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Thursday, 29 March 2007
Page: 111


Dr NELSON (Minister for Defence) (4:00 PM) —Firstly—and I have said it in the House myself—the security and protection of Australia, its people, interests and values are our highest priorities. There is no question of that, and there are two things that are required in order to do it. Firstly, you need political will: you need to have a government that believes in defence and security. Secondly, you have to have very strong economic management and to have your nation in a position where it is able to invest in the defence that is considered to be necessary to achieve the outcomes that we have.

In the 21st century, the first thing that needs to be said about defence and equipping our country with people and equipment is that what is most going to shape our future is not necessarily what we know but the things that we do not know. Our strategic planning for defence is indeed well developed. It was set out in the 2000 white paper and, as the member for Hunter has pointed out, we had one update in 2003 and another in 2005. I have also foreshadowed that throughout this year we will be—and in fact already are—examining how we will go forward to the end of this decade. Our priorities are obviously the protection and the security of our borders; we want to ensure that our gas and oil platforms are protected; we want to ensure that people who arrive here do so lawfully; and we also want to ensure that people do not arrive here and steal our fish. Five hundred Australian men and women, principally in the Navy and the Air Force, are working every day on this on our behalf.

In our planning we are also very focused on our region, particularly the ‘arc of instability’—a term that was coined by Paul Dibb and to which the member for Hunter referred—which takes us from East Timor through to the south-west Pacific. We have recognised that we are going to have to provide security and stabilisation, counterterrorism and maritime border protection, and also humanitarian support and relief in those countries for the foreseeable future. That, amongst many things, is why the government last year announced that we will invest a further $10 billion over the next 10 years in establishing two more battalions for the Australian Army, taking it from six to eight battalions.

But what we also recognise as equally important in defending our country is what happens in our region, not only South-East Asia but South Asia, Central Asia and throughout the world. We appreciate that, as we go forward, Australia, in providing defence and protection for our interests, is going to have to not only involve itself in counterterrorism, in intelligence and in working with our neighbours—Indonesia, Malaysia, Thailand, the Philippines and other countries—on counterterrorism, but also see that we nurture, nourish and support our alliances in conflicts which may well be in distant parts of the world. What happens in Afghanistan, what happens in the Middle East and the resolution eventually of the issues in Iraq have everything to do with the security of Australia. So, in terms of equipping Australia for the future, the government is extremely mindful of the fact that they are the kinds of challenges that we are facing.

We have heard from the member for Hunter. Most people are embarrassed to not know what they are talking about; it is even less common to have people boast about it, which is essentially what the member for Hunter has done. In terms of procurement, the member for Hunter referred to the Australian Strategic Policy Institute. In the institute’s defence almanac, which publishes figures on defence expenditure, in the last 11 years of the Hawke and Keating Labor governments defence expenditure declined in real terms by two per cent. In contrast, in the first 11 years of this government, defence expenditure has increased by 48 per cent. I would also point out that the Labor Party solution of increasing defence expenditure as a proportion of GDP was to actually shrink the economy, and that is not something that this government is prepared to do under any circumstances.

In 2003 this government undertook major reforms of the way in which we acquire and sustain defence equipment. In the defence white paper in 2000, we set out forward expenditure over this decade of an additional $28 billion. We also took Labor’s combat-ready troops from 42 per cent to 62 per cent. We have shifted about $900 million from the back end of defence operations to the front end of it—so-called ‘tail to teeth’. There have also been changes in defence procurement and the way that we buy our equipment. Malcolm Kinnaird and some leading businessmen and businesswomen provided us with advice on how we can better equip our Defence Force.

Since those reforms were introduced, with the Defence Materiel Organisation, the DMO, being a prescribed agency, we have over the last three years been managing about 230 projects. In fact Defence at the moment has $60 billion worth of projects on its books for acquisition and about $40 billion for sustainment or maintenance. In the three years from July 2003, 93 projects have been closed—51 of those projects have come in early and ahead of budget, saving the taxpayer some $95 million; and we have had 10 projects that have come in late, with a real cost increase totalling $131 million.

At the moment the performance of the Defence Materiel Organisation is such that over last three years the delays or slippages in projects have declined from 20 per cent to 25 per cent in 2003-04, and from 15 per cent to 20 per cent in 2005-06; and they are currently running at 10 per cent to 13 per cent. So the so-called figure of $14 billion actually relates to taking 13 or 14 per cent of a total of $100 billion of projects under management and sustainment.

It needs to be pointed out that private sector industry best practice is somewhere between eight and 10 per cent. Of course, in defence equipment we are not just talking about going down to the local Holden dealership and buying a car; we are talking about state-of-the-art defence capability and weaponry which needs to be used in some of the most extreme conditions we could possibly know. In fact, I point out to the House the article by Professor Henry Ergas, the Asia-Pacific head of the economic consultancy, CRA International, published in the Financial Review on 9 February this year. In relation to the so-called public debate on these issues, he said:

For one thing, they ignore the many successes—such as the continuing timely delivery of the new Abrams tanks for the army and the recent ahead-of-schedule delivery of a new fleet oiler for the Navy: good news is no news when it comes to defence projects.

