Christopher Pyne (Sturt, Liberal Party, Leader of the House) Share this | Link to this | Hansard source

I ask leave of the House to make a ministerial statement relating to the defence industry.

Leave granted.

Richard Marles (Corio, Australian Labor Party, Shadow Minister for Immigration and Border Protection) Share this | Link to this | Hansard source

Hear, hear.

Christopher Pyne (Sturt, Liberal Party, Leader of the House) Share this | Link to this | Hansard source

That didn't seem very enthusiastic, Richard!

Mr Marles interjecting—

I rise before the House today as the first Minister for Defence Industry, to provide an overview and to update the House on the Turnbull government's historic investment of $195 billion over the next decade in Australia's defence capability.

Particularly, I would like to outline how this government is ensuring that Australian industry can grow and continue to play a vital role in our defence future.

Defence industry is our national endeavour. Our mission is simple: to guarantee our national security and ensure that Australia can play its part in protecting peace in our own region, in Asia, in the Pacific and in the Indian Ocean; and to use the defence dollar to drive local jobs growth and a high-technology, advanced manufacturing future for Australia. A vibrant, thriving and growing defence industry sector does not just buttress our nation's defence; it also provides and supports jobs for thousands of Australians. As the defence industry grows, new jobs will be created in the economy, from naval architects and electrical engineers to plumbers, construction workers, shop assistants and labourers.

A strong Australian defence industry is key to our economic prosperity, growing and using the skills and innovation that characterise our defence industries to work to form the basis of the smart, high-tech advanced manufacturing of the 21st century that the Prime Minister so often talks about.

As he said last year, 'What we are doing in defence industry is completely transformational.' He said, 'Australia is entering the single biggest period of defence construction in its history.'

We recognise the creative, innovative and agile companies in Australia who engage with our various defence projects either directly or indirectly.

Since re-election in July 2016, this government has hit the ground running.

Honourable members: Hear, hear!

Thank you. I thank my colleagues for their support.

Land 400 downselect

Within days of taking the portfolio, BAE Systems Australia and Rheinmetall were shortlisted to compete for the Land 400 Phase 2 project. This iconic project will acquire 225 combat reconnaissance vehicles and help us win the land battle. The total acquisition cost is up to $5 billion.

In August the Commonwealth signed contracts with the two short-listed tenderers to take part in the risk mitigation activity. The test and evaluation program is now underway and it will see vehicles offered by the two companies undergo blast and ballistic testing to make sure they are good enough to transport our military personnel.

Hawkei

Thales is building the Hawkei, a next-generation protected vehicle, which represents an entirely new capability for the Army, providing a similar level of protection as the Bushmaster at about half the weight.

Late last year the project reached a major milestone—the handover to Defence of the first of 10 vehicles to roll off Thales's production line in Bendigo.

These pilot Hawkei vehicles pave the way for full-rate production in 2018 and represent a triumph of both defence capability and the country's burgeoning defence industry.

Hawkei production will involve around 170 jobs in the Bendigo region alone.

It is expected approximately 60 new jobs will be created in Thales's supply chain.

The Turnbull government is delivering after the $1.3 billion contract was signed with Thales in October 2015 to produce 1,100 Hawkei vehicles and more than 1,000 companion trailers.

Land Forces c onference

I have made visiting key defence industry hubs a priority since taking on this role.

I have already visited Henderson, Brisbane, Newcastle, Bendigo and Melbourne, and plan to visit other locations including Burnie and Bankstown. In August, I was hosted in Cairns by my good friend the member for Leichhardt—who is never short of coming forward asking for defence projects in his electorate—who took me to see the shipbuilding facilities at Norship Marine and Tropical Reef Shipyard.

It is a highly optimistic sector at the moment, and this was particularly clear at the Land Forces conference held in Adelaide in early September.

This conference was by far the largest that they have ever held.

It brought together 13,500 military leaders from 22 different armies and innovative defence companies representing 23 countries, and they had over 500 industry exhibitors who showcased their world-class technology.

It was exciting to see so many Australian companies connecting with defence.

