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STRENGTHENING AUSTRALIA’S DEFENCES

The Coalition’s defence priorities for a third term of office will provide Australia with a long-term plan for the future security of our nation, our citizens and our interests.

We are determined to ensure Australia’s defence in an uncertain world. Since 1996 our policies have produced a sharper Australian Defence Force - more combat focussed, better equipped, better supported, more mobile and more operationally ready.

Yet, the real work to build an even stronger ADF, able to face the full range of security concerns from conventional war and peace enforcement to terrorism and border protection, remains to be done.

The Coalition, unlike Labor, will guarantee full implementation of the Defence White Paper and produce a more balanced ADF, ready to deploy at short notice and able to present Government with a wide range of options to defend Australia’s interests.

The events of the past two years alone - East Timor, unauthorised boat arrivals and the September 11 terrorist attacks - show the unpredictable nature of the world we live and the importance of having an ADF able to respond to any external threat, whatever its nature.

Our plan for the future is underpinned by the biggest increase in defence funding for over 20 years - $32.4 billion in real terms over the next decade.

The Coalition’s defence priorities for a third term will be:

• Introduction of a modern, flexible remuneration system for ADF personnel, coupled with enhanced family support measures; • Consolidation of the international effectiveness of the ADF through sound relationships with our allies and regional partners; • Changing the role of Reserves from mobilisation to meet remote threats to supporting and

sustaining the types of contemporary military operations in which the ADF may be increasingly engaged; • Adoption of a more strategic industry policy based on sustaining key industry capabilities critical to Australia’s national security needs and better demand management of the

ADF’s capability requirements; • Further enhancement of the ADF’s patrol boats, maritime surveillance aircraft and intelligence capabilities that are fully engaged in the day to day monitoring and policing

of our maritime approaches; and • Annual assessments of our strategic environment to ensure our defence outlook is kept current.

PRIME MINISTER

The events of September 11 have also signalled the need for a higher-level response to the threat of terrorism. The Coalition will significantly enhance Defence’s counter-terrorist and incident response capability and, specifically, better equip the ADF to deal with terrorist attacks which are highly planned and coordinated.

The Coalition’s plan places special emphasis on the people in Defence and their families. In particular it recognises the unique requirements of service life and that employment within the ADF is more than just another job.

During Labor’s 13 years in office over 15,000 ADF personnel were cut, combat capability was run down, spending on defence was steadily reduced, administrative inefficiency was rife and there was widespread defence mismanagement and neglect.

Under Labor’s policies, the Army would simply have lacked the operational capability to restore peace and security to East Timor.

Labor’s current policies would decimate the White Paper and strip the ADF of vital resources and equipment for dubious and untried ideas - like a Coastguard - that would place in jeopardy Australia’s security and the integrity of our borders.

Australia’s defence remains a priority of the highest order for the Howard Government. During a third term in office, the gains made over recent years will be consolidated and major new improvements in the ADF’s fighting capacity made.

24 October 2001

OUR FUTURE ACTION PLAN

Strengthening Australia’s Defences Strengthening Australia’s Defences commits a third Howard Government to the biggest increase in defence spending in over 20 years. It recognises our people as an integral part of the nation’s military capability and builds a sharper Australian Defence Force (ADF) - more combat focussed, better equipped, more mobile, and operationally ready.

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Strengthening Australia’s Defences

Table of Contents

Our Future Action Plan - A Summary Our Future Action Plan - A Summary Our Future Action Plan - A Summary Our Future Action Plan - A Summary 3 3 3 3

Labor’s Alternative Labor’s Alternative Labor’s Alternative Labor’s Alternative 7 7 7 7

Highlights of the Government’s Achievements Highlights of the Government’s Achievements Highlights of the Government’s Achievements Highlights of the Government’s Achievements 11 11 11 11

Part 1 Part 1 Part 1 Part 1 Beyond Defence 2000 Beyond Defence 2000 Beyond Defence 2000 Beyond Defence 2000 19 19 19 19 A The White Paper 19

B Defence Capability Plan 2002-2015 19

(i) Land Forces 20

(ii) Air Combat 20

(iii) Maritime Forces 21

(iv) Special Forces & Intelligence 21

C Defence Funding 22

D Defence Reform 23

Part 2 Part 2 Part 2 Part 2 Defending Australia Defending Australia Defending Australia Defending Australia 24 24 24 24 A Counter-Terrorism 25

B Chemical, Biological, Radiological and Nuclear Defence 26 (i) Policy 27

(ii) Research 27

(iii) Capability 28

C Protecting our Assets 29

D Balance and Flexibility 29

Part 3 Part 3 Part 3 Part 3 Building Capability through People Building Capability through People Building Capability through People Building Capability through People 31 31 31 31

Part 4 Part 4 Part 4 Part 4 International Defence Relationships International Defence Relationships International Defence Relationships International Defence Relationships 33 33 33 33 A United States 33

B Indonesia 34

C East Timor 35

D South East Asia 35

E North Asia 36

F India 37

G New Zealand 38

H PNG 38

I South West Pacific 39

Part 5 Part 5 Part 5 Part 5 More Effective Reserves More Effective Reserves More Effective Reserves More Effective Reserves 40 40 40 40 A Legislative Changes 40

B Increased Readiness 41

C Improved Training 41

D Recruitment & Retention 42

E Labor’s Alternative 43

2 Strengthening Australia’s Defences

Part 6 Part 6 Part 6 Part 6 A Strategic Defence Industry A Strategic Defence Industry A Strategic Defence Industry A Strategic Defence Industry 44 44 44 44 A The New Strategic Approach 44

B Key Industry Capabilities 46

C Globalisation & Rationalisation 46

D Defence & Competition 47

E The Role of Defence Science 48

Defence 3

Our Future Action Plan - A Summary

The recent deployment of over 1500 members of the Australian Defence Force (ADF) to support the fight against global terrorism underlines both the uncertain security environment Australia faces and the seriousness with which the Coalition approaches the security of the nation.

The next term of Parliament will witness one of the major periods of military operational activity that Australia has witnessed for years.

More than ever, Australia’s defence is a major priority of the Howard Government. We are committed to ensuring Australia’s security in an uncertain world, with policies which are producing a sharper Australian Defence Force (ADF) - more combat focussed, better equipped, more mobile and more operationally ready.

Since it came to office in 1996 the Howard Government has:

• developed our defence policy as part of a wider national security strategy through the National Security Committee of Cabinet;

• reinvested over $2 billion of efficiency savings into current and future capability;

• undertaken the most comprehensive reappraisal of Australian defence capability for decades, Defence 2000 Our Future Defence Force;

• delivered the biggest increase in defence funding for over 20 years - $32.4 billion in real terms over the next decade;

• improved pay and conditions for ADF personnel;

• fixed Labor’s defence procurement blunders;

• restored peace and security to East Timor; and

• ensured Defence has a major role to play in meeting the many security concerns facing Australia beyond those involving military force, such as illegal immigration, terrorism, the drug trade, illegal fishing, piracy and quarantine infringements.

The Coalition’s priorities for a third term will be:

Implement the White Paper

• Implementation of the White Paper will provide long-term direction and support to the ADF, ensuring the future security of our nation, our citizens and our interests.

4 Strengthening Australia’s Defences

• Defence’s funding will rise above existing levels by $0.5 billion in 2001/02, $1.0 billion in 2002/03, $1.5 billion in 2003/04 and $2.0 billion in 2004/05, and will increase overall by an average of 3% per year between now and 2011.

• A Defence Capability Plan 2002-2015 will be implemented, enabling the ADF to face a wide range of security concerns, from conventional war and peace enforcement to terrorism, border protection and cyber attack.

• An annual assessment of our strategic environment will be undertaken to ensure our defence outlook is always kept up to date.

Defending Australia

• Effectively doubling the counter-terrorist capability of the Special Forces.

• Undertake a range of measures to increase and enhance our defences and response against Chemical, Biological and Radiological attacks.

• Further enhance the ADF’s patrol boats, maritime surveillance aircraft and intelligence capabilities that are fully engaged in the day to day monitoring and policing of our maritime approaches.

Build Capability through People

• A modern, flexible remuneration system for ADF personnel will be introduced, along with enhanced family support measures including:

• a new scheme to give single ADF members greater choice over where they live and the type of accommodation they occupy;

• ensuring ADF families continue to have priority access to DHA housing, given their family needs;

• extension of the Spouse Employment Assistance Program;

• a major expansion to the Defence Child Care Program;

• establish a new stand-alone, military specific compensation scheme;

• improved superannuation and greater flexibility in leave arrangements; and

• the allocation of $100 million per year for personnel initiatives totalling $500 million over the next five years.

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Enhance International Relationships

• The international effectiveness of the ADF will be consolidated through sound relationships with our allies and regional partners.

• We will ensure the US alliance remains strong and we will explore avenues to pursue shared strategic interest in the Asia-Pacific region.

• We will build a more realistic defence relationship with Indonesia, consolidate and broaden the defence relationships in South East Asia, and further assist the PNG Government in managing the reform of the PNGDF.

More Strategic Reserves

• A strategic role for the Reserves will be established, changing their function from mobilisation to meet remote threats to that of supporting and sustaining the types of contemporary military operations in which the ADF may be increasingly engaged.

• New categories of High Readiness Reserves will be introduced and from 2002 the Army Reserve will also contribute a rifle company to a number of infantry battalions scheduled for operational deployment overseas.

Cadets

• The Coalition Government has developed a 5 year strategic plan for the development of the Australian Services Cadet Scheme. This commitment has been strengthened by the allocation of $30 million to the Cadets in the Defence White Paper, a 25% increase in funding.

Sustain Our Industry

• Adoption of a more strategic industry policy approach based on sustaining key industry capabilities critical to Australia’s national security needs and better demand management of its capability requirements.

Labor’s Alternative

• Labor’s record in Defence continually demonstrated a lack of commitment to defence personnel, funding, capability and management. Under their policies we could not have mounted the East Timor operation.