He went on to say:

But the real problem is there is little or no appreciation of the complexities and subtleties entailed in defence procurement.

Buying advanced weapons systems is not like buying laundry soap or paper clips ... Contemporary weapons systems are among the largest and most sophisticated engineering projects our societies undertake, involving millions of interdependent parts, each technically demanding in its own right and then needing to inter-operate effectively and reliably under combat conditions.

It also should be pointed out that if you go to something which is still complex but much less complex than trying to buy, for example, a new joint strike fighter to last this country generations in terms of its air capability, road projects, on average, come in 15 per cent over budget. Of software projects in the corporate sector, 84 per cent are delivered either late or over budget and 50 per cent are abandoned altogether. Compare that with the fact that you have 20 million software code lines in a joint strike fighter. Further to that, 40 per cent of rail projects, according to research, come in over price and 50 per cent are subsequently underutilised. So, in that sense, comparing the intensity and the complexity of defence procurement with other things that happen in the private sector, I think Australia, particularly in the last five years, has been performing extremely well.

There are a couple of other things that the member for Hunter mentioned which I will just point out. Firstly, the new air combat capability is something that we as a nation need and must get right. The aircraft that we purchased to protect our airspace and to maintain control of airspace is one that will be required to last a generation. In 1991 the Royal Australian Air Force, through the defence organisation, solicited interest from manufacturers who make aircraft to have a look at the kind of aircraft that might be suitable for Australia. In 2002, the decision was made that the joint strike fighter was the correct aircraft for Australia. The new air combat capability is not just about acquiring about 100 joint strike fighters. This country needs about 100 aircraft and can afford to purchase, maintain and sustain for about a 30-year period a state-of-the-art aircraft capability.

It also depends on a number of other things. We have magnificent F111s, which we have been flying for 35 years. The risk of continuing to fly them beyond 2010 will escalate considerably and certainly, from 2012, unacceptably. Of course, there is also a cost associated with that in terms of the capability that these aircraft provide to us in the 21st century. It also requires the upgrade of our current FA18 Hornets, and the government is committed to that to ensure that those Hornets are able to keep flying throughout the next decade and meet and exceed the expectations upon them over the next decade. It also requires the acquisition of the airborne early warning commander control aircraft, the so-called Wedgetails, and the acquisition of refuelers and a ground based commander control system for air warfare.

The government made the decision to acquire a squadron of Super Hornets and to maintain them for the next decade, to ensure that under no circumstances the risk, which would be clearly unacceptable, of an air gap emerging in the early part of the next decade would not be covered. Not only was the government determined to see that that is the case; the Super Hornet, the FA18F, is a 4.5 generation aircraft. It will certainly more than exceed the requirements for Australia’s air combat capability, along with upgraded FA18s, over the next decade. It derisks the transition into the joint strike fighter. It is also an acquisition which Australia can afford because of the hard work of Australians and the very good economic management of this government over the last 10 years.

I might also point out that the reason we are having this is that the Labor Party does not support defence and does not support spending on it. The Australian National University survey of the Labor candidates conducted for the last federal election found that, whereas not one single Liberal Party or National Party candidate supported a reduction in defence expenditure, one in four Labor candidates did. I might also point out that in 1994, after 11 years in government, the Australian Defence Association made its assessment of Labor in government looking after defence. It said in part:

The number of full-time equivalent military personnel has been cut by almost 13 per cent, while regular force numbers were down 15.9 per cent. New equipment programs had been deferred and the then executive director, Mr O’Connor, said that the Australian Defence Force was being reduced to a ‘care and maintenance organisation as it had been in the thirties’. It is now incapable of meeting sustained low level commitments even at the level of non-violent UN peacekeeping tasks.

It went on to provide Labor’s scoresheet on defence as saying:

The ADF is simply unable to support the government’s foreign policy in Asia, much less being able to defend Australia. The ADF is just one more major national asset that was being sold off by the then government.

This government delivered a white paper in 2000. We are well in excess of the $28 billion. We said we would spend more on defence in the decade we are now going through. In the last 14 months the government has announced that an additional $30 billion or more will be spent on Australian troops, Navy and Air Force personnel and their equipment over the next 10 years to provide them with the equipment they need and deserve and to increase the size of the Australian Army.

In 1987 the Labor Party produced a white paper and said it was going to have a three per cent real growth in funding. Then, over the next three years, it cut the funding to defence. The reasons it did so are, firstly, the Labor Party does not support investment in defence and, secondly, the Labor Party was giving this country the recession that we were told by the then Treasurer, who became Prime Minister, we apparently all had to have.

The important thing is that Australian defence expenditure is on a solid footing. We have a 10-year plan, and it is rather extraordinary to have an opposition that criticises the government for spending more on defence than it forecast at the start of the decade—in a decade which has seen the most heinous terrorist and other attacks not only in the United States of America but also in Afghanistan, throughout the Middle East and in our own region. I think Australians will think very long and hard before they—(Time expired)