Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I inform the Senate that the President has received a letter from Senator Moore proposing that a definite matter of public importance be submitted to the Senate for discussion, namely:

"The Abbott Government's failure to honour its election promises to support Australia's Defence manufacturing industry by excluding Australian ship building companies from tendering for two new Naval supply ships and refusing to commit to building 12 Future Submarines in Australia; and

The need for the Government to keep its election promises and take action to avoid sending thousands of Australian ship building jobs overseas and putting at risk Australia's strategically vital ship building industry".

Is the proposal supported?

More than the number of senators required by the standing orders having risen in their places—

I understand that—

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

They are not going to make you defend this are they? How embarrassing!

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Order! The sooner I can complete my spiel, the sooner you can get into the debate. I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I move:

That, in the opinion of the Senate, the following is a matter of urgency:

The Abbott Government's failure to honour its election promises to support Australia's Defence manufacturing industry by excluding Australian ship building companies from tendering for two new Naval supply ships and refusing to commit to building 12 Future Submarines in Australia; and

The need for the Government to keep its election promises and take action to avoid sending thousands of Australian ship building jobs overseas and putting at risk Australia's strategically vital ship building industry.

I rise to support this motion because this government is putting the Australian shipbuilding industry in peril. Australia's shipbuilding industry is a vital strategic asset for our Navy and for our country. The shipyards in Newcastle, Melbourne, Adelaide and Perth form the backbone of this vital industry. It would be grossly irresponsible for any government to take decisions that put these vital assets at risk, but that is what this government is doing.

The Abbott government have excluded Australian companies from tendering to build two replacement supply ships for the Royal Australian Navy. They have excluded them from bidding at all. They claim that Australia cannot do it. The minister claims that our shipyards and their workers are not good enough. It is clear that the government is no longer happy just talking down our economy; they are now talking down entire industries. At the last election Labor proposed, at a minimum, a hybrid build—and potentially a complete local build—of these two important vessels as a key plank in our plan to bridge what has come to be referred to as the 'valley of death'. We knew from advice that we received in government that this was feasible and that work could have begun in the first quarter of 2016 if the government had followed Labor's plan. But rather than acting quickly after coming to government, those opposite have sat on their hands for nine months. We announced a plan in the election campaign that you could have started after the election. But no. Nine months later, we had the minister pretending to the Australian public that he had a plan. In March, this minister boasted on the front page of The Australian Financial Review that he had a plan; he had a plan to fix the valley of death. That is what he said on the front page of the Fin Review in March of this year. Minister, you do not fix the valley of death by sending Australian shipbuilding jobs to Spain or South Korea. But that is what this minister announced a week ago. No Australian companies are allowed to bid; we are building the ships in Spain or South Korea. The minister even went so far as to declare this an 'exciting' announcement. He was excited for shipbuilding workers in South Korea and Spain but he just could not give a proverbial about Australian shipworkers.

Let me tell you, Mr Deputy President: I do not think that shipping high-skilled jobs to other countries is exciting. The Labor Party does not think it is exciting, and the Australian public do not think it is exciting. This is not just a bad decision; it is another Abbott government broken promise. Let me recap the history on this. Before the election, on 9 August 2013, now Minister Johnston went up to Newcastle in election campaign mode, and he went on the local ABC radio station in Newcastle and said:

I get really fired up when I find us giving away our manufacturing base in the Defence space to foreign manufacturers, it's just not on.

Yet here he is, nine months later, doing the exact opposite. He is excluding Australian businesses from tendering for a major shipbuilding project. He says one thing before the election, misleads voters in Newcastle and all around the country. This is just another Liberal lie. It is another broken promise.

I would love to say that that was the only lie the Liberal government has been engaged in recently. But, just before the election, the Liberals made another promise. On 8 May 2013, Senator Johnston went to ASC shipbuilding yard in South Australia—and I am willing to bet that Senator Birmingham was standing next to him when he said the following regarding Australia's future submarine project: 'We will deliver these submarines from right here at the ASC in South Australia. The coalition today is committed to building 12 new submarines here in Adelaide.' That is what he said—I am willing bet he was standing next to a couple of those senators opposite—in May last year. And yet yesterday, when I asked him to repeat that promise in this chamber, he ran and hid. He refused to do it. He refused to commit to 12 submarines, and he has refused to commit to having them built in Australia. That is another Liberal lie; another Liberal broken promise.

