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Speech to the Australian Stategic Policy Institute



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THE HON CHRISTOPHER PYNE MP Minister for Defence Industry Leader of the House Federal Member for Sturt

23 April 2018 SPEECH TO THE AUSTRALIAN STRATEGIC POLICY INSTITUTE *Check Against Delivery**

Thank you to the Australian Strategic Policy Institute for arranging this event today.

ASPI’s commitment to providing independent expert advice to government has been

long-standing and welcome.

It has contributed to effective strategic policy decisions, especially about defence and

defence industry.

ASPI’s advice is as respected as it is generous. And I’m pleased to say ASPI doesn’t

project fear or favour when it comes to giving advice. This is as it should be. I for one

welcome and value such input.

Today, I launch Australia’s first ever Defence Industrial Capability Plan - one of the core

strategic pillars underpinning the Turnbull Government’s historic 200 billion dollar

investment in defence capability over the next ten years.

This investment is for the largest and most comprehensive strengthening of our defence

capability in peacetime history.

A 200 billion dollar commitment is, by any standards, ambitious.

Governments on both sides have announced many policies and initiatives over time,

aimed at supporting Australian defence industry.

But the unmet challenge, until now, has been to unite these initiatives in a single,

detailed policy framework that reaches across the breadth of planning and decision-making through to implementation.

The Turnbull Government is delivering such a coherent and cohesive policy bank.

Our goal is clear.

We seek to achieve, by 2028, a matured, innovative Australian defence industry with

greatly enhanced levels of competitiveness in the international marketplace.

We talk about a decade but we are really looking way beyond that point.

We are looking for an Australian defence industrial base that will stand us in good stead

through to the end of the century and beyond.

What we want is a sovereign defence industry with the capability, readiness, and

resilience to help meet Australia’s defence needs, to the greatest extent possible, within

our own borders.

Australia must have an innovative domestic defence industry that can provide the best

capabilities possible for our Australian Defence Force.

It’s in our national interest.

It’s directly in the interests of our nation’s security.

And for the Turnbull Government and many others, it has an additional dimension.

Defence industry must also contribute mightily to the Australian economy.

We want it to enhance the prosperity of thousands of Australian families, through

industrial opportunities and jobs.

So today, with this defence industrial capability plan, we are taking a steady, deliberate

and detailed step towards the twin objectives of national and economic security.

We are putting forward a blueprint, one that creates maximum capability alignment

between Defence needs and defence industry.

Since the Defence White Paper was released in early 2016, the Turnbull Government

has been busy.

We’re committed to an unprecedented renewal of our naval fleet - 12 future

submarines, 9 Anti Submarine Warfare Frigates, 3 Air Warfare destroyers and 12

Offshore Patrol Vessels.

Our 90 billion dollar Naval Shipbuilding plan will see them all built here in Australia, by

Australians.

We’ve established the Naval Shipbuilding College to increase the workforce and skills

needed to deliver this ambitious plan.

We’ve decided on the builder, Rheinmetall, of our future Combat Reconnaissance

vehicles.

We’ve reached a landmark 1 billion dollars of contracts for the Joint Strike Fighter, and

I’ve just returned from the US where I was pushing for more work for Australian

companies on this vital platform.

Underpinning those capability decisions and achievements has been a strong and

comprehensive policy framework.

We’ve had the Defence White Paper, the Integrated Investment Program, the Defence

Industry Policy Statement and the Defence Export Strategy - not to mention our 90

billion dollar Naval Shipbuilding Plan.

The Coalition are getting on with the job, so I hasten to add that we are moving fast to

implement a vast enterprise of associated activity that is already starting to pay off.

When we launched the Defence Export Strategy in January, Australia’s very first such

strategy, I said it was about job creation.

That it was about giving Australian defence companies the support they needed to

grow, invest and contribute to defence capability.

It was a plan designed to assist Australian industry become more internationally

competitive, and more innovative.

Today’s release of the Defence Industrial Capability Plan takes that further.

First and foremost, it restates the Government’s policy of maximising the involvement of

competitive Australian companies in the acquisition, operation, and sustainment of

defence capability.

The plan has a key message for industry— that we expect all companies, including

primes, that want to work with Defence, to consider how they currently or might best fit

in to the big picture.

Because we want industry to structure and invest to maximise their involvement, the

plan strengthens the definition of Australian defence industry.

Put simply, we are redefining the phrase ‘Australian Defence Industry’.

Having just an Australian Business Number is not enough if you are planning to be part

of this.

Being a serious contributor in Australian defence industry means having Australian-based industrial capability.