6 Strengthening Australia’s Defences

• Labor’s unwillingness to endorse in detail the 2000 White Paper and its Defence Capability Plan would rob both the ADF and defence industry of the certainty in planning these policies bring and leave Defence without a long term plan in these uncertain times.

• Labor’s Coast Guard plan would have a severe detrimental effect on the Royal Australian Navy and relies primarily on stripping the Navy of 15 patrol boats, stripping $430 million dollars from the Defence acquisition budget and stripping the 600 people who crew and maintain the patrol boats and handing them to a new bureaucracy.

In the current environment of strategic uncertainty Australia needs a balanced ADF ready to deploy at short notice and able to present the Government with a wider range of options to defend Australia’s interests. Only the Coalition can provide that.

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Labor’s Alternative

Under Labor’s 13 years in office:

Over 15,000 ADF personnel were cut. In 1983 there were almost 73,000 full time service personnel. This figure was cut to 68,000 in 1990 and to 58,000 in 1996.

ADF separations increased from 9.4% in 1983/84 to 13.2% in 1987/88 - when Mr Beazley was Defence Minister.

Combat capability was run down. The Army’s self-assessment after 13 years of Labor stated, " Units suffer from shortages of trained personnel and insufficient equipment. Elements of the force are hollow. These deficiencies in structure, training and equipment make it difficult for the Land Force to respond quickly and effectively to defence emergencies" (Restructuring the Australian Army, February 1997, p.3)

Spending on defence was steadily reduced. Defence outlays as a proportion of total budget outlays declined from 9.4% before Labor (1981/82) to 8.0% in 1994/95.

Administrative inefficiency was rife. The Howard Government’s Defence Reform Program identified over $1.1 billion in savings by eliminating Labor’s waste and duplication. Labor’s waste meant less money for the sharp end of Defence.

There was widespread defence mismanagement and neglect. This resulted in such financial disasters as the JORN (Jindalee Operational Radar Network), the purchase of two substandard amphibious transport craft, and the trouble plagued Collins submarine.

The submarines are on average two years behind schedule and will cost an additional billion dollars to become fully operational. The amphibious transports were two years behind schedule and cost an additional $275 million. JORN is four years behind schedule and is not expected to be completely operational until late next year.

Defence policy was narrowly focussed. Labor’s policy of “defence of Australia” was focussed on the defence of our coastline.

Too little attention was paid to promoting peace and security in our immediate region and approaches.

Labor failed to address our strategic environment, ignoring the defence related implications of our relations with, and issues emerging in, such neighbours as Indonesia, PNG, Fiji, and the Solomon Islands.

8 Strengthening Australia’s Defences

Under Labor the Army would not have had the capability to mount the East Timor operation. The running down of the Australian Army under Labor would have compromised the Government’s ability to mount and sustain the INTERFET operation in East Timor.

Labor abolished two regular infantry battalions and replaced them with Ready Reserve battalions - units that cost almost as much as Regular battalions but, due to legislative constraints, could not deploy overseas.

The readiness of our second Army brigade was such that we couldn’t have deployed it in time for the INTERFET operation if the Coalition had not increased its readiness in March 1999.

Labor’s mismanaged purchase of amphibious transports compromised our ability to deploy and sustain our troops. The Coalition’s leasing of the fast catamaran HMAS Jervis Bay ensured we had the capability required to do the job.

Labor’s Promises Labor’s Promises Labor’s Promises Labor’s Promises

Generally, Mr Beazley’s careless promises are just confusing.

With regard to defence policy, however, they’re dangerous.

Labor’s willingness to say anything for a vote and make sweeping promises is particularly unhelpful in an environment where planning and certainty are paramount, where resources are never cheap, and where so much is at stake.

While Labor has repeatedly claimed it supports the Government’s White Paper commitment to increased defence spending, it has reserved the right to “reprioritise in terms of the Defence needs and interests of the nation”.

Labor says the funding for the White Paper is "about right". This of course is Labor code, leaving room for wholesale spending cuts.

The White Paper and its Defence Capability Plan commits Defence spending over the next 10 years. Labor’s policies would undermine these commitments.

Labor is keeping open the option of follow-on submarine capabilities to “either replace or complement the current Collins fleet”. If Labor is committed to extra submarines, or some of the other items on its multi-billion dollar wish list, funding for other items - identified by Defence as vital to the performance of its mission - would have to be cut.

Another capability likely to be cut by Labor is the Army - that’s what they targeted when last in office and in need of funds.

Defence 9

Labor’s policies would remove certainty from the acquisition, planning and contracting detailed in the White Paper. This would also undermine industry’s capacity to plan.

The Defence Department and the ADF were intimately involved in developing the White Paper and Defence Capability Plan. It represents what they require to do the job being asked of them. It is their long term plan.

Labor ’s misguided priorities would give the ADF capabilities it neither needs nor wants. This is in part because, under Labor, Australia’s defence policy would only be geared to the perceived threat of the day.

In response to the recent terrorist attacks in the US, Mr Beazley said: “we need a shift in the balance of our defence policy towards what is now the primary international security threat which is international terrorism … we probably need to make defence priority adjustments accordingly within the defence budget”.

Australia cannot afford to structure its forces and its strategic policy to any one particular threat. The ADF must be able to face a wide range of security challenges, from conventional war and peace enforcement to cyber attack and terrorism.

In these uncertain times, Australia needs a balanced ADF, ready to deploy at short notice and able to present the Government with a wide range of options.

Labor wants to create a US style Coast Guard. Labor claims its US style Coast Guard would cost just $220 million, but a study undertaken while they were in Government found that an Australian Coastguard would cost $2 billion in today’s figures.

Kim Beazley has however allocated just $15 million for administrative costs for his Coast Guard and $0 dollars for new vessels and $0 for additional patrol boat days. His $15 million wouldn’t even buy half a patrol boat.

Labor’s Coast Guard plan relies primarily on stripping the Royal Australian Navy of 15 patrol boats, stripping $430 million dollars from the Defence acquisition budget and stripping the 600 people who crew and maintain the patrol boats and handing them to a new bureaucracy.

The Royal Australian Navy’s official advice to the Minister for Defence is that the creation of a Coastguard “would have a significant detrimental operational impact on the Navy…..There would also be a considerable loss of training opportunities, both at the basic and advanced level, for sailors and officers, which contributes to achievement of the current high levels of professionalism by Navy.”

10 Strengthening Australia’s Defences

Approximately 60% of the patrol boats’ effort is spent supporting Coastwatch. The other 40% is used on peacetime tasks such as engagement and exercises with regional maritime forces, shallow-water and inshore defence operations, coastal reconnaissance, support to Special Forces and Reserve units such as NORFORCE. Navy advice is that if its patrol boats were transferred to an external coastguard then the Navy would require additional replacement vessels to continue to perform these tasks.

This is just another example of Labor’s failure to recognise the flexibility and capability of our defence force.

The Government believes the RAN does an excellent job in protecting our borders. The Australian people recognise border protection as a legitimate role for the ADF and admire the professionalism with which the ADF carries out this difficult job.

Labor suggests it might fund its purchases through private financing initiatives. This would simply push costs out in the long term, leaving Defence, and Australian taxpayers, with a bill that can’t be paid.

If Labor really supports Defence, as it claims, it will rule out its multi-billion dollar wish list. It will admit the strategic folly of a Coast Guard and extra submarines. And it will abandon those promises which threaten the Defence Capability Plan purchases underpinning the White Paper.

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Highlights of the Governments Achievements

Australia’s defence has always been a high priority for the Howard Government. And given the appalling events of September 11, and the age of global uncertainty they heralded, national security will figure prominently on the agenda of a third Howard Government.

The Coalition has proven its commitment to, and its capacity to manage, Australia’s defence.

Since coming to office in 1996 our policies have produced a sharper Australian Defence Force (ADF) - more combat focussed, better equipped, more mobile and more operationally ready.

The effectiveness of these policies was evident when, at the forefront of the international response to the East Timor crisis, our armed services and civilian personnel performed magnificently.

The measures introduced by the Coalition Government have produced real results. Measures such as:

• The Howard Government’s determination to maintain defence spending, in real terms, during a period of fiscal restraint;

• An insistence on proper strategic and budgetary management;

• Ensuring best value for the taxpayer’s defence dollar; and

• A defence White Paper, Defence 2000 - Our Future Defence Force, delivering the biggest increase in defence funding for over 20 years.

Defence Spending

From the day it took office, and during a period of fiscal restraint, the Coalition Government has maintained defence spending in line with forward estimates. Defence was the only portfolio that maintained its spending during this period. At the same time, we have implemented a substantial reform program that is realising reinvested savings, resulting in greater capability for the same amount of money.

The Government has increased funding to Defence in the 2000/01 Budget by $304 million compared with estimated actual expenditure in 1999/00. This included $128 million to upgrade 2 Collins Class submarines and $20 million to improve the capabilities of our Reserves.

Through the White Paper the Howard Government has increased defence funding by $32.4 billion in real terms over the next decade, commencing in the 2001/02 Budget year.

12 Strengthening Australia’s Defences

Efficiency and Reform

As a result of the Government’s Defence Reform Program (DRP), at the end of 2000/01 achieved on-going savings are estimated at about $600 million per annum. In addition, cumulative one-off savings of $88 million will have been realised. DRP initiatives are expected to achieve a total of about $718 million a year in on-going savings at maturity, and $449 million in one-off savings.

As a result, cumulative DRP savings of over $2 billion have been reinvested in current and future capability ($1661million) and transition costs ($343 million). This investment has enhanced the ADF’s capability by: increasing the number of ADF personnel in combat/combat support roles; providing additional resources to the major capital investment program; contributing to the operation of new capabilities; and funding high priority logistic support.

These reform have enabled 62% of ADF personnel to be currently employed in combat/combat support positions, up from 42% in 1996.

