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Transcript of joint doorstop interview: Adelaide: 3 May 2012: : Defence White Paper; Future Submarine Project; Defence Force Posture Review; Budget; Joint Strike Fighter Program

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Subjects: Defence White Paper; Future Submarine Project; Defence Force Posture Review; Budget; Joint Strike Fighter Program

PM: I'm delighted to be in South Australia. I'm here with Premier Weatherill and I'm also here with Ministers Stephen Smith and Jason Clare.

And we're here, where you can see a submarine, for good reason. South Australia is the place where the deep maintenance of the Collins Class submarines happen. We are standing in one of our most important naval dockyard facilities.

This morning we have announced that we will next year publish a new Defence White Paper. We are committed to 12 future submarines, and we are committed to getting this job done through an investment of $214 million to get all of the design right, to make sure that what replaces the Collins Class submarine is right.

And, as we do that work, we are heading towards those new submarines being assembled right here in South Australia where all of the skills and capabilities of this place and this workforce is so important.

So this is great news for manufacturing in South Australia, it's great news for where I am today at ASC meeting with some of the workers who are already very expert in the Collins Class submarine and many of whom have worked on submarines for 10, 15, 20 years.

When you look around at the place where we are now, this technology - tech park, it is a great testament to the vision of the South Australian Government that this amount of land and capability has been set aside. And what you can imagine seeing here in the future is where there is wide open space now, it being filled up with the new businesses and new manufacturing enterprises that are making their living and making their way because the submarines are being assembled here and because that brings cutting edge skills and capabilities to South Australia.

So, it means jobs for the future.

I'll hand over to the Premier and then we'll be happy to take some questions.

PREMIER WEATHERILL: Thank you Prime Minister, and to Ministers Clare and Smith.

We are delighted with this announcement. This is just such an important announcement for South Australia's future. We now have confirmation of something very important for South Australian industry and jobs, that is the confirmation that we will build and assemble the 12 new submarines in the Future Submarine Project here

at Port Adelaide.

This, I think, is a great vindication of the very substantial investment that was made in this part of South Australia to provide the infrastructure that we are presently standing on; these fantastic facilities here at (inaudible), which has enabled the Government to have confidence in investing in the Future Submarine Project here in Port Adelaide.

There's a number of important elements to the announcement. Of course the confirmation of the 12 submarines being assembled here, but secondly some important timelines around which decisions will be made. That assists the Government and industry to organise itself around those target dates.

We also know that there's been a substantial investment of $214 million in this design stage to ensure that the appropriate options are chosen. We will make representations about what we believe is the appropriate option for South Australia. Obviously this will be made by the Commonwealth Government principally on Defence grounds but each of the four options that they're considering are all good options for South Australia. Some are better than others and we'll be making representation about them.

In this state we have an ambition to create an advanced manufacturing sector. We believe that the future security of South Australians really rests upon us building on our strong history of manufacturing and then transitioning now to an advanced manufacturing sector. That's where the jobs are. That will allow us to spread the prosperity that we know is coming to South Australia amongst a larger group of citizens. We know that for every job created in the manufacturing sector, between two and five jobs are created in the rest of the economy. It's absolutely crucial that we build on our fine tradition of manufacturing and indeed shipbuilding in South Australia.

So this is a fantastic announcement today that goes right to the heart of one of our key priorities, that is growing an advanced manufacturing sector here in South Australia.

JOURNALIST: Prime Minister, obviously as the Premier said, there is a fair difference in terms of capital investment in the state between the four options. How substantial is that difference and is there an option that the Government is leaning towards?

PM: There are four options on the table and the $214 million is to make sure we properly work through all of the options and get this right for Australia.

Of the four options they range from what's referred to as a military off the shelf option, which would still require work and assembly here in South Australia, right the way through to a wholly new Australian designed submarine.

But as we work our way through those, we'll also be working our way through the sustainment and maintenance of the Collins Class submarine. They - current Collins Class submarines, the last of them was commissioned in 2003. That means its planned life at the moment takes you to 2031. We know with patterns of sustainment and maintenance you can extend the life of submarines and that really deep maintenance happens here.

