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Defence Industry is a critical pillar in Australia's national security: speech at the ASPI Boeing 2017 National Security Dinner



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THE HON CHRISTOPHER PYNE MP

Minister for Defence Industry

Leader of the House

Federal Member for Sturt

SPEECH

ASPI-BOEING Speech

Defence Industry is a critical pillar in Australia’s national security

Canberra 23 March 2017

Check against delivery

My thanks to the Australian Strategic Policy Institute for hosting us this evening and to Boeing for their sponsorship.

ASPI is important. I really value the contribution it makes to the defence debate in Australia.

It provides a different viewpoint to the orthodoxy that comes out of Defence. This is incredibly valuable.

The institute is unique: it’s focussed; it doesn’t just look at international strategy but focusses on the details of military capability development.

So, my thanks to ASPI and Peter Jennings in particular.

Likewise let me thank Boeing for your continued contribution to Australia’s defence industry, and for this event.

It is a pleasure to have the opportunity to speak to you tonight - and it’s timely.

It is just over 12 months since the Turnbull Government declared its intention to reshape the Australian Defence Force and our local defence industry to guarantee the future security of the nation and support our economic prosperity.

The process began at the end of February last year, with the release of the Defence White Paper, the Integrated Investment Program and the Defence Industry Policy Statement.

Today I launch a further element of that process, the Maritime Technical College.

In the White Paper we acknowledged that our national security, our economic well-being - indeed, our very way of life - will be challenged more frequently and from a wider range of sources over coming decades than ever before.

We told the nation that the advantages we have historically taken for granted will be harder to maintain.

This is not mere rhetoric. The last twelve months have seen the acceleration of strategic changes around the world - a more assertive Russia and China; Brexit; North Korea’s highly dangerous nuclear and missile brinksmanship; a new broom sweeping through in Washington DC.

These developments put a premium on the need for Australia to be able to act for itself, and make national security decisions that maximise our strengths at a time of unprecedented global strategic change.

Some of these changes can be turned into opportunities for Australia - we can and must strengthen our alliance cooperation with America.

North Korea’s challenge to regional stability must be met with firm resolve.

We explained that as a government we had choices as to how we should respond - whether we would accept others determining our future security and prosperity, or whether we would ensure that we had the military capacity, the robust strategy and the well-deployed resources that we need to shape our destiny, and preserve everything we value - the characteristics that make us Australians and the envy of the world.

We chose the latter.

We chose to invest in the capabilities we needed to face the future with confidence.

We chose to spend 195 billion dollars over the next decade to underpin our national security over the next half-century.

And we chose to do something no Australian government has ever done before.

It is a truth acknowledged, but rarely stated, that national security and economic prosperity go hand in hand.

One is impossible without the other.

The Turnbull Government chose to make this link explicit.

This needs to be very clearly understood because it is the very essence of the Government’s policies.

The Australian defence industry is front and centre of this Government's vision for jobs and growth in the Australian economy.

This is where the jobs of the future will be created - and with them the broader growth that we need to ensure Australia maintains our position as an advanced economy among the top ranks of nations in the twenty-first century.

It is why I, as Minister for Defence Industry, will do everything in my power to develop and grow the sector into one of the most important parts of our economy.

For this mission to be successful it is important that this message resonates broadly. It needs to be heard outside of Canberra, in the think-tanks, the universities and research establishments, among industry and defence contractors.

Australians - outside the defence and government bubble - need to understand the linkage between national and economic security.

I call the Turnbull Government’s unprecedented investment in defence, our Great National Endeavour.

It involves and draws on everyone from the men and women on the shop floor, to the academic researcher, to the Chief of the Defence Force.

This investment is a considered and carefully calculated allocation of funds designed to provide the maximum return to the nation.

In the past we would buy defence equipment from overseas and take delivery a few years later.

Maybe some training and sustainment work would be done here, but the high quality and high value work would always be done somewhere else.

This can no longer be the approach we take.

Australia needs to be able to better express itself as a middle power in the world.

We do this through regionally superior capability, and by being able to deploy that capability where needed.

However, we can and should be able to do more. We should have the ability to stand on our own two feet. That means developing the ability to design, build, maintain and repair our own equipment. We need to grow our own defence industrial capability.