Fixing Labor’s Blunders

Under Labor there was widespread defence mismanagement and neglect, resulting in such acquisition problems as the troubled JORN (Jindalee Operational Radar Network), the inappropriate purchase of two amphibious transport craft, and the trouble-plagued Collins submarine.

Under the Howard Government, a comprehensive Acquisition Reform Program has been developed and implementation has commenced. This will minimise the scope for costly acquisition blunders.

The Coalition has also fixed Labor’s mistakes:

JORN - Construction of buildings and antenna arrays at the Queensland and Western Australia sites was completed in 1997. Installation of electronics hardware is complete, with software integration now progressing well at both sites. A significant and ‘useable’ operational capability from both JORN sites is expected to be available in late 2001 and from the network in mid 2002.

Submarines - The White Paper has stated that all six Collins submarines will be brought to a high level of capability. Interim modifications to the combat system have improved performance. Boats 4 and 5 have been successfully upgraded and all boats will now be modified for better acoustic performance and reliability.

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Landing ships - After being fixed HMAS MANOORA was accepted in November 1999 and saw service in East Timor and the Solomon Islands. HMAS KANIMBLA was accepted in October 2000. Both vessels participated successfully in exercise Tandem Thrust. HMAS MANOORA is playing a vital role in the Howard Government’s efforts to stem the flow of illegal immigrants.

Restoring Peace and Security to East Timor

With strong international support, and Australia playing a key leadership role, the International Force East Timor (INTERFET) was rapidly assembled and deployed to resolve a security and humanitarian crisis in the territory. Within 48 hours of the first INTERFET forces arriving in Dili 2,300 personnel were on the ground, the process of restoring peace and security to East Timor had begun, and desperately needed humanitarian aid was being delivered throughout the territory.

INTERFET consisted of a coalition of twenty-two nations, including significant regional participation. At its peak, the UN-mandated multinational force dispatched 11,500 troops, of whom 5,592 were Australian. At the conclusion of its mission, having fulfilled its mandate to restore peace and security to East Timor, INTERFET handed responsibility to the United Nations Transitional Administration for East Timor (UNTAET). INTERFET remains one of the most successful UN-sanctioned peacekeeping operations.

The East Timor operation was a success because the Howard Government had addressed the problems experienced by the Australian Army during thirteen years of Labor neglect. Two infantry battalions had been recreated, increasing the readiness of our second brigade, and the catamaran HMAS JERVIS BAY had been leased.

Defence White Paper

Defence 2000 - Our Future Defence Force represents the most comprehensive reappraisal of Australian defence capability for decades. The White Paper provides the crucial strategic guidance that the ADF requires to implement an appropriate, realistic and affordable force structure in the early 21st century. It gives the ADF the flexibility

and the capability to play a positive role in promoting stability and cooperation in our region.

One of the key planks of the White Paper is an increase in defence funding of an average 3% per annum in real terms over the coming decade, with an immediate increase of $500 million in 2001/02, and $1,000 million in the following year. In all, defence spending over the decade is expected to increase by a total of $32.4 billion in real terms. This is the biggest and most specific long-term funding commitment for defence in over 20 years.

14 Strengthening Australia’s Defences

This Government also took the unprecedented step of conducting a broad public consultation process, enabling the Australian people to be better informed about the security issues confronting Australia, and seeking their views on the defence of our nation.

Our People

The recruitment and retention of skilled personnel is an important focus of Coalition policy. The efforts of highly dedicated men and women underpin the defence of Australia’s national interest.

Under the Howard Government pay and conditions for ADF personnel have improved. The 1999-2002 ADF Enterprise Productivity Arrangement provides phased pay increases totalling 10.9% over the three-year life of the Arrangement. For the first time, ADF members were extensively consulted when the remuneration package was being developed.

The Coalition Government has also: enhanced the operation of the Defence Home Owner Scheme; established the Defence Community Organisation (DCO) to provide effective and efficient support to defence members and their families; established the ADF Spouse Employment Initiative; increased the Defence Family Support Funding Program; and exempted a wide range of service-related benefits from Fringe Benefit Tax reporting requirements.

Fighting Global Terrorism

The Coalition has been in the forefront of the commitment to combating international terrorism. In response to the appalling terrorist attacks of September 11, the Government invoked the ANZUS Treaty, recognising that these attacks constitute an attack on the values we all hold dear.

The Government made available a range of military assets to support the US effort against international terrorism including a detachment of special forces, two air to air refuelling aircraft, two long range maritime surveillance aircraft, four F/A-18 aircraft and a naval task group. In all over 1550 ADF personnel will be committed to this fight. We also extended the Australian naval presence in the Persian Gulf, authorised ADF personnel on exchange with US and UK combat units to deploy with those forces, and continue to provide support through our intelligence assets.

At the same time the Government has also taken a range of measures to boost Australia’s domestic capabilities including doubling the counter-terrorist capability of the Special Forces and to reinstate the specialist Incident Response Unit, whose capabilities in responding to chemical, biological, radiological and explosive incidents were in place during the Olympic Games.

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A National Approach to Security

Since 1996 the Coalition Government has ensured a coherent approach to national security by integrating effectively our defence, foreign policy and trade initiatives through the formation of the . National Security Committee of Cabinet and the Secretaries Committee on National Security in May 1996. Labor’s Security Committee and its Secretaries Committee made only 228 decisions over 11 years, an average of 20 per year, and rarely dealt with foreign policy or defence issues, focusing on intelligence and security issues, largely of a procedural nature.

The Coalition’s National Security Committee and Secretaries Committee has made 418 decisions over 5 years, an average of 85 per year focussing on issues including border protection, East Timor, the White Paper, counter-terrorism and fixing the Collins submarines.

The INTERFET deployment, and development of the 2000 Defence White Paper, involved the most comprehensive process of ministerial-level decision making about Australia’s defence policy in many years. As a result, the Howard Government is the best informed government on national security issues for decades and is thoroughly acquainted with the challenges of our strategic environment and the issues of Australian defence policy.

Enhancing International Relationships

Throughout its term in office, the Howard Government has consolidated the international effectiveness of the ADF by establishing and maintaining sound relationships with our allies and regional partners.

We have enhanced our relationship with the United States. We are building a more realistic relationship with Indonesia. Australian assistance has been pivotal in the establishment of the East Timor Defence Force. We have supported the Bougainville and Solomon Islands peace processes and have continued to support the reform efforts of the Morauta government in Papua New Guinea.

The Coalition remains focussed on maximising interoperability with the New Zealand Defence Force, and has made significant policy and ADF operational contributions to enhance the effectiveness of the Five Power Defence Arrangement. Our bilateral defence relationships with Japan, China and South Korea have deepened. We have also initiated a strategic dialogue with India.

16 Strengthening Australia’s Defences

Protecting our Borders

Under the Howard Government, the ADF has played a major role in addressing those security challenges facing Australia but not involving military force. These include illegal immigration, terrorism, the drug trade, illegal fishing, piracy and quarantine infringements. Our patrol boats, maritime surveillance aircraft and intelligence capabilities are fully engaged in the day to day monitoring and policing of our maritime approaches, and their efforts are closely integrated with other agencies.

So far in 2001 the Navy has boarded 137 foreign fishing vessels. 34 vessels suspected of illegally fishing in the Australian Fisheries Zone have been apprehended and escorted to port and another 18 have had their fishing gear confiscated.

In the same period the ADF had contributed to the interception and escort to mainland ports of 3680 unlawful persons from 13 of the 33 incidents involving unauthorised arrivals by boat. A further 987 unauthorised boat arrivals have been intercepted and prevented from entering the Australian migration zone, commencing with the MV Tampa.

The Howard Government believes the ADF should continue performing these important functions and our future agenda is outlined in “Protecting Our Borders.”

Reserves

Initiatives to enhance the operational utility of the Reserves have been developed under the Coalition and are now in effect. These include: new legislative provisions governing the use, employment and deployment overseas of the Reserves ; measures to strengthen community linkages; improved training; and better recruitment and retention strategies.

Additional funding of $20 million was provided in the 2000/01 Budget for Reserves initiatives. An additional $22 million has been set aside for Reserves in 2001/02.

Cadets

The Coalition Government undertook a comprehensive review of the Australian Services Cadet Scheme. The review reconfirms the Government's commitment to Cadets and maps out a 5 year strategic plan for the development of the scheme. This commitment has been strengthened by the allocation of $30 million to the Cadets in the Defence White Paper, a 25% increase in funding.

Defence 17

Safest Olympics Ever

During the Sydney 2000 Olympics, the Australian Defence Force played a vital part in the biggest security operation ever undertaken in Australia.

By the close of the Paralympic Games, about 4,000 personnel from all three ADF services had supported the Sydney 2000 Games - around the same size as the force initially deployed to East Timor. They were involved in: operational searches of venues and vehicles to detect and dispose of suspicious items; clearance diving; the transport of Olympics officials and delegates; and ceremonial support, including ADF bands.

Defence in Regional Australia

On 31 January 2000 in Nyngan the Prime Minister made a commitment to maintain the existing level of Federal Government services to rural and regional Australia which included Defence.

Defence has been a major driver of regional growth over the past twenty years with the development of significant bases in the north and west of the country. The majority of Defence’s bases are located in regional areas or the outskirts of capital cities. Approximately 70% of the Defence Force is located outside the mainland State capitals.

Much of the rationalisation and consolidation of the Defence estate during the past five years has involved relocation of functions from high cost metropolitan areas to regional locations.

Since 1996 the Howard Government has initiated a number of defence proposals which will have a positive impact on regional Australia, including:

• creation of the Defence Materiel Organisation which is expected to result in the relocation of approximately 550 positions from Canberra to regional areas;

• establishment of the Defence Personnel Service Call Centre in Cooma with mature numbers of some 150 personnel;

• retention of RAAF Base Wagga;

• construction of the Navy Ammunition Facility at Eden;

• retention of Fort Queenscliff with the relocation of the Army Soldier Career Management Agency from Melbourne;

• major base redevelopments in regional locations including at Lavarack Barracks and the RAAF Base in Townsville, RAAF Amberley at Ipswich, and HMAS Albatross at Nowra;

18 Strengthening Australia’s Defences

• retention and upgrade of an indigenous propellant and high explosives manufacturing capability at Mulwala, safeguarding the jobs of 320 people directly and 300 indirectly;

• revision of the tender process for the Defence Integrated Distribution System (DIDS), to reaffirm the importance of maintaining jobs in regional and rural Australia; and

• establishment of a new co-located Headquarters Australian Theatre to be built in the Queanbeyan area with investment of about $200m in equipment and buildings, and requiring local housing for about 2,500 Service personnel and their families.