It was also good to see the member for Corangamite there, who is interested in advocating for jobs in her electorate, particularly in the Land 400 space.

Future submarine project

Acting on the findings of the 2016 Defence white paper the Turnbull government has determined that Australia needs 12 regionally superior submarines with a high degree of interoperability with the United States—craft that will provide our nation with an effective deterrent and an ability to play an active part in antisubmarine warfare operations in our region. In September we signed the first contract ahead of schedule with DCNS to mobilise the resources needed to develop our regionally superior Future Submarine and commence its design. At the same time we announced Lockheed Martin Australia as the combat system integrator—again, ahead of schedule.

On 20 December 2016, the intergovernmental agreement between France and Australia was signed, which defines the principles, the framework and initial means of support and cooperation between the two governments—again, ahead of schedule. As a crucial part of the process we have already commenced work to maximise the opportunity for Australian industry involvement in the project and early planning for the construction of the submarines here in Australia.

Future frigates and offshore patrol vessels

The government has also announced plans to build nine antisubmarine warfare frigates. It is set to start construction in Adelaide by 2020, which will cost $35 billion. The future frigate and offshore patrol vessel programs will directly create over 2,500 jobs for Australians and will indirectly support the jobs of many thousands more. The $3 billion to $4 billion program to construct 12 offshore patrol vessels will begin in Adelaide in 2018 and then transition to Henderson in Western Australia.

The OPV project remains on track, with the request for tender being released on 30 November 2016. This will see the designers team up with Australian shipbuilders to try and win this iconic project. We are delivering on our commitment—spending more money locally where possible, boosting growth, creating jobs and giving our military the best equipment we can.

Workshops

We are committed to giving Australian companies as much opportunity as possible to be part of these future defence projects. Over the past few months and for many more months to come, local companies are being given the chance find out more about the opportunities available during a series of Land 400, future frigates and offshore patrol vessel workshops being held nationwide, including in the member for Swan's electorate. He in fact opened that on 2 November. Thousands of Australian small and medium-sized enterprises have registered to participate in the Defence facilitated showcase workshops—a chance for Australian suppliers to get their slice of a very big pie. It is critical that we provide Australian companies with opportunities to enter this supply chain.

Naval shipbuilding plan

The Turnbull government will release a naval shipbuilding plan imminently that brings together all of the elements of the government's continuous naval shipbuilding strategy—the first in Australia's history. The government's unprecedented commitment to continuous naval shipbuilding will support the strategic and capability needs of Defence; provide a viable, permanent shipbuilding industry; provide certainty for the shipbuilding workforce; deliver value for money; build commercial confidence; and promote the use of global best practice. Defence is conducting a strategic review of the workforce, skills and infrastructure needs at Osborne and at Henderson to inform the naval shipbuilding plan's development.

The government is committed to maximising Australian industry involvement in the naval construction programs for future submarines, future frigates and offshore patrol vessels. I look forward to revisiting Austal's shipyard at Henderson in the near future with the member for Canning to see the rollout of Australian defence capability. I also acknowledge that the member for Canning, as a former serviceman and probably the most recent serviceman in the parliament, has a deep interest in defence industry opportunities for his region and for his constituents. He is not here. Never mind.

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

He's working hard.

Christopher Pyne (Sturt, Liberal Party, Leader of the House) Share this | Link to this | Hansard source

He is a very good fellow.

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

I will pass on your comments.

Christopher Pyne (Sturt, Liberal Party, Leader of the House) Share this | Link to this | Hansard source

Please do.

ASC s eparation

To that end, in mid-October the government also announced the structural separation of ASC into three entities. These three new companies will support the key capabilities of shipbuilding, submarine sustainment, and infrastructure. The separation of ASC will deliver a more flexible approach to managing the investment required in shipbuilding infrastructure to support the government's historic continuous shipbuilding program. The new submarine sustainment and shipbuilding companies will continue ASC's important role in the sustainment of the Collins class submarines and the finalisation of the air warfare destroyers respectively.