This is why the Turnbull Government has - for the first time - decided to link strategic and industrial capability.

When we are successful we will be better allies, even more serious adversaries than we are now and have a better ability to project our power in the region.

This will require a cultural change in the way Australia thinks about defence and particularly defence procurement.

The Turnbull Government is driving that cultural change, from the National Security Committee, on which I sit, to the media that reports the decisions and the effect they have.

We know that the long lead times on defence projects leave us with no scope for complacency.

We know that our regional strategic situation is getting more difficult and risky and that the time frames we have to prepare for our long term defence options are getting pressured.

We know that if a decision is ready to be made, it should be.

It’s why we announced in 2016 that the Turnbull Government will acquire twelve regionally superior submarines, all of which, from submarine number one to submarine number twelve, will be built in Australia, by an Australian workforce, using Australian steel.

Further, it’s why we brought forward the decision on the Future Submarine Combat System.

I also announce tonight that the Request for Tender for the Future Frigates programme will be brought forward and will be released to the three tenderers by the end of next week.

This 35 billion dollar project will create thousands of jobs in my home state of South Australia.

It will create knock on benefits up and down the supply chain across the country.

The Government is getting on with it, making good decisions as early as possible to give Australian industry and the ADF the certainty they seek.

Time and money wasted at the beginning of any project is always time and money that must be made up at the end.

That means we must get things right from the start.

The Turnbull Government’s goal is to oversee the development of a lasting, sustainable defence industry.

Success in this will not only be measured by whether equipment is delivered on time and on budget.

Rather success will be defined by whether our record 195 billion dollar investment is leveraged so that we are able to stand on our own two feet.

Take the Future Frigates Project - we have the capability in Australia to build our nine European designed frigates at Osborne in South Australia.

For our next fleet, we should aspire to not only build the frigates in Australia, but to design them here as well.

Our aspiration should extend to selling those designs overseas to our allies and regional partners.

This will allow Australia to move to a time where Australia’s defence industry can fill their books with export orders.

This will flow into the second key criteria for success. If we are successful many thousands more Australians will see the potential in the defence industry. I foresee a time where Australians will see the defence industry as a job for life, not for the life of a project.

These are not wild aspirations. The fundamental elements already exist in Australia.

Across the spectrum of technology we have demonstrated the capacity to develop world beating technologies.

The Wedgetail aircraft, which the Australian Government - in collaboration with Boeing - has developed is one of the most capable pieces of technology in its class, in the world.

The Bushmaster - Australia’s life-saving protected vehicle - is already being exported by Thales Australia. CEA created a phased array radar that is truly astonishing in its capability.

To build on this we must engage Australian industry as early as possible to ensure that they are in a position to engage meaningfully in tenders when they arise.

We have also started engaging with the large international primes earlier to make it clear that it is the Government’s priority that as much meaningful work as possible is done in Australia.

This will ensure that our defence dollar stays here and benefits Australia’s economy.

Creating that industry isn’t just about harnessing technology.

It’s about Australians; their skill and ingenuity, creating the jobs that will transform our economy and maintain and enhance our standard of living.

The greater the ability of Australian industry in meeting our capability needs, the greater the level of national sovereignty we enjoy.

Exports will be crucial to the sustainability of this new industry and its health and vitality.

Increased defence exports will be good for our economy and defence capability.

That is why beefing up our export capacity is one of my main tasks. Currently we rank fifth in the world for defence imports, but twentieth in the world for exports.

We will strive to reverse those numbers. The Turnbull Government will release a Defence Export Strategy later this year to plan, guide and measure defence export outcomes.

This will be in support of our economic, foreign and trade policy objectives and defence capabilities and national security goals.

The Defence Export Strategy will also help with the task of transforming Australian industry to guarantee future prosperity.

It will be complementary with work the Government has already done. In just over 12 months, the Turnbull Government has already made significant progress in building our future defence industry capability.

We have established the Centre for Defence Industry Capability, along with the Defence Innovation Hub and just last week I launched the Next Generation Technologies Fund.

These will help companies work with Defence, get that first foothold as a subcontractor, expand their operations overseas, see an innovative new technology through to procurement, or partner with academia and others to do some real ‘blue sky’ research.