Australia needs a domestic shipbuilding industry. Over the next 30 years the Australian Defence Force needs 48 ships at a cost of $60 billion to $80 billion, with an additional $180 billion to $200 billion for the through-life support that these ships will need. Among the vessels we need are submarines, frigates, patrol boats, mine hunters, survey vessels and heavy landing craft—and do not tell me we cannot build these in Australia. The Anzac frigate project was an outstanding success—built in Australia with world-class ships delivered to the Royal Australian Navy. At present we have three air warfare destroyers and two landing helicopter docks under construction. These are the most sophisticated ships built or assembled in Australia.

Simon Birmingham (SA, Liberal Party, Parliamentary Secretary to the Minister for the Environment) Share this | Link to this | Hansard source

Yeah, who started that?

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Do not believe the minister when he claims that they are failing projects. The AWDs remain within their funding envelope. The LHDs are on track to be delivered in 2014 and 2016. The Labor government invested heavily to provide industry with the means to recover the skills lost during the Howard years and to steadily improve productivity. But this government wants to junk this investment and these jobs.

I will take that interjection from Senator Birmingham because it is true, Senator Birmingham, that the Howard government—on one of the very few occasions—had a forward vision on this. They accepted that we needed to start the program; they accepted that that would be because we were starting from scratch and we had to upskill an entire sector so we were ready for the future. All those ships I talked about were—to be fair to the Howard government—a legacy. But what we have seen in the last few weeks is endangering thousands of jobs. All that extra investment, all those extra costs that were incurred to get us up to world-class standard were all thrown out the window because the minister got rolled in cabinet again. In March he said, 'I have got a plan to fix this.' He could have just done what Labor called on to happen and was planning to do after the election—that is, start the project. Nine months were wasted, the minister got rolled and jobs were lost. (Time expired)

Simon Birmingham (SA, Liberal Party, Parliamentary Secretary to the Minister for the Environment) Share this | Link to this | Hansard source

The sheer front, the sheer hypocrisy of those opposite seems to know absolutely no bounds. Senator Conroy came in here hectoring and lecturing, and I am sure Senator Carr in Senator Gallacher will do likewise. We heard the hysteria of Senator Wong yesterday on this topic. For six long years the government of those opposite did nothing to help naval capability in this country and did nothing to actually sign any contracts or develop any further delivery of work to Australia's shipbuilding industry. We had nothing from the government of those opposite and now they come in here and talk about what has happened in nine months.

The so-called 'valley of death' that may exist for Australia's defence industries is entirely the making of six years of failure by the Labor government to make a decision, sign a contract or fund a project. It was entirely the fault of those opposite. If you listened carefully to Senator Conroy's nine minutes, you would have realised that, in that entire nine-minute period, never was he able to talk about a project that was initiated, started and with work commenced by the Labor government. I issue this challenge to further Labor speakers in this debate: tell us, in the naval shipbuilding space, of the projects that your government initiated, funded and contracted. Name one. Please, during this debate tell us where you started work like the Howard government started the work on the AWDs. Those opposite were too damn busy defending each other from their own attacks within to worry about the successful and effective defence of the country.

Let us look back at the record of those opposite because, when Senator Conroy wants to talk about promises, I remember promises. I remember 19 August 2007 when then opposition leader, Kevin Rudd, went to Adelaide and promised that there would be submarines built by the ASC with construction to begin in 2017. In 2007, he said:

Starting the process this year will guarantee continuity of work for South Australia's defence industry and those employed in the sector. It will also provide a big boost to South Australia's growing knowledge and skills base and its reputation as the defence state.

Well, I am sure if the project had started after the election of Mr Rudd as Prime Minister in 2007, those words may have come true. But, of course, it did not start then, did it? Far from it. Another two years it took until 2009. What did we then get? We got a promise to a commitment for 12 submarines. That was it, no funding, no detail, no contract. After two years of hard work by that Labor administration, they had gone from Rudd's election promise where work was going to start in 2007 to two years later in 2009 and they could now say it would be 12 submarines. That was all. And there was a promise that there would be initial operating capacity by 2025-26.