The Coalition’s policy on regional and rural Australia will continue to be applied when considering options for current and future defence activities.

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Part 1 Beyond DEFENCE 2000

A The White Paper

The Government’s intentions for defence are now a matter of public record. They are contained in the Defence White Paper. The Howard Government has decided on a policy which effectively addresses strategic imperatives while honouring an ongoing commitment to budgetary responsibility.

It is a blueprint for the future security of Australia and a stronger, more capable Defence Force. The White Paper provides long-term direction and support to the Australian Defence Force (ADF), as well as an unprecedented commitment to the future security of our nation, our citizens and our interests.

Defence 2000 is like no other Defence White Paper. The process involved the most comprehensive process of ministerial-level decision making about Australia’s defence policy for many years. The result is that this is the most informed government on defence issues for the past 20 years.

The senior Defence leadership was fully engaged in the advice that went to Government. An extensive public consultation process provided important benchmarks for Government policy setting. A parallel internal defence consultation process engaged a broad cross section of military and civilian personnel in the process.

Government gave the issues careful consideration, listened to a broad range of opinion and committed itself to a comprehensive long term plan. All of these factors made for a robust White Paper. In developing its defence policy, the Howard Government balanced competing interests in a responsible and sustainable manner. To ensure our defence outlook is up to date, the Coalition will direct Defence to undertake annual assessments of our strategic environment.

B Defence Capability Plan 2002-2015

Setting it apart from its predecessors, this White Paper specifically ties the Federal Government’s long-term funding commitment to a Defence Capability Plan (DCP).

The DCP, as set out in the White Paper, addresses shortcomings in some ADF capabilities. This will enable Defence to maintain a balanced force, ready to deploy at short notice and able to present the Government with a wider range of options.

20 Strengthening Australia’s Defences

Under the Coalition’s Plan, the ADF will be able to face a wide range of security concerns, from conventional war and peace enforcement to border protection and terrorism.

In developing the Defence Capability Plan, the Government considered the trends in defence technology in the decades to come and the opportunities offered by the Revolution in Military Affairs (RMA). We have attempted to identify those aspects of technological change that are most likely to affect major long-term capabilities and thus where investments will need to be made in coming years.

Unlike Labor, the Howard Government does not believe Australia can afford to structure the ADF to face just one particular threat of the day.

Accordingly, a third Howard Government will implement the following initiatives:

(i) Land Forces

• Two squadrons of Air Reconnaissance Helicopters (20-24 aircraft) to enter service in 2004/05;

• An additional squadron (12 aircraft) of troop lift helicopters to enter service around 2007;

• Major upgrade of 350 of our M113 armoured personnel carriers, to enter service from 2005;

• Improved body armour, weapons, night vision equipment and communications systems for all soldiers in deployable land forces, entering service around 2007;

• Tactical uninhabited aerial vehicles (UAVs) to enter service from 2008;

• New guided weapons for land forces to enter service from 2005;

• Replacement of the HMAS Tobruk by 2010 and replacement of HMAS MANOORA and KANIMBLA in 2015; and

• Replacement of the Caribou tactical transport aircraft from 2010 and refurbishment of the C-130H by 2008.

(ii) Air Combat

• Upgrades of our F/A-18 Hornets, to be completed by 2008;

• Purchase of four Airborne Early Warning and Control (AEW&C) aircraft, to enter service in 2007;

• Purchase of five new-generation air-to-air refuelling aircraft planned to enter service in 2006; and

• Acquisition of up to 100 new combat aircraft to replace both the F/A-18 and F-111, beginning in 2006/07 with the first aircraft to enter service in 2012.

Defence 21

(iii) Maritime Forces

• Major upgrades of the ANZAC class frigates with upgraded ships to be in service by 2007;

• Purchase of at least three air-warfare capable ships commencing in 2005/06 with the ships entering service from 2013;

• Bringing all six Collins class submarines to a high level of capability by 2008;

• Replacement of the support ships HMAS WESTRALIA in 2009 and HMAS SUCCESS no later than in 2015;

• 15 new patrol boats replacing the Fremantle class, expected to enter service from 2004/05;

• Major mid-life upgrade of the Seahawk helicopter commencing 2003; and

• Further upgrades of the 19 P-3C Orion maritime patrol aircraft starting from 2002 with refurbishment commencing 2007.

(iv) Special Forces and Intelligence

• In 2001/02, some $360 million has been allocated for Special Forces operations. On current plans this will increase to $442 million by 2010/11. Specific initiatives include:

• additional counter-terrorist equipment for the SAS; and

• full Commando capability for 4RAR.

• In 2001/02, $451 million has been allocated for Defence intelligence. On current plans this figure will increase to $565 million by 2010/11. Specific initiatives include:

• enhanced signals intelligence and imagery collection capabilities;

• improved intelligence processing and dissemination systems;

• deeper levels of cooperation with the US in some key areas;

• Additional research into defence from Chemical and Biological weapons; and

• Development of cyber-warfare defences.

• Under a third Howard Government the men and women of Defence will have the resources and capabilities they need to do the job asked of them. The Capability Plan will also provide greater certainty in acquisition, planning and contracting - giving Australian industry a more secure basis on which to plan.

22 Strengthening Australia’s Defences

C Defence Funding

The 2001/02 Budget reaffirms the Government’s commitment to implementing the White Paper recommendations. Defence’s funding will increase above existing levels by $0.5 billion in 2001/02, $1.0 billion in 2002/03, $1.5 billion in 2003/04 and $2.0 billion in 2004/05, and will increase overall by an average of 3% per year between now and 2011.

The funding increase resulting from the White Paper together with the funds used to generate and sustain the East Timor deployment force represents a commitment by this Government to an increase in Defence funding, over the next decade from 2001-02, of more than $32.4 billion.

These amounts are not based on any funding formula, but rather they represent the funds associated with the capability commitments in the Defence Capability Plan decided by the Government.

01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11

Totals

Defence funding excluding White Paper 12.3 12.5 12.8 12.4 12.7 13.0 13.3 13.6 14.0 14.3 130.9

Force Generation 0.42 0.42 0.42 0.42 0.42 0.42 0.42 2.9

Price and Exchange Rate Update 0.10 0.12 0.15 0.17 0.19 0.21 0.22 0.23 0.25 0.28 1.9

Defence funding increase from White Paper 0.5 1.0 1.5 2.0 2.4 3.1 3.5 3.7 4.5 5.4 27.6

Totals 12.9 13.6 14.5 15.0 15.7 16.7 17.4 17.9 19.2 20.4 163.3

Of these funds approximately 41.6% will be spent on Personnel, 27.5% on Capital Investment and the remaining 30.9% on Operating costs.

Defence funding With and Without White Paper Increase

0

5

10

15

20

25

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

Year

$billion (00-01 Budget price basis)

Defence funding increase from White paper

Exchange Rate Update

Force Generation

Defence funding excluding white paper

Defence 23

$’billion 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 Total

Personnel 5.5 5.7 5.9 6.1 6.4 6.9 7.3 7.5 8 8.6 67.9

Other Operating (2)

4.1 4.0 4.4 4.5 5.0 4.9 5.2 5.7 6.2 6.4 50.4

Capital 3.3 3.9 4.2 4.4 4.3 4.9 4.9 4.7 5.0 5.4 45.0

TOTAL 12.9 13.6 14.5 15.0 15.7 16.7 17.4 17.9 19.2 20.4 163.3

(2) This amount effectively reflects the amount of the Government’s funding not used annually to finance personnel expenses and capital investment costs.

The Coalition Government, through a robust and comprehensive White Paper, is providing certainty and direction for the ADF over the next decade and beyond.

D Defence Reform

In return for the biggest funding increase for Defence in 20 years, the Defence Department and the ADF will be expected to continue the reform program begun three years ago, achieving the gains in efficiency, project management and financial management set out in the White Paper. Specific initiatives are being developed to realise $50 million per annum initially, rising to $200 million by 2003/04, with these savings being reallocated to high-priority activities.

A program is also being implemented to improve Defence management information and supporting systems and processes, and to identify further efficiencies in keeping with the goals outlined in the White Paper. $35 million has been specifically set aside in 2001/02 for improvements to management information collection and systems.

0

5

10

15

20

25

01/02 02/03 03/04 04/05

05/06 06/07 07/08 08/09

09/10 10/11

$Billion (2001-02 Budget price basis)

Capital Other Operating Personnel

24 Strengthening Australia’s Defences

Part 2 Defending Australia

The defence of Australian territory and borders, critical infrastructure, and the Australian people from terrorist attack was, is, and always will be the most essential function of Government.

This is not a new concept, but the level and type of threat we might face and how we respond to it is changing.

The Coalition has long believed that Australia’s national security environment has become increasingly complex, diverse and unpredictable.

Defence 2000 makes it clear that Australia faces many security concerns other than those involving conventional military force. These include the potential for non-military threats, such as terrorism, cyber attack, organised crime. They also include border protection concerns such as illegal immigration, the drug trade, illegal fishing, piracy and quarantine infringements. Further details are contained in the Coalition’s policy to protect Australia’s borders.

The White Paper recognises that various forms of military operations other than conventional war are becoming more common. It also recognises that over the next 10 years the ADF will continue to undertake operations other than conventional war, both in our region and beyond.

The Coalition believes that the ADF must have a major part to play in these defence activities and that the ADF can and will play an increasing role in helping to address a wide range of these non-military security concerns.