So we've got to plan through sustaining the Collins - that means work here - and then having the future submarines and that means work in South Australia too.

JOURNALIST: Does that mean you're looking to delay the onset of the next generation of subs?

PM: No, it means we are doing all of the prudent planning you would expect so we do not face a capability gap, so we move from one generation of submarines to another without a capability gap.

JOURNALIST: Prime Minister, the Collins have spent a substantial amount of time on the Projects of Concern list in Defence. How confident are you that ASC can actually deliver what it will tell you it can deliver within budget?

PM: One of the things Minister Smith has spent a great deal of time doing is learning the lessons from the Collins Class submarine, and amongst those lessons is that you've got to be very, very focused and very precise about design questions before you start.

So when you look at huge military projects around the world, if difficulties are going to arise during the procurement they tend to arise early in the procurement process because there hasn't been sufficient clarity around design and capability questions

before the actual work on them starts.

That's one of the lessons we've learnt from the Collins Class submarine which is why we're taking the time and the money, $214 million, to get this right.

JOURNALIST: Has a nuclear option been ruled out completely then?

PM: Yes it has, it has been ruled out. We don't have a nuclear industry in Australia and consequently we don't have the skills and capabilities to enable us to assemble or maintain nuclear-powered submarines. We just don't have the people here who do that work because we don't have a civil nuclear industry.

JOURNALIST: How much will cost be a factor in the decision? I assume that (inaudible) will be the cheapest mode. Would that be-

PM: Well don't think you can make any of these simple assumptions about how costs and capabilities arise. The decision will be made, of course we always look for value for money but the decision will be made on the capacities that we want the submarine to have which then goes to your strategic assessments about what you want the submarine to do.

Now a lot of this is dealt with in the Defence force White Paper, the 2009 White Paper, but of course we are evolving to the next Defence White Paper, and looking now in a great deal of detail at these questions, strategic and capability questions.

JOURNALIST: You indicated that there's four European companies that will be initial beneficiaries of the design work. Why not support ASC's design capability through their (inaudible) work that they've been doing?

PM: Well I'll turn to Minister Smith on that, but I think we've just got to be very clear about what we're doing with the $214 million, the designs and studies that will enable us to make the best possible selection as to how the future submarines will be

generated, whether we move from a military off the shelf style acquisition or whether we go all the way through to an evolved Collins Class submarine, a son or daughter of Collins, or to a wholly new Australian designed sub. That's what we're using the $214 million for and you've got to be very, very clear about capabilities, what you want, how you can do it, what the strategic use of the submarines are. And that's what we're being very clear on.

We are of course looking to get the best knowledge and advice we can from around the world including other nations around the world that build and operate submarines. And Minister Smith might want to say something about that.

MINISTER SMITH: Where ASC will be invaluable to the Government's consideration of the future submarine program is of course the work that it's done for a long period of time on Collins, and one of the options is what I describe as the son or daughter of Collins. In other words a submarine which is a derivative of a Collins Class submarine. The best people to advise us in that respect, firstly ASC on the basis of the experience, the maintenance and the sustainment, secondly the original designer of the Collins Class Submarine, Kockums, and the material that we've released today makes it clear that we'll be having discussions with Kockums about precisely that issue. So there is absolutely no doubt that ASC will have a very good input into our deliberations.

The studies that we're doing with the so called military off the shelf companies are producers of submarines essentially in Europe. The initial assessment is whether those submarines give us the capability required. I'm not putting a timetable on any of these considerations, but that will be one of the easier judgements and assessments to make.

JOURNALIST: But isn't it an indication to Australian industry that you don't have faith in their capability to do the design?

MINISTER SMITH: Absolutely not. If that was the case then you wouldn't have half of the options being a derivative of Collins Class submarine where the expertise is here, or the second option in that category, a wholly newly designed Australian submarine.

JOURNALIST: But in terms of parochial South Australian interests what you're talking about today is not as unequivocal and not as blatantly good news as it was when the White Paper was introduced.