It means company and board presence, infrastructure, and a skills base that can

complete value-added work here in Australia, employing Australian workers.

It’s an important shift, and signals to Industry that establishing a shop-front and getting

an ABN is no longer enough.

Plenty in this room know that I give tremendous support to Australia’s defence industry,

but I also demand a lot from them so this will come as no surprise.

The Plan goes further.

The Plan lays out the range of opportunities for our defence industry, particularly our

small to medium enterprises - over the next decade.

It reaches across each of the Integrated Investment Program capability streams that

together call upon the 200 billion dollar investment in defence capability over the period.

The Plan details the range of existing and new defence industry and innovation

programs that, combined, form a system for Australia to build its industrial capability.

Because it brings all the elements of the undertaking together, in a single package, it is

over-arching.

It’s a fantastic summary for industry of the direction we are heading in, and what

opportunities are available.

As a nation, as an industry, it is incumbent upon us all to capture all the opportunities

and bring them to reality, as we intensify the throughput of projects and programs in the

Integrated Investment Program.

The Government is pulling its weight.

We have the much-needed comprehensive policy bank in place, and we have

appropriated unprecedented funding.

We are achieving record levels of government decisions on our major capital equipment

investment.

In the last financial year the Turnbull Government approved 74 capability related

proposals.

As at March this year we’re already on 90 decisions.

Unlike or predecessors, we are reducing delays and in fact are bringing forward

decisions ahead of schedule.

This pattern from the Turnbull Government will continue throughout 2018 and coming

years.

The government will release Australian industrial strategies for each of the six

Integrated Investment Program capability streams from mid-2019.

This timing is necessary in order to ensure the analysis that underpins these industrial

strategies is robust, and that there has been sufficient time for consultation.

The strategies will take into account the government’s major capability decisions over

2018, the initial implementation of the Sovereign Industrial Capability Priorities, and the

defence industry initiatives addressed in today’s Defence Industrial Capability Plan.

Today’s Plan introduces an initial list of Sovereign Industrial Capability Priorities.

There are some industrial capabilities that we must have access to, or control over, in

Australia.

Sovereign industrial capability secures the Australian Defence Force’s ability to achieve

its operational mission today and well into the future.

The term sovereignty means different things to different people, but in the national

defence context, it is the ability to independently employ defence capability or force,

when and where required.

To produce a desired military effect, with or without notice, with or without our allies.

That said, our defence sovereignty is enabled by industrial capability sourced both

within Australia and overseas.

Thus we will continue to leverage the United States and the international market for

many major platforms and systems, in order to deliver the best capability to our

warfighters.

The Government is fully committed to Australian participation to the highest extent

possible.

But the nature of global supply chains today means no country can be fully self-sufficient in its defence or defence industry.

Even if Australia wanted to substantially grow the scale of industrial capability

manufactured in Australia, it would not be cost effective to do so in all areas.

So in approaching the consideration of Sovereign Industrial Capability Priorities, we

have focused on a definition that covers access to, or control over, the essential skills,

technology, intellectual property, financial resources and infrastructure within our

defence industrial base.

The initial Sovereign Industrial Capability Priorities are the product of a rigorous

assessment framework.

It took in the strategic, capability, and resource dimensions of industrial sovereignty -

and it made judgements based on Defence needs.

In this context, the initial Sovereign Industrial Capability Priorities identified in this Plan

are focused on areas that are operationally critical to the Defence mission; priorities

within the Integrated Investment Program over the next three to five years; or that need

more dedicated monitoring, management, and support due to their industrial complexity,

government priority, or requirements across multiple capability programs.

The priorities are described at a capability level, rather than a company or technology

level.

This approach will encourage innovation in existing technologies and provide flexibility in

supporting new developments across the Integrated Investment Program capability

streams and within individual projects.

The ten initial Sovereign Industrial Capability Priorities are:

 Collins Class Submarine maintenance and technology upgrade;

 Continuous Shipbuilding Program (including rolling submarine acquisition);

 Land Combat Vehicle and technology upgrade;

 Enhanced Active and Passive Phased Array Radar Capability;

 Combat clothing survivability and signature reduction technologies;

 Advanced signal processing capability in Electronic Warfare, Cyber and

Information Security, and Signature Management technologies and operations;

 Surveillance and Intelligence data collection, analysis and dissemination, and

Complex Systems Integration;

 Test, Evaluation, Certification and Systems Assurance;

 Munitions and Small Arms Research, Design, Development and Manufacture;

and

 Aerospace Platform Deep Maintenance.

These Sovereign Industrial Capability Priorities take the place of the previous Priority

Industry Capabilities.