The events of the past two years alone - East Timor, unauthorised boat arrivals and the September 11 terrorist attacks - have shown the importance of having a balanced ADF when policy decisions require the widest possible range of viable response options. The Coalition believes that preparing the ADF for such operations must take a more prominent place in our defence planning than it has in the past.

The Howard Government believes that in the current environment of strategic uncertainty Australia needs a balanced ADF ready to deploy at short notice and able to present the Government with a wider range of options to defend Australia and Australia’s interests. The Coalition believes in providing real responses, not bureaucratic changes.

Defence 25

A Counter-Terrorism

Since 1996 the Coalition built up Australia’s Special Operations Group that it now comprises the SAS Regiment, a high readiness Commando battalion (4RAR), a Reserve Commando battalion (1 Cdo Regt) and various support elements. The role of these units is to conduct offensive and recovery operations beyond the range and scope of other ADF units. These operations include the counter-terrorist capability provided by the SAS.

Since 1996, the Special Forces contribution to the defence of Australia’s interests has been significant. Operations in the Persian Gulf, East Timor, Sydney Olympics, Southern Oceans, Christmas Island and Afghanistan are a major reason why the ADF is held with such high regard.

Prior to the White Paper the Government had built up our counter-terrorist capability culminating in the Defence contribution to the Sydney 2000 Olympics. The Coalition’s funding commitment in its Defence White Paper includes a range of measures to further enhance our Special Forces and to deal with the threat of terrorism.

In 2001-02 some $360 million has been allocated for Special Forces operations. On current plans this will increase by almost 23% to $442 million by 2010-11. Specific initiatives include additional counter-terrorist equipment for the SAS and the establishment of a full Commando capability for 4RAR.

The extra counter terrorist equipment will ensure the SAS has a range of additional mission essential equipment to do their job including communications, weaponry, mobility and electro-optics. Projects to deliver a full-time Commando capability to the Holsworthy-based 4RAR will introduce enhancements to battalion’s lethality, mobility, electronic capabilities, sustainability and survivability. $117 million will be spent on raising 4RAR to a full-time commando battalion, including $44 million on new facilities and $73m on new equipment.

As a full time Commando Battalion, 4RAR’s expanded tasks will include service assisted/protected evacuation, entry from the air and sea, maritime point of entry and combat search and rescue.

Funding has also been included to provide for enhanced training systems and facilities to ensure these special capabilities are sustained. This training will be enhanced by the Government’s establishment of the Special Forces Training Centre at Singleton in December 1998.

The Coalition will also ensure modifications are made to the Collins Class submarine to accommodate special force operations.

26 Strengthening Australia’s Defences

In Defence intelligence some $451 million has been allocated for 2001-02, increasing by over 25% to $565 million by 2010-11. This increased funding will account for enhanced signals intelligence and imagery collection capabilities; improved intelligence processing and dissemination systems; and deeper levels of cooperation with the US in some key areas.

While the White Paper had foreshadowed the increasing involvement of the ADF in unconventional operations, the events of September 11 had indicated the need for a higher-level response to the threat of terrorism. Following the terrorist attacks in New York, Washington and Pennsylvania the Government has decided to significantly enhance Defence’s Counter-Terrorist and Incident Response capability.

The Coalition believes the terrorist actions in the United States point to the need to better equip the ADF to deal with terrorist attacks which were highly planned and coordinated.

The Government has decided to effectively double the counter-terrorist capability of the Special Forces and to reinstate the specialist Incident Response Unit, whose capabilities in responding to chemical, biological, radiological and explosive incidents were in place during the Olympic Games.

B Chemical, Biological, Radiological, and Nuclear Defence

The aftermath of the September 11 terrorist attacks has reinforced the increasing threat and danger of attacks involving Chemical, Biological, Radiological and Nuclear (CBRN) weapons. The Tokyo subway nerve gas attacks and the more recent anthrax outbreaks in the US have highlighted the potential use of such weapons.

There are still obstacles to the terrorist use of CBRN weapons. Obtaining, storing and transporting the materials is difficult, they are relatively difficult to weaponise or disperse on a large scale, and their use is heavily dependent on wind and other weather conditions.

But while such a threat might be considered as one that is low in probability to Australia, it is a threat that is very high in consequence. Therefore it is a threat the Coalition takes extremely seriously. We built up our CBRN defence capabilities in the lead up to the Sydney Olympics. This is the time to take further preventive action.

Under the Coalition, Defence will become the lead Government agency responsible for Chemical, Biological, Radiological and Nuclear Defence (CBRND) policy and will oversee a range of measures to increase our defences and response against such weapons.

Defence 27

(i) Policy

Under the Coalition the key committee for coordinating policy within Defence will be the CBRN Defence Committee (CBRNDC). This will replace the existing Nuclear Biological Chemical Defence Steering Committee (NBCDSC). The committee will have authority directly to the Secretary and CDF and will meet on a regular basis. This Committee will consist of representatives from Army, Air, Navy, the Surgeon General, Defence Science and Technology Organisation (DSTO), the Defence Intelligence Organisation (DIO) and Emergency Management Australia (EMA).

The first priority of this new committee will be to present the Government early in 2002 with a realistic program to boost our CBRN capabilities.

Extensive interactions with other Defence and civil agencies will underpin this effort. In addition to the CBRNDC, contributing organisations will included State Police and Emergency Services, Police Forensic Units, State and Commonwealth Health authorities, the Public Health Laboratories Network, CSIRO and a network of Commonwealth intelligence and security agencies.

Under the Coalition Australia will become a full member of the three working groups of the Chemical Biological Counter-Terrorism Trilateral with the US, UK and Canada. Australia recently hosted a meeting of one Group, currently has observer status and has been invited to become a full member.

(ii) Research

Past Defence research into NBC defence has predominately sought to provide advice to Defence on protective measures for ADF personnel. Under the Coalition this research will be expanded to provide advice to the Commonwealth and States more generally.

DSTO in Melbourne undertakes R&D across the CBRND spectrum with a more recent emphasis on biological defence. DSTO maintains many collaborative interactions with overseas nations and draws heavily on the civilian R&D base. DSTO’s biological defence R&D program is monitored by the interdepartmental Chief Defence Scientist’s Biological Defence Advisory Committee, ensuring proposed programs are consistent with all aspects of Government policy.

DSTO will continued to maintain close relations with key players in the Commonwealth and States health systems that were developed for the Sydney Olympics on casualty handling and treatment should an attack ever occur.

28 Strengthening Australia’s Defences

The Coalition will examine every option to stockpile vaccines, antibiotics and nerve agent treatments. Caches of some nerve agent treatments were created for the Sydney Olympics and a process to acquire vaccines from the US as required was developed . The Commonwealth Serum Laboratories will have a key role to play.

DSTO’s research into defence against chemical and biological weapons will also continue to assist the Government’s international efforts to control and eliminate chemical and biological weapons, principally through the Chemical Weapons Convention and Biological Weapons Convention.

All research will be reported to the United Nations in the Annual Confidence Building Measures of the Biological Weapons Convention and is consistent with this convention.

As part of the Coalition’s Capability Technology Demonstrator CTD) Program, funding also commenced in July 1999 on a project to test sensor technology that would provide continuous, unmanned, 24 hour monitoring for biological warfare (BW) agents present as aerosols. Successful completion will address a world-wide limitation in BW aerosol detection capability, by providing continuous, high sensitivity, high selectivity sensing.

DSTO is contributing to this work through cooperation with the US Defense Advanced Research Projects Agency (DARPA). Under the Coalition’s plan to develop our defences against biological weapons, extra funding will be devoted under the CTD Program to advance the project further.

(iii) Capability

Under the Coalition, the core of the CBRN response capability will be the Joint Incident Response Unit. This includes the Chemical, Biological and Radiological Response (CBRR) Squadron, Explosive Ordnance Disposal and High Risk Search Squadrons and a DSTO-led Technical Support Group, supplemented by overseas effort where necessary.

A National CBR Working Group (chaired by EMA) has been established to coordinate development of the CBR response capabilities. This Group has liaison links with other relevant fora such as Standing Advisory Committee on Commonwealth/State Co-operation for Protection Against Violence (SAC-PAV) which is one of the principal instruments for co-ordinating the national capability for protecting Australia from politically motivated violence.

Defence 29

The recent Government decision to re-establish the Incident Response Unit will see a significant expansion of the capability offered by the CBRR Squadron. Future CBRN capability is planned under Project Wolfhound under the Coalition’s Defence Capability Plan which will acquire equipment to support the long-term CBRR Squadron capability.

At this stage approximately $30-50 million has been allocated under this project in the DCP to expand and enhance the ADF’s CBRR capability. Further proposals on the longer-term enhancement of these capabilities will be considered by the Government early in 2002.

C Protecting our Assets

Another critical element of defending Australia is the protection of our wider infrastructure.

In the past year the Coalition has passed two important pieces of legislation that will allow the Defence Forces a role to play in protecting our vital assets and infrastructure.

• The Defence Legislation Amendment (Aid to the Civilian Authorities) Bill 2000, passed in September last year, clarifies the existing powers of State, Territory and Commonwealth Governments to request call out of the Defence Force in Australia in rare situations where police need help to deal with an extreme emergency.

• The Defence Legislation Amendment (Enhancement of the Reserves and Modernisation) Act 2001 enables the Government to call out the Reserves for a wide range of operations including combat, defence emergency, peacekeeping, civil and humanitarian aid and disaster relief.

The Coalition’s general commitments to Defence will ensure the funding is there to enable the ADF the appropriate tools to do the job required now that the legislative framework has been laid.

D Balance and Flexibility

Defending Australia is not a solely Defence function. The Coalition views this responsibility as a partnership among Commonwealth, State and private sector organisations. It requires a coordinated, balanced and strategic view as to our what requirements are. The threats to Australia are multifaceted and constantly changing.

But defending Australia is also a very real defence function. It is not achieved by simple bureaucratic changes. It requires real effort.

