Nick Xenophon (SA, Independent) Share this | Hansard source

I rise to speak to the motion to take note of the Economics References Committee report, Future of Australia’s naval shipbuilding industry: Tender process for the navy’s new supply ships, which Senator Fawcett has just referred to. I was a participant in this inquiry. In fact, the terms of reference for this particular inquiry were proposed by me to the committee. Although Senator Fawcett did not participate in the inquiry, I commend him for his very considered and wise contribution. I have enormous respect and regard for the fact that he served our nation well in the Australian Defence Forces in the Australian Air Force.

Let us make no mistake about this. The decision made by the government on the basis of advice from the Defence Materiel Organisation not to even allow Australian companies to tender for the $1.5 billion supply ship contract is a disgrace. It does not make sense to me that they be excluded entirely. It does not make sense to me that Australian companies did not even have a chance to be part of a competitive tender process. It is a gobsmackingly stupid decision by the government.

Having said that, I have a lot of respect for the integrity, the decency and the competence of our Minister for Defence, Senator Johnston. I think he is a good man who is doing his best, but somehow this decision was made. I do not want to focus my remarks on Senator Johnston because I suspect, although I have no evidence for it, that there were other forces at play, that, in relation to this particular decision, the bean counters won, that the DMO won the day, and that really concerns me.

Let us put this decision in perspective. The Australian government is effectively saying that Australian companies are not worthy, are not good enough to put in a tender for a $1.5 billion contract—$1.5 billion worth of shipbuilding with a huge strategic, economic and social impact on this nation. We heard evidence at the inquiry from local shipbuilders. We heard evidence from the Australian industry that they could have been part of this, that they could have participated in this. It was put to me privately that, for instance, the Australian industry could have participated in this project with a joint venture with overseas shipbuilders—maybe the hull could have been made overseas, given the time constraints, but that the fit out, the technology, the electronics, the various capabilities within that vessel all could have been done here in Australia, so that a significant proportion of the $1.5 billion could have been spent here in Australia. We heard from Senator Fawcett about the potential multiplier effect. We heard from him that it could vary from 1.6 to seven in terms of the number of other jobs it could create, the economic activity that could drives, let alone the skills base that it could build and let alone the strategic significance of that.

Let us put it into perspective, Mr Acting Deputy President Edwards, as a fellow South Australian senator. We are in deep trouble in our home state of South Australia with the impending departure of General Motors Holden as an automotive manufacturer in South Australia. We are losing skills. I know of smart car designers and engineers who are already going overseas because the jobs will not be here in three years time. We know that in South Australia there are many thousands of jobs in the component sector, directly between 7,000 and 10,000 and indirectly in tier 3 and 4 manufacturers, thousands more—a huge economic impact on South Australia.

We know that unless we ensure as a matter of urgency that there is a sufficient fund to allow those industries to transition, to make other things, other than for General Motors Holden, for Toyota or for Ford in Victoria, as they do, there will be mass job losses; there will be a massive impact on the South Australian economy. I do not understand why the federal government, in addition to ripping $500 million from the Automotive Transformation Scheme as part of their election promise, took another $400 million from the Automotive Transformation Scheme in the budget. I put on notice to this government that I will oppose that resolutely, I will oppose it every way possible to ensure that those cuts do not go through. I am grateful for the discussions I have had with Senator Kim Carr from the opposition, whose passion for manufacturing is well known. We need to ensure that those cuts do not take place and we also need to ensure that ships are built in Australia, that submarines are built in Australia and, as much as possible, in South Australia.

Senator Fawcett's contribution made a very good point about the capabilities and made a very good point about the fact that when you are building something you build up the skills and expertise, that to judge our shipbuilding industry by the first ship or the first submarine that is built is not fair because that is not how it works in the real world. We know that expertise and efficiencies are built up as you go along. If there are labour practices that could be improved, if productivity gains are to be made, then so be it. I am all for that, but not to allow the Australian shipbuilders to even tender for a $1.5 billion supply ship contract is extraordinary. It is a vote of no confidence by the DMO, by the Australian government in our shipbuilding industry

I think the ordinary man or woman in the street, if they heard that, would be scratching their head and saying, 'Why wasn't Australian industry given a chance, a fair go, to even compete for this tender process?' I know that Warren King, the head of DMO, has been around for a long time, but I do not accept his rationale for the decision. I think the rationale could be summed up as: 'We didn't want to put Australian industry to the expense of putting in a tender process.' How insulting!

I think it is important that we put it into perspective as well that, for every dollar spent on local defence procurement, there is a huge impact on our local economy. A study done in the United Kingdom indicated that, for every pound spent on local UK defence procurement, there was a return to the exchequer, the treasury of the UK, of 37 per cent. That is the magnitude we are looking at. So even if a ship is a bit more expensive to build in Australia, the economic benefits are still overwhelmingly in favour of it being built here—let alone the strategic significance of it being built here. We are losing our engineers in the automotive sector. We are losing our expertise in manufacturing. If we lose our shipbuilding, if we lose our submarine capacity, it will be a disaster for Australian industry and for my home state of South Australia.

I thank, and acknowledge the role of, Chris Burns, the head of the Defence Teaming Centre in SA. He has been a champion for the local defence industry and has spoken fearlessly on behalf of local defence contractors. In fact, what he has said resonates across the country. He is a highly competent and articulate representative for the industry and his views ought to be heeded by government. His submission, and his evidence, was incredibly powerful, yet it appears that it has been ignored by government. What Mr Burns told the committee needs to be heeded. We need to look at having some certainty for the industry. If we do not, the valley of death will be upon us. We will lose thousands of jobs that we will never get back and we will lose that critical defence capability, which will be a national tragedy.

I seek leave to continue my remarks.

Leave granted.