You’ll spot similarities between those - between the Priority Industry Capabilities and the

Sovereign Industrial Capability Priorities.

This is natural, given the nature of our defence industrial base and its strengths and

state of development.

However, there is a substantial change to how these priorities are to be managed and

supported compared to the previous approach, where Priority Industry Capabilities were

managed in isolation.

The Sovereign Industrial Capability Priorities will be developed, managed, and

supported right across our defence planning spectrum.

This will run from early in the defence capability planning process, including in strategic

policy and force design cycles.

The priorities will be considered as part of Integrated Investment Program planning to

determine whether Defence needs to prioritise, allocate funding to, or mandate these

capability priorities across the life cycle.

Where relevant, the Sovereign Industrial Capability Priorities will be incorporated into

the Australian Industry Capability Plans that accompany major capital equipment

projects of 20 million dollars and above.

The priorities will also be considered in the targeting of defence industry and innovation

funding.

I am also pleased to announce today that a new, dedicated grant program valued at up

to 17 million dollars per year, will provide direct support to Australian small to medium

enterprises that contribute to the Sovereign Industrial Capability Priorities.

This competitive grant process, which will be delivered by the Centre for Defence

Industry Capability, will commence in mid-2018.

It will help small to medium enterprises meet a portion of the costs for capital equipment

purchases and non-recurring engineering costs.

In announcing these initial priorities, it is important to reinforce that this is not about

picking winners or seeking to focus our defence industry into select areas.

The broad-based opportunities for Australian industry will continue across the whole

Integrated Investment Program. We need Australian industry to be active across that

entire program.

The priorities ensure that our defence industry is robust and resilient in areas critical to

our defence.

From mid-2019, the government will release Implementation Plans for the ten priorities.

They will provide greater detail on the level of defence demand for each priority, the

strengths, risks and opportunities facing the sector, and how Defence will ensure the

industrial capability is developed and supported to ensure they remain resilient.

This further work will provide an opportunity to undertake deep analysis of the industrial

base that supports each priority.

In turn it will look at the best balance of mechanisms to support them, acknowledging

they individually differ and will require differing approaches.

As I said, these are the initial priorities.

The Sovereign Industrial Capability Priorities will be reviewed periodically to assess

whether further focus on the delivery of these capabilities is required.

A roadshow of briefings will follow to make sure Industry across the country is well

positioned to take advantage of the opportunities included in the Plan.

Today, in launching the Australian Government’s first ever Defence Industrial Capability

Plan, we are setting out the vision and objectives for our whole defence industry over

the next decade.

We are detailing how we will work together with our partners to achieve success.

Our vision for our defence industry a decade from now, in 2028, has five objectives:

One, is for a broader and deeper defence industrial base where agile small to medium

enterprises are better placed to interact with Defence and global defence companies,

and are not solely reliant on the Australian Defence Force for their success;

Two, is for a strategic approach to defence industry investment to ensure Australian

government investment in critical defence capabilities is prioritised, and that Australian

businesses are provided the maximum opportunity to be involved;

Three, for an innovative and competitive defence industry boasting world-leading

defence capabilities developed through increased collaboration between Defence,

business, universities and the research sector.

Four, for a robust defence industry export capability where Australia’s defence industry

is a key player in international defence capabilities, providing greater stability for

businesses across peaks and troughs in domestic demand and increasing their

capability to support Defence.

And Five, for a Defence and industry partnership that enables Australia to position for

the future by ensuring we have the right people with the right skills, in the right place, at

the right time to respond to changing environments, to seize opportunities, and to

manage increasing strategic and technological complexity.

We are at a very important moment in time for Australia’s defence industry, a true

watershed moment for our whole nation.

We can achieve these goals if we have the right people with the right skills, can respond

to a change in the strategic environment, and can seize all available opportunities, and

if we manage increasing strategic and technological complexity.

We have the policy structure for it.

We have a massive fiscal commitment from the Turnbull Government and from its

record of action.

Since the Defence White Paper was released, just over two years ago, we have made

great and real progress.

We’ve seen the benefits of having strengthened the Australian Industry Capability

Program requirements to build sovereign Australian industry capability.

It shows in our Offshore Patrol Vessel and our Land 400 Combat Reconnaissance

Capability investments.

It’s estimated the OPV project will create around 1000 jobs - 400 direct and a further

600 in the supply chain.

The Australian Industry Content for the project is estimated at 60%.

It will also help preserve and enhance shipbuilding skills required for the Future

Frigates.

The first two OPVs will be built at the Osborne Naval Shipyard in South Australia

starting this year, before 10 will be constructed at the Henderson Maritime Precinct in

Western Australia from 2020.