30 Strengthening Australia’s Defences

Australian cannot afford to have a knee jerk reactive defence policy only suited to the perceived popular threat of the day. We can’t afford to structure our forces or strategic policy to any one particular threat. The ADF must be able to face a wide range of security concerns from conventional war and peace enforcement to cyber attack and terrorism and everything that falls in between.

The Coalition’s White Paper provides that flexibility. Under a Coalition Government the men and women of Defence will have the resources and capabilities they need to do the job being asked of them.

Defence 31

Part 3 Building Capability through People

Our strategic planning is designed to integrate people into capability in a deliberate way. Just as we think whole-of-life and whole-of-system as we develop our acquisition strategies, we need similar thinking when dealing with our people.

In practical terms, we need to recognise and develop ways of planning for a workforce that is mobile, both internally and across organisations. We need to think in terms of individuals moving in and out of Defence, or transitioning between Defence and other organisations while continuing to contribute to Defence.

People issues now figure more prominently in our capability decision making. Personnel and equipment aspects of capability are important considerations when acquisition decisions are being made.

The Government must be able to make the right capability decisions, confident that these decisions are sustainable. In order to support this requirement, Defence will develop a more sophisticated and strategic workforce planning capacity.

In December of last year the Howard Government launched the White Paper - a comprehensive reappraisal of Australian defence capability and strategic direction for the next decade. It is unique in that it contains a Defence Capability Plan - a capability blueprint for the future - and is supported by a funding commitment from Government.

This funding commitment includes the allocation of $100 million per year for personnel initiatives totalling $500 million over the next five years.

The White Paper places special emphasis on the people in Defence. In particular, it recognises the unique requirements of service life and acknowledges that being part of the ADF is more than just a job.

The White Paper also identifies the challenge we face in providing the capability needed to meet challenges of the future. This challenge lies in attracting, recruiting and retaining the right people with the right skills. Without the right people, the right equipment is useless.

The Howard Government recognises that the ADF is called on to undertake unique functions on behalf of the community, and that the requirement to serve is often onerous on individuals and their families.

We also recognise that the ADF is part of the community it serves, and that community standards are relevant in shaping ADF conditions of service.

32 Strengthening Australia’s Defences

We also believe in choice and in flexibility. We do not believe that one size fits all.

As a result, the Coalition sees three essential principles underpinning conditions of service for the ADF:

• combat operations are unique to the ADF and should be recognised with specific remuneration policies;

• these policies should reflect the liability ADF members have to serve and the special characteristics of military service; and

• these policies should be consistent, to the extent practical, with those in the wider community.

In its third term the Coalition will introduce a modern, flexible remuneration system for ADF personnel will be introduced, along with enhanced family support measures including:

• a new scheme to give single ADF members greater choice over where they live and the type of accommodation they occupy;

• ensuring ADF families continue to have priority access to DHA housing, given their family needs;

• extension of the Spouse Employment Assistance Program;

• a major expansion to the Defence Child Care Program;

• establish a new stand-alone, military specific compensation scheme;

• improved superannuation and greater flexibility in leave arrangements; and

• the allocation of $100 million per year for personnel initiatives or $500 million over the next five years.

Further details are contained in the separate Defence personnel policy “Recognition, Reward and Respect”.

Defence 33

Part 4 International Defence Relations

Australia’s armed forces complement and support the frontline work of our diplomats. Our influence on security issues, in the region and beyond, is to a significant degree dependent on our willingness and ability to commit forces to operations when necessary.

The quality and capability of the ADF is therefore essential to the day to day diplomacy which shapes our strategic environment.

Our network of bilateral defence and security relationships is integral to Australia's foreign policy, a policy which places the highest priority on supporting our strategic interests.

A United States

In 2001, Australia's formal alliance with the United States reached 50 years of age with the anniversary of the signing of the ANZUS Treaty in September 1951. It also marked the first time that the Treaty was invoked, to support the US and to meet the common threat of international terrorism. The Treaty remains today the foundation of a relationship that is one of our great national assets.

Over the next decade and beyond, our alliance with the United States will help us to pursue all of the strategic objectives set out in the Howard Government’s White Paper. It is the breadth of benefit we receive from the alliance, as well as its depth, which makes it such an important element of our overall strategic policy. But we should not take the health of our alliance for granted. We will need to work hard with the United States to ensure its continuing viability and relevance in a period of change.

Australia's alliance with the United States is a two-way relationship. We are a dynamic, independent-thinking and, on occasion, constructively critical partner of the United States. The alliance affords excellent access to, and significant influence on, US thinking and policy on the Asia Pacific.

At times, of course, the United States and Australia will differ in our approaches to issues, or on the priority we give them. When that happens, it is important that Australia has the ability to pursue our interests independently.

Under the Coalition, a strong defence relationship is being built with the new Bush Administration. This has been well illustrated by the Defence Minister’s visit to the US in April 2001, the Australia-US Ministerial talks (AUSMIN) recently held in Australia with US Secretary of Defense Donald Rumsfeld and Secretary of State Colin Powell, and the visit by the Prime Minister to the US in September 2001. That visit

34 Strengthening Australia’s Defences

was also marked by the signing of a Statement of Principles for Submarine cooperation between the RAN and the US Navy.

Under a Coalition Government all the mechanisms within the alliance - AUSMIN, intelligence partnership, diverse operational links, especially with Pacific Command - will be developed effectively to influence US policy and advance Australia's defence security interests.

A third Howard Government will:

• ensure the US alliance remains strong, and channels of influence on US policy and access to military technology and intelligence remain open;

• take advantage of any opportunities for expanded cooperation afforded by the new Bush administration; • explore avenues to pursue shared strategic interest in the Asia-Pacific region; and • ensure that the pursuit of these goals does not occur at the

expense of our commitment to enhance defence self-reliance or our proposals to upgrade security engagement with the region.

B Indonesia

The tumultuous events following the East Timor ballot last year, culminating in the deployment of INTERFET, caused understandable tensions between Australia and Indonesia, our largest and most important near neighbour. These tensions resulted in the suspension of most areas of defence contact.

The Howard Government is committed to working with the Indonesian Government to establish over time a defence relationship that serves our enduring shared strategic interests.

A long term objective for the relationship is to see Indonesia play a confident and constructive role in regional security. Another key aim is to encourage a stable long-term future for Indonesia in which the Indonesian armed forces play an appropriate role - characterised by professionalism and respect for the rule of law. We intend to restore a sense of shared strategic interests between our two defence establishments based on the principle of mutual benefit and respect for the primacy of civilian government.

The Coalition will continue to explore opportunities to build, in an evolutionary way, a new, more realistic defence relationship with Indonesia. We will pursue future opportunities for: cooperative maritime surveillance activities; humanitarian assistance; and a cooperative effort to combat illegal immigration.

Defence 35

C East Timor

Within a short time East Timor will pass from UN authority to full independence. It faces formidable security challenges. Australia’s aim will be to provide, with others, an appropriate level of help and support for East Timor as it builds the capabilities and national institutions it will need to ensure its security and thereby contribute to the security of its neighbourhood.

Defence relations have been established with the new East Timor Defence Force (ETDF) which was officially constituted in February 2001. Australian assistance was pivotal to the establishment of the ETDF and Australia will likely be the ETDF’s most significant partner. We have drawn on our network of defence links with countries such as the US, New Zealand, Thailand and Malaysia to ensure those countries are also involved in the development of the ETDF.

The Coalition will:

• seek to develop an effective defence relationship with East Timor;

• strike a balance between withdrawing ADF personnel from East Timor as soon as possible after independence and the need to ensure UNTAET’s work is seen through to a satisfactory close; and

• ensure ongoing international involvement to share the burden.

D South East Asia

The Coalition’s aim is to promote our strategic objectives in South East Asia by helping to shape and support a network of multilateral and bilateral relationships that enables countries to work together to manage any differences, and which could, if necessary, respond to challenges to shared interests.

Our policy has been to emphasise the close alignment of our strategic interests with those of our South East Asian neighbours, to encourage regional cooperation among the South East Asian states, and to help where we can in the development of appropriate regional military capabilities.

In pursuing these policies over the past six years, Australia has built up strong bilateral defence relationships with almost every country in South East Asia. Overall there is probably no country, either within the region or outside it, that has greater range and depth of defence contact with the countries of South East Asia than Australia.

36 Strengthening Australia’s Defences

Australia's close defence relationship with Singapore is characterised by shared strategic perceptions, and includes extensive exercises and training by the Singapore Armed Forces in Australia. Australia and Malaysia have a long history of military cooperation, demonstrated over the years by Australia's support for the territorial integrity of Malaysia in earlier crises and through the ongoing ADF presence at Butterworth. Australia's membership of the Five Power Defence Arrangements (FPDA) commits Australia, along with New Zealand and the United Kingdom, to assist Malaysia and Singapore against external aggression. Membership of the FPDA serves enduring Australian interests in the security of maritime South East Asia, and complements our bilateral relationships in the region.

The Philippines' support for regional security was recently demonstrated through its commitment to INTERFET and UNTAET. Thailand's provision of important support and leadership in East Timor in 1999 and 2000 demonstrated its willingness to act cooperatively with Australia and others in support of regional security.

We have conducted a regular dialogue on regional security issues with Vietnam since 1998 and are seeking to establish a broad-based strategic relationship that would include regular visits and training exchange programs. Australia is also maintaining and developing modest defence relationships with other countries in South East Asia, notably Cambodia and Brunei.

A third Howard Government will consolidate and broaden the defence relationships in South East Asia and deepen our strategic dialogue through an expanding program of cooperative activities including maritime surveillance cooperation, extending cooperation in defence reform and modernisation, further cooperation on financial and management reform, and science and technological cooperation.

The Coalition will also ensure that FPDA evolves in response to increasing complexity in the regional environment and to meet the demands of modern warfare, from mainly air defence to a combined and joint operational focus.

