Rex Patrick (SA, Independent) Share this | Hansard source

I move:

That the Senate take note of the minister's failure to provide either an answer or an explanation.

I did inform the minister's office, or raised a question in the minister's office, this morning in relation to these questions. It indicated that I might exercise my rights at the end of question time. I'll just let the chamber know what this question is about. It's an important question about defence industry. I have four questions. The first is: what is the current status of the mapping or matching of industry capability to defence requirements? This is something that Defence had indicated they were undertaking, and it was merely a question to try and find out what the status was. I also asked a second question: how is the department capturing or documenting this? The third question: Dr Sawczak advised that the government was working with EBS on a feasibility study to enhance the mapping. What is the status of the feasibility study? Again, that's quite a reasonable question. The final question was reminding the department or the minister that Ms Kate Louis, as the first assistant secretary of defence industry policy, had previously stated to the Senate committee that such work was being done in 2016 and 2017, so I just wanted to know what happened with the work and the associated plans and what the output was of that work. These are important questions that go to defence industry and the use of Australian industry in our defence projects. It's much, much easier for the department to operate if it has a prior understanding of exactly what industry is able to do.

Now, comfort is the enemy of progress. What we've been seeing for far too many years is comfort, and there shouldn't be. The government needs to wake up in relation to industry capability from not just a defence perspective but a national resilience perspective, and I'll talk briefly about that. World War II forced us to do this. In late 1942 the government was considering postwar reconstruction, and we had a division of government called the Division of Industrial Development. It was aimed at developing and expanding secondary industry in postwar Australia in areas that included rural reconstruction; the conversion of munitions and armaments factories for other industrial uses; and encouragement for an Australian car-manufacturing industry, workforce training and employment opportunities, electricity supplies, fuel production and industrial technology. That was what we were doing at the end of World War II—in fact, well before it ended—to make sure we had a plan coming out of it.

Now we have COVID. The government has done a reasonably good job, or it did a reasonably good job at the start of COVID. I won't talk to the vaccine rollout and the lack of quarantine facilities, but a reasonable job was done at the start to protect Australians. We did call on Australian industry to assist us in that regard, making sure that we had medical supplies and things like PPE. Sadly, all of that emphasis seems to have tapered off. The government's approach to Australian industry has been demonstrated by the department. It seems to be that industry should be standing by ready, willing and able should government decide to engage them. That often happens when we've got a foreign supplier that gets us into a mess or when it's an emergency, but there's a general belief that Australian industry will be ready and waiting and that they'll be there when we need them. That's an unfair proposition, and it's also not a reality. There's a saying: use it or lose it. If we don't have our industry, if we're not engaging our industry, then of course it's going to taper away and it's not going to be there when we need it.

Whilst I can use defence as a reference point, the problem is not strictly limited to defence. We have the largest island nation and yet we have no merchant navy. That has a corresponding impact on shipbuilding and sustainment. We have tier 1 contractors that are all foreign owned. All those large projects that we're developing under the extra $10 billion of money that has been provided by the government in the budget has to go to foreign owned companies, because our companies, the Australian owned companies, are tier 2 companies. That simply means that we're handing over those functions to foreign companies. We have dwindling offshore oil and fuel refining. We can see that listed on the Notice Paperthe need to weigh in and support our refineries. Even when we asked the four remaining refineries to stay in Australia, only two of them took up the offer. We will be dealing with that, but we shouldn't be in this problem. We're also reducing textile production. Last year when I asked Defence, 'Where's the map—where's the thing that tells us how we integrate our industry capability into our defence capability?' we were told that there was work going on but that they don't have one.

We can look at things like the Commonwealth Procurement Rules. They were changed in 2016. They require officials to achieve value for money. Of course we want that. But for procurements above $4 million—or $7.5 million for construction services—we also require officials, in accordance with the rules, to consider the economic benefit of the procurement to the Australian economy. This hasn't been happening. Even since the August 2020 guidelines were issued, it still doesn't seem to be happening. What we need to be doing is making sure, whenever we buy something with Australian taxpayers' money, we look to the economic benefit that comes from selecting a particular entity for doing that. That includes looking at how many jobs they might create. How much investment might they make here in Australia? What are the supply chain effects of going with a particular tender? These questions are required in our rules, but are not followed through. One of the reasons I think they're not followed through is because departments like Defence simply don't have the tools to be able to work out the trade-offs between taking one particular option versus another option and understanding what the economic benefit of that is, because the government simply is not tooling them up correctly. What we shouldn't be doing is just saying, 'What is the cost, what is the price.' We should be saying, 'What is the value of going with a particular contractor,' but we're not doing that.