While the former Labor Government did not commission a single naval ship for the six years they were in power, we have made major decisions on shipbuilding, and have commissioned 54 new vessels.

We have selected DCNS as the design partner for the Future Submarine.

South Australia has been chosen as the build site for Australia’s future complex warships and submarines.

The Offshore Patrol Vessels will first be built in SA before they move to WA when the Frigates start to be built

Two weeks ago, I re-opened a former mining factory as the new construction hub for the Pacific Patrol Boats which will be built by Austal in WA - scheduled to start in April.

Using the defence dollar to drive the take-up of high-technology and give new impetus to our advanced manufacturing industries is central to our vision of a resilient future Australian economy.

Ensuring the benefits of this expenditure are shared nationally is also essential.

We want to see the growth of a future economy where the impact of defence work is felt throughout Australian industry and in every corner of our nation.

Already, defence industry appeared in the National Accounts last quarter as being a driver of the economy.

This can only be built upon by strong strategic planning and government, defence, academia and industry working together in pursuit of a common outcome.

We want to see the development of an industry which is innovative, export-ready and - above all - self-sustaining.

This will not come about because of a ministerial decree.

So while we are already making the decisions necessary to grow industry capacity, we must also combine this with industry development.

The decisions we are making are not one-offs.

We need to always review and adjust our approach as we seek to meet our strategic needs.

This is what the Defence Industry Policy Statement provides us with - the framework to strategically plan and manage industry capacity and capability by Defence.

We have already placed a marker in the sand with the Australian Industry Capability Program - a program that aims to maximise Australian industry involvement in every defence acquisition project worth 20 million dollars and above.

We have strengthened the requirements on tenderers to provide Australian Industry Capability Plans that maximise Australian industry involvement, build our industrial base for long-term benefit, transfer technology to Australia and support export opportunities.

This must not be a box ticking exercise to be completed then ignored, but an essential element of the capability we seek.

The first and - one of the most significant illustrations of this - is the Request for Tender for the Offshore Patrol Vessels.

We want to ensure the tenderers’ responses maximise Australian industry opportunities through a local build using Australian made steel.

The Request for Tender requires each tenderer to develop an Australian Industry Capability Plan that maximises the opportunities for Australian industry participation.

These plans will need to include how they will transition their existing supply chains to Australian supply chains and how they will integrate local suppliers in their global supply chains.

This project, expected to create around 400 jobs, is the perfect practical demonstration of the Government’s defence industry policy at work.

While the Australian Industry Capability Program will focus on our capital projects, our work to establish the Defence Industry Capability Plan and Sovereign Industrial Capabilities sit at the centre of our ability to plan and manage the industrial base.

To know the critical industrial capabilities which need to stay under Australian control is equally important.

We intend to ensure that we start with a capability edge - a capability edge we can evolve swiftly and efficiently.

We will use the Defence Industrial Capability Plan to set out how Australian industry needs to grow and upskill to make the most of the opportunities on offer.

Investing in STEM skills - science, technology, engineering and mathematics will be vital - skills that will allow us to guide Defence’s future.

We will have an unprecedented opportunity for the Commonwealth, states and territories - along with industry - to work together to develop and implement a national Defence STEM skilling strategy to guide our future industrial capability.

We expect, with these initiatives the sector will grow and offer challenging, well-paid and constant jobs for decades to come.

We will engage and excite younger Australians with what they can be part of, create the buzz that will draw them into a career in the sector.

This brings me to the announcement of the establishment of Australia’s Maritime Technical College.

The College will have an initial investment of up to 25 million dollars.

The core responsibility of the Maritime Technical College will be to ensure that Australia’s future shipbuilding projects have the skills available when they are required.

The Government will release an open tender for the College in the coming weeks and the College will start operation on 1 January 2018.

By necessity it will have to be national in scope. No one state can do this by itself. It will need to work with, rather than compete with, existing institutions like the Australian Maritime College in Launceston.

The Maritime Technical College will be focused on increasing the size of the workforce available. It is critical that the number of workers available expands. We cannot have each project cannibalising neighbouring industries.

To ensure that the College grows the pool of workers, and is national, it will take a hub and spoke approach.