E North Asia

Defence relations with China have expanded in the past four years and are now the closest they have ever been. The relationship is based on senior level visits and the annual Defence Strategic Dialogue Talks. Six members of China’s Central Military Commission have visited Australia in the past 3 years including General Chi Haotian, the Minister for Defence, and most recently, General Zhang Wannian, Vice Chairman of the Commission.

The Australian Minister for Defence also twice visited Beijing. These visits and talks are supported by a variety of other activities, including regular naval ship visits, staff college exchanges and study visits.

Defence 37

Australia’s defence ties with Japan and Korea are well established. We share with Japan a commitment to a strong and enduring US role in regional security and a willingness through our respective alliances to work hard to support US engagement. We also share a wide range of other strategic interests and objectives, including freedom and security of navigation and trade, and strong support for the UN's role in global security. We have already worked together on key security issues including non-proliferation, Cambodia and East Timor - where Japan provided generous assistance to INTERFET.

South Korea is becoming a more important and influential element of the North East Asian security community. We will therefore develop further our strategic dialogue with South Korea, both to improve our understanding of events on the Peninsula itself, and to benefit from Korean perspectives on wider regional security issues. We also welcome South Korea's increased engagement in regional affairs, as reflected for example in its important support for INTERFET and UNTAET.

The Coalition will:

• pay particular attention to further developing defence ties with China, as an important element in engaging Beijing on regional security issues;

• use defence ties with Japan and South Korea to encourage their involvement in regional affairs as well as continuing support for US engagement in North East Asia and the wider region; and

• identify further opportunities in North Asia and make proposals to establish more regular strategic dialogue and exchanges between think-tanks, staff colleges and Defence policy-related bodies.

F India

India is increasingly important to the wider regional strategic balance. This has not only increased Australia's interest in building contact on security issues with India; it has also made India more interested in Australia's distinctive approach and outlook on regional security affairs.

Political-military strategic dialogue with India began in August this year. The exchange of Defence Advisers (DA) with India was advanced with the return of Australia’s DA to India in January 2001, and India’s DA is expected to return to Australia in the near future.

The Indian Defence Minister visited Australia in June 2001 and it is intended that the Australian Defence Minister will visit India early in 2002. Defence college exchanges recommenced in January 2001 with two Indian students attending courses at the Australian Defence College. Australian attendance at Indian staff colleges recommenced in early June.

38 Strengthening Australia’s Defences

The Coalition will further develop our strategic dialogue with India, particularly with respect to opportunities for greater naval interaction in the region.

G New Zealand

The centrepiece of our defence relationship with New Zealand is the maintenance of the Closer Defence Relations (CDR) arrangement that codifies the mutual commitment to improving bilateral defence relations.

Australia remains focussed on maximising interoperability between the NZDF and the ADF, with current talks concentrating on how to improve interoperability in the context of the New Zealand Government Defence Statement (and related documents) of May 2001. The high quality of New Zealand's forces is beyond question. They made an outstanding contribution to INTERFET, and Australia is grateful for the speed and generosity with which they were committed and supported.

Ministerial talks held on 6 July 2001 provided the opportunity to impress on the NZ Government the need to match defence capabilities to its bilateral and regional security needs and obligations.

The Coalition will reinforce with New Zealand, in constructive ways, the importance of maintaining its commitments to a credible defence capability and our bilateral relationship.

H PNG

The Coalition believes that as our closest neighbour and a country with which we have deep historical associations, Papua New Guinea will always be important in Australia's strategic thinking. We want to remain Papua New Guinea's primary defence partner and maintain a defence relationship based on mutual benefit and reciprocity.

Under the Coalition, Australia continues to support the defence reform agenda of the Morauta Government. The PNGDF was stabilised in late 2000 through an up to $A10 million short-term assistance package. The package alleviated short-term pressures by ensuring a continuing rations supply, base services, financial management and the settlement of a number of outstanding utilities claims against the PNGDF.

Defence has maintained close consultation with the PNGDF on the development of credible and fully costed revised reform proposals. Training assistance was targeted at improving the basic management, military and strategic skills of the PNGDF throughout the organisation.

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The Coalition will, in collaboration with other relevant portfolios, assist the PNG Government in managing the significant reform of the PNGDF. Defence will need to play a major role in assisting the PNG Government to manage what is likely to prove a difficult transition process.

I South West Pacific

In the South West Pacific, as in Papua New Guinea, the Coalition’s aim is to maintain our position as the key strategic partner. Australian interests in a stable and secure South West Pacific are matched by significant responsibilities as a leader and regional power.

The Coalition’s policy in the region is underpinned by a large program of defence engagement, a $20million Defence Cooperation Program and some 70 Australian advisers posted throughout the Pacific.

The Pacific Patrol Boat Project, which provides assistance for patrol and protection of the large maritime zones of Pacific Islands, is at the core of our Defence Cooperation Program in the South Pacific. Some 22 patrol boats have been supplied to 12 Pacific Island countries.

The Coalition’s ongoing commitment to the Pacific Patrol Boat Project was demonstrated recently by the decision to extend the project for a further 15 years. The Government will also assist with security reviews for the Governments of the South West Pacific, most notably Vanuatu, Tonga and the Solomon Islands.

40 Strengthening Australia’s Defences

Part 5 More Effective Reserves

The Coalition is committed to enhancing the role of Australia’s Reserve forces. We are ensuring that the Reserves are an integral part of a modern, readily deployable Australian Defence Force. Our policies are ensuring that Reserves work and train side by side their Regular counterparts. They ensure that Reserves are part of the ADF.

A more effective Reserve component is needed to meet the changing demands posed by Australia's strategic environment. Today, Reserves comprise about 42% of the total ADF. Over the next decade, Reserves will become a more important element of the ADF's capability.

Given the likelihood of frequent and concurrent operations, the Reserves will be the most efficient way of providing sustainment and surge capacity. Moreover, they can provide skills not available within the permanent forces or held only in small numbers.

Traditionally, the Reserves have been viewed as a mobilisation base for the ADF in time of major conflict. But recent military operations have highlighted the importance of the Reserves in meeting the requirements of contemporary military operations. As a result, the strategic role for the Reserves has now changed from mobilisation to meet remote threats to that of supporting and sustaining the types of contemporary military operations in which the ADF may be increasingly engaged.

The decisions the Howard Government has to enhance the contribution of the Reserves to ADF capability are of fundamental importance and will profoundly change the Reserves. They provide greater options for the employment of the Reserves, while demonstrating to the Reservists themselves, and the community from which they are drawn, that measures are being put in place to support them in their service.

A Legislative Changes

Of the Government's initiatives to enhance the Reserves, changes to the legislation governing the use and employment of Reserves have been of the greatest significance. .

The Defence Legislation Amendment (Enhancement of the Reserves and Modernisation) Act 2001 and the Defence Reserve Service (Protection) Act 2001 became operational in April this year.

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The Defence Legislation Amendment Act enable Government to call out the Reserves as a whole or in part for a wide range of operations, including combat, defence emergency, peace-enforcement, peacekeeping, civil and humanitarian aid, and disaster relief Importantly, these changes provide the framework to introduce new categories of Reserve service, to allow for some units and individual Reservists to be held at higher levels of readiness.

The Protection Act provides appropriate measures to protect the jobs of Reservists and support their families and employers. Employer support for the Reserve is crucial. The Protection Act allows the payment of an Employer Support Payment to assist employers and self-employed Reservists defray the costs of supporting and releasing employee-Reservists for extended periods of training and operational deployment. These initiatives are estimated to cost around $20 million per year and are already in operation..

B Increased Readiness

Defence 2000 makes a firm commitment to enhance the contribution the Army Reserve makes to Australia’s military capability. The Howard Government recognises that the strategic role of the Reserves is to support and sustain the day-to-day operations of the Army.

Accordingly, future categories of Reserve service will extend from High Readiness Reserves (HRR) through to Medium Readiness Reserves (MRR) and Lower Readiness Reserves (LRR). These new categories of service will be underpinned by conditions of service that are structured to enhance attraction and retention. Flexible and innovative methods of recruiting and training are to be implemented. The Government will also simplify the arrangements for soldiers to transfer between the Regular and Reserve parts of the Army.

From 2002 the Army Reserve will also contribute a rifle company to a number of infantry battalions scheduled for operational deployment overseas. More broadly, as part of the expanded role of the Army Reserve, it can be expected to provide individuals and units, as well as specialist skills and capabilities such as Civil-Military Coordination and Reinforcement Holding Units.

C Improved Training

An improved Reserve capability will require adequate resources and equipment to be allocated, ensuring that Reservists are trained and equipped to meet operational requirements.

While the training will be driven by military requirements, many of the competencies gained will be directly transferable to the civilian workplace at no direct cost to employers. To better demonstrate the value of military and skills training to Reservists and employers alike,

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the existing Defence program, which is seeking to have its training accredited within the national training framework, has been accelerated.

Reservists will have nationally recognised evidence of their attainments, and employers will have online access to a database of competencies gained through their employee-Reservists' participation in military service.

To realise those benefits, reciprocal commitments will be required from Reservists and their employers. Reservists, particularly those required to maintain high levels of individual readiness, will be asked to commit significantly more time to training to achieve higher levels of military competencies, and to maintain them over time.

This increased commitment will impact on the Reservists, their families and communities, and their employers. The Coalition will develop a range of measures to manage those impacts, including:

• changes to conditions of service;

• innovative ways of delivering training, such as breaking down training into modules and phases; and

• ongoing consultation with the Reserves' stakeholder community to facilitate Reservists' leave for training.

As a major employer of Reservists, the Government will lead the way, implementing leave policies and employment practices that support the release of Reservists for peacetime training and deployment.

D Recruitment and Retention

The Coalition will continue to address the issues of Reserve recruitment and retention by redirecting the focus back to the communities from which Reservists are drawn. Community support is important to the overall process of recruitment and local Reserve units will play a greater role in attracting and fostering recruits. This, in concert with the national Reserves recruitment program, should result in improved recruiting results. The financial incentive package for employers will also directly support recruiting.