We have a requirement to have Australian industry participation plans developed. The AIP Authority—it's under the Australian Jobs Act—basically needs a revolving door for the number of people who pass through that office. It's a continual churn. We do have Australian industry capability plans, but the reality is that these plans are not being implemented and enforced. I've seen the plan that was offered up by Naval Group, then DCNS, for the future submarines. It was actually a good plan. It involved partnering with ASC. It involved establishing a whole bunch of centres of excellence. It involved developing technologies here in Australia. These are exactly the sorts of things we want to do with an Australian industry capability plan. And yet, we find what was contracted by Defence was nothing along those lines. They did everything they could do to avoid ASC, and they did everything they could to avoid contracting in the very things that DCNS promised. I also note that, in that particular contract, even though—I've seen this in the documentation, where Naval Group did offer metrics. They offered 50 per cent. We didn't contract that. We have recently had to retrospectively contract in 60 per cent. That's a huge problem. You can't ask people to front up with an AIC plan, assess them on the quality of their AIC plan and then just put it in the back drawer.

One of the problems I think we have is Defence people concentrate on Defence. They don't think about Industry. Recently we tried to have Industry driving some of this in the Defence space, and Defence pulled it back in under their wing, I guess so that industry players didn't have to be or wouldn't be loud. There's a whole range of things we need to be thinking about in relation to this. We've just seen, with the Boomeranger contract, Australia contract out a whole bunch of sea boats when that's something we can do here in Australia. Indeed, under World Trade Organization rules, because it's defence related, we can overtly state we are going with an Australian company, and yet we don't seem to do that.

I'll tell you the story of how uncoordinated we are. We had a company, an Adelaide company, called Ezy-Fit procure—part of the procurement was paid by them, part of it was paid by the department of industry, to buy machining tools that would allow Ezy-Fit to build periscopes for the future submarines, and, indeed, to assist with sustaining Collins. What happened then? Defence contracted the job overseas. So, the taxpayer lost, and the company lost. They had bought an asset that could no longer be used.

We need people to focus on these sorts of matters. There are many, many things that we can do at the end of COVID. I'll just turn to an executive order signed by the US President on 25 January this year on ensuring the future is made in all of America by all of America's workers. Let me read from that executive order, just one paragraph because it's enough:

It is the policy of my Administration that the United States Government should, consistent with applicable law, use terms and conditions of Federal financial assistance awards and Federal procurements to maximize the use of goods, products, and materials produced in, and services offered in, the United States.

There's leadership from the US President, signing into effect an executive order which must be complied with.

We still have this view here in Australia that we should simply let the market decide. What we have happen here is that the Australian government—and I'm not being critical of what we do here—imposes upon Australian companies minimum wages, leave loadings, holiday pay, long service leave and superannuation. We make them comply with environmental laws. We make them comply with occupational health and safety laws. We make them comply with a whole range of quality regulations. We do that, and that drives cost up. I don't say that's a bad thing. I think that ends up with Australians producing quality products. But then, when the government goes out and procure things, it looks at the price coming in from Vietnam or China or some other foreign jurisdiction where those particular requirements are not mandated. It's not an even playing field, and yet the doctrine of competitive advantage gets played out all of the time on the other side of the chamber. It is not a level playing field. It is not a level playing field when we deal with procurements that involve Chinese companies, because often they are well and truly backed by the state. So let's not pretend this theory of competitive advantage applies.

I've stood up and talked a little bit about Australian industry. It's really, really important. It's important for our resilience and important for our national security. Yet, when I ask a simple question—and remember that I ask these questions not for me but on behalf of my constituents—about what the government is doing to map industry capability to our defence needs, I can't get an answer in a timely fashion. Firstly, that worries me about what's happening behind the scenes, because they ought to be easy answers to come to. But, secondly, it is disrespectful to my constituents, who have a right to know, through Senate processes, what the answers to their questions are.