Students could be undertaking training through the Maritime Technical College which is for shipbuilding in South Australia, but actually be studying at Queensland University of Technology or at a TAFE in Shepparton or Bunbury.

Initially the College will be required to ensure that the Offshore Patrol Vessel project has sufficient workers available when construction starts in 2018.

Following this, the College will focus on providing adequate workers to the Future Frigates project which cuts steel in 2020. At its peak the Future Frigate project will need more than 2500 skilled workers.

For many workers this will require re-training from other industries, particularly the automotive sector. For others this will mean going through a full apprenticeship.

It is also incumbent on the Government to ensure that there is a change in attitude towards naval shipbuilding and the defence industry generally.

After years of Labor neglect and high profile closures across the country, many Australians think the naval shipbuilding industry is slowing down.

Nothing could be further from the truth. It is the opposite.

Australia’s naval shipbuilding industry is on the cusp of one of its most significant growth trajectories.

The College and the Government will work closely together on an extensive and long running communications campaign to adjust these attitudes.

As the Turnbull Government embarks on the largest ever renewal of our defence capability, there will be opportunities across the board to assist with design, manufacturing, testing and sustainment.

Twelve months ago the Government committed close to 1.6 billion dollars in defence industry and innovation programs over the next decade in the Defence Industry Policy Statement.

The significance of such a large investment in building industry capability and competitiveness should be clear.

It is ample demonstration that the Government believes in investing in the sector so that the greatest possible amount of our broader investment in defence is spent in Australia.

This is a crucial element of our commitment to national security.

Ladies and gentlemen, I said earlier that the government was fundamentally interested in driving cultural change as a way to solidify defence reform.

It’s one thing to tinker with the wire diagrams of organisational change but altogether harder to shift long standing cultural behaviours about ‘the way things are done around here’.

One area where I think we need to work harder is in changing how the defence organisation and industry interact.

At least everyone understands the concept - that there is a need for industry to be drawn closer to discussions with government and defence about how to extract more innovation, agility and cost savings from the defence-industry relationship.

I’m really pleased to hear both industry and defence leaders tell me they see ‘green shoots’ in defence and industry interaction.

But I can’t deny that I also hear the opposite from time to time. That sometimes it is more difficult for the two groups to have open and frank conversations than it should be.

To support this discussion I have asked ASPI to develop a report for me on how to promote a closer, more open, more innovative discussion between defence and industry.

I look forward to receiving it in the second half of this year.

There will be unprecedented opportunities for Australian industry across the Integrated Investment Program over the next 10 years.

The Australian Defence Force of 2025 will be very different from today’s because of the decisions we have made in the Defence White Paper.

Aviation capabilities such as the next-generation F-35A Joint Strike Fighter, the, Poseidon aircraft and the Triton unmanned aerial surveillance vehicle will be entering service. The Growler Electronic Attack Aircraft is entering service.

Our first Future Frigate will have entered service, as will a number of Offshore Patrol Vessels.

The final design of the Future Submarine will be complete, and construction will be underway.

Infrastructure investment at Osborne and Henderson will largely be complete.

And in the land domain a modernisation of Army capability will be well on its way to completion with the delivery of the Hawkei, a new medium and heavy truck fleet and replacements for the aging armoured personnel carrier entering service.

Our Australian Defence Force will be underpinned by world-leading intelligence, surveillance, cyberspace and electronic warfare capabilities.

We will also have seen huge growth in Australia’s defence industry, to take its rightful place as one of the key underpinnings of the Australian economy.

The Centre for Defence Industry Capability to encourage businesses that have not traditionally considered themselves part of the defence sector or considered pursuing defence work will take advantage of the opportunities now on offer.

Indeed, the best innovations in our future defence capability may come from companies or sectors which have not yet considered a future in defence - or where we have not seen the potential synchronicities.

We will secure a sustainable, long-term future for the Australian shipbuilding industry and thousands of new jobs for Australians.

It will be a different kind of role, one underpinned by technology and a new partnership between government and industry.

It is a revolutionary and extraordinary change to the defence sector.

The Turnbull Government is hard at work on our plans to defend our nation and secure our future prosperity.

I encourage all of you to join in this exciting nation-building task our Great National Endeavour.