Sandy Macdonald (NSW, National Party) Share this | Link to this | Hansard source

My question is to Senator Minchin, the Minister representing the Prime Minister. It involves an area in which I know he has more than a passing interest and concerns the announcement this morning of the design and/or builder of the new amphibious lift ships and air warfare destroyers. Will the minister advise the Senate of how the government is building Australia’s naval capacity and how this will benefit Australian industry?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Sandy Macdonald for his question and acknowledge his fine record in the Defence portfolio. The government announced this morning the details of the largest acquisition of new naval capacity in Australia’s history. Not only will the five major new ships give the Navy a greatly enhanced capability both in military and humanitarian operations but they also represent a great opportunity for Australian industry right across this country. After a very careful three-year selection process, the government has finally chosen the Spanish Navantia F100 design as the next generation of air warfare destroyers. The F100 is the right ship for a number of reasons: it is an existing design that has proven itself already in interoperational exercises with the US Navy; it incorporates the Aegis combat system; it has the speed, range and endurance to meet the Navy’s needs; it has 48 missile cells; it has sufficient helicopter capacity; and, importantly, the F100 can be delivered at least four years earlier and at a significantly cheaper cost than the alternative.

The cost of the project is nearly $8 billion, which is greater than the initial indicative cost. I am very conscious of ensuring value for money in Defence acquisition, but in this case I am satisfied that the work undertaken by DMO in analysing this acquisition does demonstrate it is a fair and accurate cost. I want to congratulate DMO on the way in which they have approached and managed this project so far. Defence projects do increase in cost. That is inevitable when you are dealing with cutting-edge technology, as these ships will have. As we had previously decided, the shipbuilder for the AWDs will be ASC in my home state of South Australia. The project will ultimately create more than 1,500 shipbuilding jobs in Adelaide. But, equally, with 70 per cent of the hull block and module fabrication to be undertaken across Australia, another 1,500 jobs will be created in the rest of the country. The proposed Navantia ship design gives the Navy the best capability not just for military operations but also for very important humanitarian and disaster relief work, which these ships will be engaged in.

The government also announced today that the preferred tenderer for the amphibious ship project is Tenix. I congratulate Tenix, a great Australian company, with their shipbuilding based in Melbourne. That two-ship project is valued at $3 billion and, like the AWDs, has gone through a very thorough costing assessment process. Value for money is being achieved through a partial overseas build but the final consolidation and all the so-called smart end of the work will be done in Australia—in this case, principally in Melbourne, but about $100 million of combat system and integration work will occur in Adelaide. For both AWDs and amphibious ships, the building of the ships domestically will mean that Australian industry has the skills and capability to provide the through-life support for the entire life of these great ships.

This is an $11-billion investment in our Navy’s infrastructure and is fully funded through our defence capability plan. With strong surpluses, we do not have to go into debt or deficit to fund this infrastructure. But, as the Labor states have shown through their recent state budgets, especially New South Wales yesterday, Labor governments simply cannot budget in a disciplined way. The Labor state governments are collectively borrowing some $70 billion over the next five years to make up for their neglect of infrastructure over previous years. We have two important roles: managing the economy and providing for national defence. It is because our budget is strong, the economy is strong, we can make these very significant investments in naval infrastructure to ensure strong naval capability for decades to come.