The creation of these three new companies follows a strategic review of the ASC, which was conducted in 2015. Work has already begun on the separation of ASC into the three new companies, with full separation expected to be completed by June 2017.

International visits

In my first international visit as the Minister for Defence Industry, I visited the United States and the United Arab Emirates. I met with key defence officials in Dubai to highlight the capacity and capabilities of our defence companies. In the US I had the pleasure of meeting with the key defence companies operating in Australia as well as Pentagon officials, including the then US Secretary of Defense, Ashton Carter, to sell the merits of Australian defence industry.

The recent US election has seen a President elected who during the campaign committed to a massive expansion of around half a trillion US dollars to their defence budget. This result could bring with it an expansion of opportunities for Australian defence companies.

Joint Strike Fighter maintenance and sustainment hub

Following my visit to the US, I was pleased to announce on 7 November that Australia had been successful in the first round of assignments for work maintaining the componentry of the global fleet of Joint Strike Fighters. Successful companies include HI Fraser, which is located in the member for Mackellar's electorate, and Rockwell Collins Australia, which is located in the member for North Sydney's electorate.

The award of this contract acknowledges that Australia has the skills base and capacity to take on one of the most technically complex and expensive defence projects ever produced, as a maintenance and sustainment hub for the Joint Strike Fighter aircraft operating in the Asia-Pacific. This places Australia as the regional hub for maintenance, repair, overhaul and upgrade for the Joint Strike Fighter fleet, potentially bringing hundreds of millions of dollars and supporting hundreds of Australian jobs for decades to come.

Just this morning I had a phone call from the newly appointed Secretary of Defense, James Mattis. In the call I congratulated Secretary Mattis on his recent appointment and noted his keen interest and personal history working with Australia. I expressed my enthusiasm and strong desire to work closely on our shared defence interests as a key ally of the United States. Secretary Mattis reiterated his strong support for the Joint Strike Fighter program as a key strategic capability for the United States and allies across the globe.

We talked about the fact that the price for the lot 10 of the Joint Strike Fighter has been recently announced and has dropped below $100 million for the first time. For Australia this is hugely significant and represents a 25 per cent reduction from the price of the fighter in 2014, showing the program is on track in terms of delivery and efficiency.

Poseidon a ircraft

On 16 November, I, along with the Prime Minister and the Minister for Immigration and Border Protection, took delivery of the first of 12 P-8A Poseidon aircraft. The Poseidon is at the cutting edge of military technology. These aircraft will support a full range of tasks, including antisurface and antisubmarine warfare; maritime and overland intelligence, surveillance and reconnaissance; electronic support; as well as providing a search and rescue capability. Operated from RAAF base at Edinburgh, this will create more than 35 highly skilled jobs in South Australia.

Centre for Defence Industry Capability (CDIC)

The government is also committed to working with industry to build our innovation potential and ensure Defence maximises its opportunities to develop cutting-edge technologies. In December last year I opened the Centre for Defence Industry Capability, which has been funded at $230 million over the decade, a close collaboration between the private sector, Defence and AusIndustry. It is headquartered in Adelaide. The CDIC is designed to have a national reach to ensure flexible access for industry across Australia.

At the same time I opened the Defence Innovation Hub. The new $640 million innovation hub will bring together Defence, industry, academia and research institutions to collaborate on innovative, creative and cutting-edge technologies that can deliver better Defence outcomes.

We will also invest $730 million over the next decade in the Next Generation Technologies Fund (NGTF). The NGTF will provide opportunities to better position Defence to respond to future strategic challenges and develop the next generation game-changing technologies and capabilities to enhance national security into the future. I will be making more announcements about this new funding in early 2017.

Closing

As you can see, we are getting on with the job. This government has put the defence of our nation and the building of our defence capability at the very centre of our national policy agenda. We are determined to use the Defence dollar—$195 billion over the next decade—in building capability, to assist in transforming our economy, driving and growing local jobs.

In spending this it is critical that we get maximum value for money, that we learn from the mistakes of the past. Projects like the Air Warfare Destroyer, which was taken back from the brink by this government, must not be allowed to happen again. In the future we will use world's best-practice manufacturing and shipbuilding techniques to ensure success.