MINISTER SMITH: Well that is not right.

PM: That's not right.

MINISTER SMITH: That is not right and it's not right because whatever option the Government determines after exhaustive study where we make sure we get everything right and we make sure there is value for money in defence terms (inaudible) but also value for money in the taxpayers eyes. Whatever option we decide upon the work, the assembly work will be done here, just as we expect and are planning for, the deep maintenance and sustainment to continue to be done here. So whatever occurs this port, this facility in South Australia wins out of this process.

JOURNALIST: But what does it mean in terms of, I guess, jobs and money spent?

MINISTER SMITH: What it means is - what it means is more money spent, more jobs here, more skills here, a greater manufacturing base, and as the Premier has very correctly said, it provides a platform to help not just defence manufacturing in South Australia but all manufacturing in South Australia to take it to the level - the next level which is not the traditional manufacturing we've seen in South Australia but the high level, high quality, high skill advanced manufacturing technology.

JOURNALISTS: (Inaudible)

PM: Just hang on one second. I'll intervene there and we'll take a couple of more questions, then we're going to have to go. We actually have to get through to Melbourne.

First, I think it's important for people to remember the size and scale of this. We are talking about the biggest procurement project the nation has ever done, bigger than any military procurement project in the nation's history; in value terms worth more than the Snowy Hydro. The biggest project the nation has ever done. That is what the new Future Submarines represent.

You would expect us, when we are doing a project of that size and scale, nation-changing, history-making, you would expect us to look at all options in forensic detail, and that is what we're going to do. And that is what the $214 million is for.

But whatever option is ultimately chosen, whatever option, it will mean jobs here in South Australia. When you use the word assemble - and the Premier and I were just having this conversation before. When you're using the word assemble it doesn't

really do justice to the amount of work that is necessary even to realise a military off the shelf capability and do its deep maintenance. Even the word maintenance doesn't really do justice to the amount of work that happens here on these submarines.

So we are talking about jobs and skills here in South Australia; direct jobs and direct skills. But we also know manufacturing benefits, your whole manufacturing sector benefits from having higher and higher skill levels available in different parts of it. That's why the car industry is so important because of the higher skill levels and why the work here will be so important.

(Inaudible) trying to get a question in for a while.

JOURNALIST: When are you likely to be in a position to make a decision on the lifetime and the retirement of the Collins Class? Is that once this $214 million process is finished or will that be after the Coles review?

PM: Well, Minister Smith can explain to you the Coles review has been -

MINISTER SMITH: Well, in terms of the design life of the Collins, the design life of the Collins was calculated to be 28 years. So if you take the production of the last Collins 2003, you're looking at 2031. We're currently doing an exhaustive study to assess what we believe the actual lifecycle of the Collins Class will be; not an on

paper design calculation. And we know experience from overseas. The United States, for example, the Ohio Class submarine's life - designed life or life of type was effectively extended from 30 years to 40 years. Now, we're doing that to make sure that in the end we don't have a gap in capability from transition out of the Collins Class submarine to the new Future Submarine Project. So that's a separate study we're doing.

So far as Coles is concerned (inaudible) and I received the first part of the Coles review work in December of last year. This is to get the maintenance and sustainment of the Collins Class back on to a much better footing, to get more days on operation and in the water out of the Collins Class. That has been an ongoing problem that ASC knows only too well, as have successive governments.

I will receive the second part of the Coles review on Collins maintenance and sustainment in - at the end of this month, and we'll give that subject, we'll give that our consideration.

But we are confident that the work that Mr Coles and his team have been doing in conjunction with ASC will see us get an enhanced improvement and performance out of our maintenance and sustainment arrangements.

JOURNALIST: Does that mean a longer life, does that mean that this, these new submarines may be a little further away that you thought?

MINISTER SMITH: Well - no, no. We want to bring the future submarine program into fruition in an orderly manner but after we've done all of the forensic and methodic work that the Prime Minister has referred to, at the same time to minimise the risk of any gap in capability we're doing that separate work on the Collins.