The legislative changes will also allow the ADF to adopt more flexible recruiting and management strategies. These will enhance retention of military experience by offering incentives to full-time members to continue serving in the Reserves, rather than leave the ADF completely. Permanent force members will be able to transfer to the Reserves, and Reservists to lower levels of readiness. This will help to retain trained people in the ADF.

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E Labor’s Alternative

The decisions the Coalition is taking to enhance the contribution of the Reserves to ADF capability are of fundamental importance and will profoundly change the Reserves.

They provide greater options for the employment of the Reserves, while demonstrating to the Reservists themselves, and the community from which they are drawn, that the Government is putting measures in place to support them in their service.

This is in contrast to Labor’s record on the Reserves. Labor is now representing itself as the party that will look after Reservists - when in fact its main Reserve initiative in Government, the Ready Reserve, was nothing more than a cost-cutting exercise.

Labor introduced the Ready Reserve because it wanted to do Defence capability on the cheap. It scrapped two battalions of regular troops to pay for a Reserve Force that was only designed to operate 50 days a year.

Labor said the scheme would save money because the annual cost of a Ready Reservist would only be one third that of a regular soldier - but as usual got the sums wrong. Later estimates showed the true cost of a Ready Reservist soldier was about two-thirds that of a full-time soldier. Labor’s plan was conceptually flawed, financially irresponsible and strategically frivolous.

As usual, we are fixing Labor’s mess and putting in place a system that will benefit individual Reservists, the Reserve forces and the ADF as a whole.

44 Strengthening Australia’s Defences

Part 6 A Strategic Defence Industry

The Coalition believes Australian industry is a vital component of Defence capability, through its development and supply of equipment and systems, together with associated through-life support. Given the increasing reliance on industry through outsourced commercial support, as well as the demands of the White Paper investment, a sustainable defence industry base is essential if Australian industry is to meet Defence's future needs.

The White Paper and associated Defence Capability Plan provide a unique opportunity to give industry the certainty needed to build sustainable Defence industry capabilities.

The Coalition will commit $47 billion over the next 10 years to the acquisition of major defence capital equipment and will spend $19 billion dollars on in-service support. In addition Defence will spend $10 billion dollars on support to operations drawing on the broader national support base.

The Coalition will:

• adopt a more strategic industry policy approach;

• base this approach on sustaining key industry capabilities critical to Australia’s national security needs and better demand management of its capability requirements;

• define the key industry capabilities that it requires and develop long-term strategies to sustain them;

• change the way Defence manages its demand, linking individual acquisitions to the sustainability of key industry capabilities within defence industry sectors;

• change Defence’s competition policy arrangements, involving the introduction of a two-tiered approach to industry in which Defence develops a long-term commercial relationship with Australia’s small number of ‘tier 1’ prime-contractors actively supported by expected open competition at the ‘tier 2’ subcontractor level; and

• in support of this two-tiered approach, adopt new accountability and transparency measures to ensure continued value for money outcomes.

A The New Strategic Approach

Sustaining key Australian defence industry capabilities will require a fundamentally different approach by Defence to its industry relationship. This new strategic approach to industry policy will encompass more structured, long-term commercial relationships with Australia’s small number of ‘tier 1’ prime contractors. The primary

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driver for the relationship will be the sustainability of key defence industry capabilities rather than open competition.

Individual acquisition decisions need to be strategically linked, where relevant, and offered to ‘tier 1’ companies as part of a long-term, multi-project arrangement. This will provide industry with the business activity and forward planning guidance necessary to sustain critical defence industry capabilities.

Defence currently promotes a commercial relationship with industry based on a project-by-project acquisition strategy. The problem with this winner-takes-all approach is that it promotes an unpredictable ‘boom and bust’ environment for defence industry. This is particularly the case for the small number of ‘tier 1’ prime contractors and, as a result, the capacity of these companies to make long-term investments in Australia is seriously constrained by the uncertain prospect of any long-term, sustainable relationship with Defence.

Most importantly, Defence’s current approach does not develop long term relationships with the key Defence industry companies. Additionally, Defence’s current project-by-project approach can also create destructive competition amongst the small number of ‘tier 1’ prime contractors. This approach ignores the secondary long-term effects of selection decisions, which encourage over-capacity within ‘tier 1’ companies, compared with Defence demand.

Although the current approach might sustain the ‘winning’ company for the life of the project, it is often to the detriment of Defence’s long-term needs, and the skill sets and capabilities inherent within the unsuccessful companies. The end result is that the skill sets and capabilities that Defence requires from industry cannot be sustained, and Defence either pays the price for their cyclical re-establishment, or risks not having the capabilities when required to meet operational contingencies.

The current ad hoc approach to defence industry, often involving the conduct of large projects with little thought as to how to sustain the key industry capabilities that have been created once the project is completed, must change. For example, the lack of whole of life planning for the Collins Class submarines has required significant investment to refocus the Australian Submarine Corporation and generate a sustainable submarine support capability.

With planned major projects such as new generation Combat Aircraft, Air Warfare Destroyers and Helicopter programs, Defence cannot afford to generate any further unsustainable industry capability. A new approach to Defence’s relationship with ‘tier 1’ companies, which focuses on the sustainability of key industry capabilities, as opposed to open competition on a project-by-project basis, is required.

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B Key Industry Capabilities

To provide an appropriate planning base for industry, Defence needs to define the critical skills and capabilities required from industry, and must also define its total expected demand over time.

Defining the critical defence industry capabilities that Australia requires is an essential prerequisite to a more strategic defence industry policy approach. By defining key industry capabilities, strategies can be developed to sustain, and ensure Defence access to them. Equally important, policies can be developed to discourage or redirect those capabilities that are not particularly important to meeting Australia’s policy of defence self-reliance.

The ten-year Defence Capability Plan provides an unprecedented level of strategic guidance on Defence’s future capability requirements. This guidance will assist in identification of key defence industry capabilities and the linking of Defence’s total long-term demand to the sustainability of these key capabilities.

The Defence White Paper also identifies Australia’s defence industry capability priority areas. These include:

• combat and systems software and support;

• data management and signal processing;

• command, control and communication systems;

• systems integration; and

• the repair, maintenance and upgrade of major weapons and surveillance platforms.

These priorities represent high-level defence industry capabilities that are of greatest strategic importance to Australia. As part of Defence’s new strategic industry policy approach, each of these capability priorities will be broken down into more specific critical industry capabilities, to enable the development of long-term strategies to sustain them. Critical capabilities requiring government-to-government arrangements, in order to meet strategic national security imperatives, will also be identified (eg submarine combat systems).

C Globalisation and Rationalisation

Australian industry is not immune to world trends of consolidation and globalisation. In the United States, the United Kingdom and Europe, government policy has effectively shaped the capabilities of their defence industries through active official encouragement of restructuring and rationalisation. For example, in the US, there are now only two manufacturers of naval surface combatants, one manufacturer of submarines and only two manufacturers of combat aircraft. In the UK, there is effectively only one of each.

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In Australia, no such rationalisation policy exists. As such, capacity within key sectors of the defence marketplace far exceeds Defence’s long-term demand. As a result, few defence companies operating in Australia make a respectable profit on a sustained basis. While the strategic Defence approach proposed will provide a framework, industry itself also has a crucial role to play in the sustainability of key defence industry capabilities and must play a key role in the consolidation process. Industry restructuring, as well as greater use of alliances, joint ventures and teaming, will be required, if key defence industry capabilities are to be sustained by Defence’s finite demand.

D Defence and Competition

In accordance with Government policy, Defence’s current procurement approach is based on an open competition model. However, this model, as it relates to Defence’s dealings with ‘tier 1’ companies, does not always produce the best long-term value for money outcome. The Defence monopsony, coupled with a decreasing number of ‘tier 1’ companies (due to globalisation and industry rationalisation) has created an environment in which competition for the sake of competition fails to sustain key defence industry capabilities, and may end up costing the Government more than it saves.

To address this problem, Defence must adopt a more structured, long-term commercial relationship with Australia’s small number of ‘tier1’ prime contractors. This would involve arranging individual acquisitions, where applicable, into long-term, multi-project packages based on related capabilities. These multi-project packages would be offered to ‘tier 1’ companies, under a sole source, restricted or ‘follow-on-business’ arrangement, and structured to ensure the sustainability of key industry capabilities.

As part of this approach, Defence would expect the ‘tier 1’ companies to competitively subcontract the majority of project work to those SMEs operating at the ‘tier 2’ level. However, to ensure commonality of defence subsystems, competition at the ‘tier 2’ level may not always be appropriate and longer-term, more secure commercial arrangement might be needed in some circumstances.

If Defence is to relax its competition policy in relation to its dealings with ‘tier 1’ defence companies, new accountability and transparency measures must be established to ensure that value for money outcomes are maintained. These measures will include open-book accounting, mutually agreed profit margins, benchmarking against international standards, the use of third party assessors, and a more structured program of incentives and penalties for performance outside that specified. Defence’s recently introduced ‘company ScoreCards’ will be used to identify companies that consistently perform above and below Defence’s expectations. The requirement for ‘tier 1’ companies

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to competitively tender the majority of project work at the ‘tier 2’ subcontractor level will also enhance accountability.

E The role of Defence Science

The Defence White Paper places a high priority on the increased use of technology to ensure that Australia can establish and maintain a capability ‘knowledge edge’. DSTO has a crucial role to play in working with defence industry to meet this challenge and maximise Australia’s defence capability through the use of technology.

DSTO, in close partnership with Australia’s defence industry, will play an increasingly important role in developing innovative ways in which local and imported technologies can be adapted to Australia’s unique operational requirements.

Accordingly, DSTO must place a high priority on supporting industry-based innovation and R&D activities that target critical high-technology military capabilities. This will require DSTO to regularly advise industry of its innovation, R&D and technology priorities and, as part of the new strategic industry policy approach, these priorities will need to form a key element within each of the DICA.