This will mean that we will not just hope that our processes and systems work, but rather that they are tried and tested. This will be through utilising a range of cutting-edge techniques including 3D planning, building a prototype ship of the Future Frigate and ensuring that the workforce are trained to the highest standards.

The government will do this while meeting the time frames that we have committed to and creating the jobs that we promised to deliver. The Offshore Patrol Vessel project will start in 2018 at Osborne in South Australia before it moves to Henderson, WA when the Future Frigate project starts. It will create more than 400 jobs. We will 'cut steel' on the Future Frigate project in 2020, as we promised, which will create 2,000 jobs at Osborne. The Future Submarine project will start in the early 2020s and will create 2,800 jobs—5,000 jobs at Osborne alone.

After years of Labor's neglect, we recognise that Australian industry is crucial to maintaining and developing the future ADF. Good relationships with industry are fundamental to developing a sovereign defence capability and that is why we are seeking to build closer ties between the military and industry—this will provide innovative solutions and capabilities to the ADF, and it really is happening. The reports from the industry and from Defence show there is a completely new buzz in the defence industry in Australia.

Currently 25,000 Australians are employed in the defence industry, and there are over 3,000 small to medium enterprises all around our country—they provide essential capability, services and support to the ADF. So we recognise the importance of this national endeavour. There is no time to waste in implementing it, there is no opportunity that should be ignored and there is no limit to what the Australian defence industry can achieve with the right business framework and appropriate government advice and support.

This government under the leadership of Prime Minister Turnbull will ensure that the growth of the Australian defence industry as a national enterprise in providing defence capability for the protection of our nation also becomes one of the most important industrial sectors in our national economy.

Richard Marles (Corio, Australian Labor Party, Shadow Minister for Immigration and Border Protection) Share this | Link to this | Hansard source

I thank the Minister for Defence Industry for giving his ministerial statement. Labor's attitude, when it comes to national security and when it comes to defence, begins with a spirit of bipartisanship. Labor, like the coalition, passionately believes that the first priority of any government is to provide for our nation's security and to provide for our nation's defence. This is an area of public policy that should be above party politics.

There is much in what the minister has said which does indicate good news—for example, the minister spoke about opportunities that may come to the Australian defence industry through increased expenditure under the new American administration. I wholeheartedly agree that there are opportunities in relation to that and the Australian defence industryshould pursue them. We would work with the government in seeking to facilitate that. Indeed, what the minister has just reported in terms of his conversations with Secretary Mattis around American support for the future of the Joint Strike Fighter is good news, as is the specific news about Australia's defence industry role within the production of the Joint Strike Fighter.

Having said that, it does not mean by any means that Labor provides the government with a blank cheque when it comes to this area of policy, both in terms of strategy and in terms of defence industry. We do not stand in blind agreement with the coalition on all matters and we would not be expected to. We have an absolute obligation as an alternative government to hold the current government to account, to ask questions and to challenge, where appropriate, the decisions that government makes. Whilst there are obvious differences between Labor and the coalition in other areas of public policy about how Australia should be governed, national security is not one of them, but it is an area where, of course, detailed attention needs to be provided. A critical example of this is that Labor does support the government's target of increasing Defence spending to two per cent of GDP. That is an important commitment that has been made on a bipartisan basis.

The coalition at times likes to play politics with Labor's support for that target. They often talk about the spending of the Labor government in 2012-13, but what those comments always miss is that in 2002-03 under the Howard government, when Australia was actively engaged in military actions overseas, defence spending was just 0.02 per cent of GDP higher than the year they like to criticise. Furthermore, they often miss the fact that defence spending under Labor was at 1.93 per cent of GDP in 2009-10—higher than at any time during the Howard government and higher than it has been under the current government. In fact, the 2009-10 figure of 1.93 per cent was the highest spending level since 1994-95, when defence spending by the Keating Labor government was at 1.96 per cent of GDP.

