmaster contract among the main local issues. John Moore replaced Ian McLachlan as defence minister in 1998 and the following year the Howard government sold ADI to a fifty-fifty partnership comprising Transfield Australia and French company Thompsons-CSF, which is now Thales.

In 1999, the first production contract for 370 Bushmasters was signed with ADI and the first Bushmasters to be used on operations, the two original prototype test vehicles affectionately known as B1 and B2, were deployed to East Timor. After Peter Reith replaced John Moore as defence minister in 2001, he received a recommendation from the Defence Materiel Organisation that the Bushmaster production contract should be cancelled. Sections of the defence department and senior military personnel had expressed strong doubts regarding the Bushmaster's suitability for the ADF. This ensured that the suitability of the Bushmaster and ADI would again be a major issue in the 2001 federal election campaign. The Howard government was re-elected, but I was successful in retaining Bendigo for Labor.

In March 2002, I led a deputation to new defence minister, Senator Robert Hill, to argue the case for retaining the Bushmaster contract for ADI. Four months later, Senator Hill, to his great credit, announced that the government would honour a revised Bushmaster contract with ADI, although the number of vehicles would be reduced from 370 to 299. The first production Bushmasters rolled off the assembly line at ADI Bendigo in 2003 and in 2006 Thales Australia acquired 100 per cent ownership of ADI and assumed full control of its operations. The company restructured and Thales specialist vehicles were created at the Bendigo factory. By this time, more Bushmasters had been deployed in East Timor, Iraq and Afghanistan, where again and again they demonstrated their superiority in saving the lives of Australian defence soldiers.

After succeeding Senator Hill as defence minister, Dr Brendan Nelson increased the contract with ADI for Bushmaster PMVs to a total of about 730 vehicles. This was about the time that the Australian Defence Force Land 121 Phase 3 vehicle acquisition program released specifications for several light, medium and heavy trucks including a number of armour protected vehicles. Twenty vehicles were initially assessed with a view to short listing the light to medium category down to three, but despite the Bushmaster's proven combat performance, a utility variant, then called the Copperhead, was not even included in the initial assessment process. Again, some senior defence personnel had expressed doubts on this vehicle's suitability.

Meanwhile, having seen the success of Bushmasters in Iraq and Afghanistan, the Netherlands Defence Force placed an initial order for 25 Bushmasters, which was subsequently increased to a total of 86 vehicles. This important export order was won despite a conspicuous lack of support from the Howard government for Thales' efforts to sell their world-beating products overseas.

In the 2007 federal election, potential export markets for Thales protected mobility vehicles was a major issue in the Bendigo campaign. I retained the seat for Labor and the member for Hunter was sworn in as the new defence minister in the Rudd government. This was followed by further export success for the Bushmaster when the British defence force took delivery of 24 vehicles.

In 2008 the new Labor government overhauled the troubled Land 121 Phase 3 program resulting in the Bushmaster single-cab utility vehicle finally being considered in a new round of initial assessments. Subsequently the Defence Materiel Organisation short-listed the Bushmaster utility, along with vehicles from Mercedes-Benz and MAN. We are still waiting for a final purchase recommendation, which has been expected from the DMO since last December.

The ADF also needs to replace a significant part of its ageing Land Rover fleet and its Land 121 Phase 4 program will provide around 1,300 light protected mobility vehicles for this purpose. Defence minister Fitzgibbon announced in 2008 that Australia would commit about $40 million to participate in the US joint light tactical vehicle development program, with a view to buying a US vehicle to meet the ADF's light protected mobility vehicle requirements. The minister's statement also signalled an opportunity for Australia's defence manufacturing sector to compete in the light protected mobility vehicle program, and Thales developed the Hawkei prototype for this category. However, during private briefings on Land 121 Phase 4 from senior DMO personnel in 2009, I was told that they did not believe Thales were capable of producing a light protected mobility vehicle. Senator John Faulkner replaced the member for Hunter as Minister for Defence later that year and a separate Minister for Defence Materiel, the member for Charlton, was appointed.

In May last year Mr Combet announced funding for three Australian manufactured light protected mobility vehicles to compete against the US JLTV. Thales, Force Protection and General Dynamics each received funding of up to $9 million to develop prototypes. Thales's Hawkei is the only Australian designed and manufactured vehicle involved. We have also learned from the US documents made public by WikiLeaks last year that US diplomats have been pressuring Australian officials to abandon our defence manufacturing sector and purchase products exclusively from the United States.

In the narrow re-election of the Gillard government in 2010, I was returned as the member for Bendigo, the member for Perth replaced Senator Faulkner as the Minister for Defence and the member for Blaxland became Minister for Defence Materiel. In February this year Thales delivered two Hawkei prototypes for an intensive test and appraisal process to select an Australian light protected mobility vehicle to compete with the successful US JLTV vehicle. A decision on this is anticipated within two years.

The people of Bendigo continue to support the city's defence industries. In April, about 300 people attended a rally to demonstrate that support. Since then, the defence minister has announced an order for another 101 Bushmaster PMVs for the Australian Army. Today, Thales is part of Bendigo's progressive and innovative defence industry—one that also includes protective clothing manufacturer Australian Defence Apparel and the Defence Imagery and Geospatial Organisation. Bendigo's defence industries employ more than 800 people and the jobs supported by the ADA and Thales operations alone represent approximately 18 per cent of Bendigo's total employment in manufacturing. It is one of the key sectors of Bendigo's economy. The annual direct output generated by the defence industry in Bendigo is estimated at more than $490 million and, including the flow-on effects to other sectors, the industry's total contribution to the local economy is estimated to be around $760 million a year.

I have tried to demonstrate today that Australia has a world-class, innovative manufacturing capability in protected mobility vehicles and armoured protective clothing. I believe it is in our national interest that this should be retained and supported—and this is a regionally-based industry that contributes significantly to the economy of central Victoria. As I have also shown, we do not always make it easy for our domestic manufacturers to deliver the world-class products they are capable of producing. The saga I have recounted of Thales and its Bushmaster vehicle program is one of delay, prevarication and uncertainty, and it has claimed more than one political scalp along the way. If we are serious about encouraging our manufacturers in this country, we must walk the walk and not just talk the talk. We must do better. Government can do much to support local manufacturing through its various acquisition programs without making compromises on the quality of its purchases. This year's budget includes several measures that continue this government's support for local industries to innovate and compete in world markets. I commend the budget to the House.