Over the 30-year life of the Land 400 Combat Reconnaissance Vehicles Australian

industry will secure two thirds, or $10.2 billion, of the total investment in acquiring and

maintaining the fleet.

It’s estimated up to 1450 jobs will be created right across Australia.

Rheinmetall is working with more than 40 companies around the country, ensuring the

delivery of these vehicles will be a national enterprise.

This is what we want. And this is where we are going.

We have recognised industry as a Fundamental Input to Capability ensuring industry is

considered across our defence capability planning.

We have moved towards a more sustainable and resilient defence industry that is more

export-oriented and internationally competitive with our Defence Export Strategy.

We have initiated the first Defence Industry Information Campaign, the Workforce

Behind the Defence Force, so Australians of all ages, and business, are alert to the

opportunities available.

We have established enablers of industry and innovation, through the Centre for

Defence Industry Capability, the Defence Innovation Hub and the Next Generation

Technologies Fund.

And our work goes on.

We are transforming the way we acquire military capability, and defence companies

from around the world have responded.

These companies no longer just outline the strengths of their vehicle, ship, or widget.

They also show us how many Australians will be employed making that platform, how

many Australian companies will be in the supply chain, what percentage of Australian

product will be used, and how Australian industry will be further developed to stand on

its own.

For example, with the recent announcement of the decision to build 211 Rheinmetall

Boxer armoured fighting vehicles, it was shown that Australian industry content for the

acquisition and sustainment of the vehicles would be around 70%; and more than 40

local suppliers would be used from around the country; and that Rheinmetall would

establish a Military Vehicle Centre of Excellence.

We are seeing the same sorts of commitments from the three companies who submitted

tenders to build our future frigates.

This Industrial Capability Plan is to give these companies more direction and guidance

on how to achieve the defence industry our nation needs.

Until now. Australia has never had a long-term plan for what we want our defence

industry to be, nor did have we have a blueprint to guide the development of that

industry.

We created that vision for our naval shipbuilding industry with the Naval Shipbuilding

Plan in May last year.

Now, in releasing this first-ever Defence Industrial Capability Plan today, the

Government is putting forward its vision, direction, and plan for a defence industry that

is positioned to meet Australia’s strategic and capability goals.

There is much to be proud of regarding our defence industry today and how in particular

it has responded to the opportunities and policy directions the Government has laid out.

But we are still at the beginning - or perhaps we are at the end of the beginning!

But we are certainly, together, getting ahead.

Now, in order to realise the objectives of this plan, defence industry must step up and

deliver with even greater commitment.

Industry must invest in the technology, skills, and people required to reform and

increase its competiveness.

The government sees a very bright future for defence industry if it takes advantage of

the available opportunities.

Australia’s defence industry in 2028 will be larger, more capable, and more

internationally competitive than it is now.

There will be more medium-sized Australian defence businesses pulling through small

to medium Enterprise-enabled supply chains across a geographically dispersed national

industrial base.

Our defence industry will offer well paid, long-term career paths. It will be investing

heavily in Science, Technology, Engineering and Mathematics skills to support the

needs of a more complex Australian Defence Force.

It will be looking to build greater capacity and capability in areas requiring greater

sovereignty.

The technology cycle will move very fast in many areas of the sector, requiring high

degrees of innovation at a relentless pace.

An export-oriented defence industry will be more internationally competitive and resilient,

offering cost effective solutions to meet Defence’s needs. It is not for the faint-hearted.

I encourage companies across Australia to read our plan, note the potential

opportunities and to take advantage of the support we are offering.

This government is serious about enhancing the partnership between Defence and

defence industry, because we are committed to our defence industry. That means doing

the right thing by Australia in terms of long-term defence, national security and

economic security.

Succeeding in this national enterprise will require a national approach.

It is one that can’t be achieved by government alone.

Detailed plans such as this give industry the best help Government can deliver.

To further paraphrase Winston Churchill- as I did a minute ago - we aim to give

industry the policy tools. Now it is for industry to finish the job.

Industry will always have the Coalition Government’s backing.

We will be there every step of the way because we are deeply committed to our national

security, as our record shows, and we are deeply committed to prosperity for every

Australians, as our record also shows.

Thank you again for this opportunity to speak with you, and I wish you all a bright and

very capable 2018.

[Ends]

Media contacts Scott Bolitho: 02 6277 7840, pynemedia@defence.gov.au Eleisa Hancock: 02 6277 7840, pynemedia@defence.gov.au Defence Media: (02) 6127 1999, media@defence.gov.au