Now the extent to which our maintenance and sustainment improves that means more days in the water and more operational days so far as the Collins is concerned, but one factor which is relevant to moving from a design life of type to an actual

calculation of what we expect the life of type to be - or an extension to the design life of type is the fact that they've been in the water less than we expected when they were built, so that's (inaudible).

JOURNALIST: Minister, very quickly, retired Major General Jim Molan who headed our mission in Iraq, in response to Government cuts today, and I quote he said ‘one day we're going to need the Australian Defence Force and I have no confidence, in the next 25 years, it's going to be ready’. Is that an insult to Defence?

MINISTER SMITH: Well Mr Molan is entitled to his views. We've made a range of announcements today about a new White Paper, about submarines, and force posture. These will culminate in terms of force posture and the White Paper in the first half of next year. One of the issues that we have to grapple with is the same issue that the United States has grappled with, the same issue that the United Kingdom has grappled with which is after the global financial crisis we're going through a difficult fiscal and financial period.

But as the Prime Minister has made clear and as I've made clear, whatever occurs in the budget next week will not have any adverse implications for our overseas operations - so no adverse implications for Afghanistan, for East Timor, or for the Solomon Islands.

No adverse implications for the kit and the resources we give troops about to deploy or on deployment, no adverse implications for any of the arrangements we've put in place with the United States so far as northern Australia is concerned. And as a

general proposition, no adverse implications to all conditions and entitlements. And no adverse implications for military numbers. Now -

JOURNALIST: So he's wrong?

MINISTER SMITH: Well I don't share his view, I don't share his view. What we are doing is making sure with reference in recent days to - two difficulties or problems post Vietnam. One was after Vietnam we reduced our military numbers. And the second was after Vietnam we didn't stop and think and give strategic thought to where and how we should posture our Defence Force.

We're not making the same mistake here. We're seeing over the next few years an orderly draw down and transition from Afghanistan, an orderly draw down and transition from our stabilisation forces in East Timor and the Solomon Islands.

So we need to give, for those reasons alone, strategic thought to the future of the ADF in addition to the other factors the Prime Minister and I have spoken about today - including how you grapple with changing financial and economic circumstances.

In the budget you will see more detail on that but what we've tried to do is to make sure that we can continue the vital work that the ADF do in operations but also we continue delivering the core capability of the 2009 White Paper including


JOURNALIST: Minister, do you acknowledge that the decision on the Joint Strike Fighters leaves some companies who have invested heavily in that project in the lurch?

MINISTER SMITH: Well, some of the companies who - Australian companies who are providing parts for the Joint Strike Fighter have already found difficulty as a result of delays in the project and the United States moving more than - the production of more than 150 planes to the right, to use the jargon, but effectively put the production of those planes two or more years down the track. That has been the substantial cause of difficulties so far as Australian industry is concerned.

What we've done in our announcement is to essentially put our timetable for the production of the first of our 12 aircraft on the same timetable as the United States did in the last few months.

JOURNALIST: So you've made a bad situation worse?

MINISTER SMITH: No, I don't accept that analysis. What has occurred is that when the largest producer - when the largest purchaser of the project moves a substantial proportion of its production to the right, because of developmental difficulties, because of so-called currency issues, everyone else in the project effectively has to move in the same direction, and that's what we've done.

It's been a responsible decision so far as we are concerned. The project will ultimately, in my view, be delivered but there have been ongoing development issues, ongoing difficulties in schedule. And the United States has met those head-on in the course of the last six months.

And I've been saying for some four or five months now we have to ensure there's no gap in our capability and we'll make a formal decision about that by the end of this year.

At the moment my advice is that our Classic Hornets and our Super Hornets will avoid any gap in capability. Secondly, we have to make sure that the Joint Strike Fighters that are delivered to us are delivered to us in a manner in which we get value for money. So we've made a decision today on Joint Strike Fighters, and announced it, which is comparable to the decision that Leon Panetta, the Secretary of Defense in the US made a few months ago so far as he's concerned.