I am sure that the minister has enjoyed taking us through his list of greatest hits over the last 15 minutes or so, and indeed there is obviously good news in much of what he said, but I would like to remind the House that the self-congratulatory trip down memory lane only tells us perhaps one side of the government's recent history in relation to defence industry. The truth is that the government has also overseen a litany of disasters when it comes to defence procurement. There was a failure, for example, to invest in Australian defence industry jobs, resulting in the loss of over 1,500 jobs at shipyards across Australia. Workers in South Australia and Victoria well understand that fact. A failure to provide Australian companies with the opportunity to compete for the contract to build the Navy supply ships by conducting a limited tender process with two overseas companies is an example of that. There is the failure to deliver the enterprise level naval shipbuilding plan that this government promised would be released with the defence white paper. We saw a former defence minister famously claim that he would not trust ASC to build a canoe, and in just over three years we have already seen in this area of public policy three defence ministers in the portfolio and indeed if you include those who have held the positions of assistant minister with responsibility for defence industry or defence personnel there has been a total of eight ministers in what should be a stable area of government but in fact has been a revolving door. Now we have a bizarre situation where we have two defence ministers at the same time. The government has not, or perhaps cannot, give us the policy reasons for the split in responsibilities—I think everyone understands the political reasons but we have never seen a proper policy articulation of why we now have two defence ministers.

As an aside, Labor's bipartisan approach to policy in respect of defence does go to the critical review that the government undertook, which was the First Principles Review by the first defence minister, Senator Johnston. It was a significant review and the outcomes of that have the potential to represent a sea change within the culture of Defence. The First Principles Review undertook a comprehensive assessment of the way in which the defence establishment operates and made a number of recommendations for significant organisational change. We fully support the work and outcomes of that review and commend the government for undertaking it. One of the key mantras of the review, though, was 'one defence', so it is ironic that with a mantra of one defence the Turnbull government in fact has two defence ministers seeking to ensure that culture of one defence. Labor has a very traditional view in respect of how this portfolio should be handled, and we will, if elected to government in the future, have one defence minister reflecting the key principle of one defence.

Finally, we saw this country's most significant and expensive procurement decision, in respect of future submarines, being tossed around the government party room in order to save the former Prime Minister's job. Specific to the Minister for Defence Industry's area of responsibility, the Integrated Investment Plan released by this government has less detail in it than the Defence Capability Plan released by the former Labor government, and it gives no indication of how the government seeks to change Australian industry involvement in defence procurement. Over the last three years Labor has been making a case about the strategic importance of having a strong domestic defence industry for Australian innovation, technology and jobs but meanwhile we have seen in the Turnbull government in large measure a government that has been running a policy of domestic neglect.

In large measure, the Turnbull government has spent the past three years focussing on the acquisition of off-the-shelf defence equipment and has shown little regard for Australia's local defence industry. Australia accounts for 10 per cent of US foreign military sales and is the seventh largest defence importer in the world. The Turnbull government has been happy to spend this investment overseas, instead of leveraging it to grow the Australian defence industry. It is ultimately an indictment of the Turnbull government's commitment to Australian defence industry that, at the same time as local shipyards are shedding jobs, the government has contracted Spanish shipyards to build the Navy's replenishment vessels. It is all very well for the minister to talk about the rhetoric of supporting local defence technology and jobs, but at the end of the day the government and the minister will be judged on what is actually delivered.

Labor has a strong history of developing Australia's defence industry and capacity. We have a strong contemporary history when it comes to submarines and the current existing class of submarines, the Collins class. It was the previous Labor government, addressing the concerns regarding the readiness of the Collins class submarines, that initiated the Coles review. The recommendations that came from that review are recommendations that we implemented. The implementation of these recommendations saw the former Labor government double the sustainment budget for the Collins class, which has led to four of those boats being in the water today and five crews being ready. It has led to Kim Beazley, a giant of Australian defence policy, saying last year:

The Collins class submarines are a great Australian engineering accomplishment and to go from no background in submarine production to building one of the best conventional submarines ever produced was a genuine national achievement.

Mr Beazley is absolutely right. It is worth remembering that all of that occurred against a backdrop of pretty serious criticism from the coalition of the time, but we do not hear that criticism from the coalition today in respect of the Collins class submarines.

Labor has always supported the Australian defence industry and recognises that sovereign capability is critical to our national interest and national security. Nowhere is this more apparent than when it comes to Australia's Future Submarine Program. The future submarine project is as defining a piece of materiel acquisition as we have ever had in terms of the future shape of the Australian Defence Force. As such, it is the biggest and the most important strategic challenge the Australian defence industry and the Australian defence establishment face today. There has been no bigger procurement in terms of both scale and cost, with 12 submarines budgeted at this point at more than $30 billion.

This will be the largest defence project in Australia's history and will procure a capability that will be critical to our future national security, yet it has been the subject of political meddling under the Abbott-Turnbull government. Expert after expert described the competitive evaluation process dreamt up by the former Prime Minister and former Minister Andrews as woefully inadequate and rushed. Warren King, the defence department's former head of procurement, is on the record as saying that another 12 months of analysis was needed for the government to have sufficient information to make the best possible decision. The Abbott-Turnbull government, in truth, has bungled this decision from day one. That this decision ended up being tossed around the government party room as I described earlier in the context of a leadership contest at the beginning of 2015 was ultimately a total disgrace. To see our nation's single biggest military defence procurement being tossed around in order to secure votes in respect of a single individual's career is breathtaking. It was ultimately an affront to the Australian public. It fundamentally disrespected the defence industry and our Defence personnel, but more importantly it undermined good public policy.

Let me be clear: Labor does unreservedly support the government's commitment to build all of these submarines in Australia. This decision is critically important for Australian industry. However, in the context of this commitment, there are number questions now about exactly how this will play out. Recently, for example, questions have been raised about the training capacity and the staffing capacity which exists in Australia to fulfil the Collins upgrade and sustainment program. These issues are intimately connected with the future submarines project, which will not be completed in terms of the building of the submarines until the middle of this century, and in terms of the life of the future submarines it will be well into the latter part of this century. This of course means that the Collins upgrade itself, and indeed the sustainment of those boats to keep them relevant, contemporary and safe, is a critically important issue. From the mid-2020s through until the 2040s, the maintenance of Collins is going to be an expensive undertaking, and we need to ensure there is absolutely no capability gap in the ultimate transition between Collins and the future submarines.

The truth is this: what is being planned now provides a capability which will not come into being until the early 2030s, a long time into the future, and which is a very expensive procurement. It is going to go over the course of a series of Australian governments. That is the reality. We absolutely support the procurement of these submarines, as I have said, but future Labor governments—indeed, future governments of all persuasions—will have an obligation to actively manage this project and the ongoing procurement of these submarines. I want to say now that we will do so on the basis of seriously going about these questions from the point of view of the best public policy for Australia, not just the best politics of the particular moment in time. We will bring to bear some very important principles. One is that it is critical that in the development of the future submarines project that there is no delay. It is already a very long procurement process. It is absolutely critical that there is at the heart of this procurement the development of Australian jobs, Australian industry and a sovereign capability to build submarines in this country.

In conclusion, I want to reiterate the support that Labor has for the growing of our defence budget to two per cent of GDP. I want to reiterate Labor's support for the acquisition of the capabilities that have been outlined by the minister and indeed in the government's defence white paper and the industry capability plan. I want to reiterate Labor's support for Australian jobs in the procurement of these capabilities and, in doing so, the building of a vibrant Australian defence industry which has the capacity in the future to do more export around the world. Also, importantly, I want to acknowledge that the defence industry is a high-tech industry and that it has a role in boosting technology throughout our country, and that we will seek to make sure that it plays that role as a future Labor government. We absolutely support the important place it has within our national economy.

Labor, in opposition, will continue to support the government in respect of the increase in our defence spending in the build-up of the Australian defence industry, but in the process we will hold the government to account at every step along the way to make sure that the acquisition of appropriate capability, the creation of jobs in this country and the development of a high-tech industry is ultimately achieved.