Then what happened? Another few years rolled forward until last year, 2013, when, because of the complete inactivity of the government to fund any work on developing those submarines, they had to push back the date for the operating capability by another four years. So the 2007 promise saw nothing happen until 2009 and then saw nothing happen until 2013 and then again got delayed further. Of course, nothing ever happened. What the Labor Party did for naval shipbuilding in this country during six long years was zero, zip, nada, nothing at all. The challenge remains to those opposite to come in here and demonstrate that they delivered anything.

Senator Conroy had the gall to come in here and say that at the last election Labor proposed something. Well, for God's sake. At the 2010 election Labor proposed something and did not deliver; at the 2013 election Labor proposed something and did not deliver. Why on earth should we believe that they would have delivered had they actually been re-elected in 2013? Because for the previous six years, they had delivered absolutely nothing at all. In fact, in the defence space, what had they done? They cut $16 billion from the defence budget. The share of GDP spent on defence fell to 1.56 per cent—its lowest level since 1938. They want to talk about investing in defence industries but, when they were in government, they drove investment in defence down to its lowest share of our economy since 1938.

In 2012-13 the government of those opposite made the single largest cut to the defence budget since the end of the Korean conflict. They cut 10½ per cent from the defence budget. There is little wonder that they were not able to make any decisions to fund shipbuilding, because they were cutting the budget and cutting the funding that you need to commit to make those decisions. They had no budget there to be able to make decisions or commitments. As a result of their disregard, it was not just the submarine projects that suffered the fate of deferral and inaction and an inability to be delivered. Overall some 119 different Defence projects were delayed, 43 different Defence projects were reduced and eight were cancelled altogether.

This is the chaos that Senator Johnston as Defence minister in our government inherited in the Defence portfolio. It is the utter chaos and mismanagement that saw funds bled from Defence, projects deferred—and continued announcements, of course. The announcements never stopped. They were always very good at going out and doing press conferences and making announcements. They could just never deliver on them at all.

We are getting on with two tasks here. Firstly, we are delivering for Defence—for their capabilities and what they need for their naval capabilities in the future. Secondly, we are trying to put naval shipbuilding in Australia back on a sustainable footing that we hope and trust can be a sustainable footing for the long term, not just the type of ad hoc approach that reflects the decision making of those opposite.

In terms of delivering for Defence, and for the Navy in particular, that has required us to make some difficult decisions. The truth is that the Navy needs new supply vessels, they need them urgently and they are of a size and scale that cannot be cost-competitively delivered in Australia. The estimates are that for the two vessels that the minister announced we would procure—decisions that could have been taken by those opposite but were not—it would have cost an additional $300 million to $500 million for just those two vessels alone to be built in Australia.

Knowing that that is a difficult decision—and I would rather, of course, have seen them built in Australia if it were cost competitive to do so—we have committed to try to get the Australian naval shipbuilding industry back in a competitive position so that the overwhelming majority of future work may be bid for and hopefully won by Australia's naval shipbuilding industry. That is why some $78.2 million has been brought forward to begin preliminary engineering and design work so that future frigates may be built in Australia. It is why we have given a commitment to construct more than 20 Pacific Patrol Boats here in Australia. It is why we are working hard to get the AWD contract under control so that ultimately the delivery of those air warfare destroyers will be a success and will be something that the ASC and the other partners in that contract can use to earn support for winning future contracts and ensuring they get work in Adelaide and elsewhere around Australia.

So, as a government, we are working to a very clear plan. Unlike those opposite, we have made decisions. Unlike those opposite, we have funded those decisions. Unlike those opposite, we will enter into contracts to deliver upon those decisions. Unlike those opposite, those working in the naval shipbuilding industries and those companies involved in those industries can see a clear plan and a clear pathway from this government, which is working through towards the delivery next year of our naval capability plan as part of the new Defence white paper that will give certainty for the long haul. They can have certainty that when this government says it will do something and says it will build something, we will follow through and we will deliver for our Defence industries, unlike the six years of malaise they suffered previously.

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

I only have three minutes to make a contribution on this very important issue because I want my colleague Senator Madigan to speak on behalf of his state of Victoria. In relation to my state of South Australia, this is a bad decision made by the government. I am sick of the blame shifting and the finger pointing as to who should have done what or who could have done what over the last few years and over the last nine months of this government. The fact is this: two supply ships will not be built in Australia. It could have avoided the valley of death. As decent and as good and as capable a Defence minister as Senator Johnston—who, I believe, is a good man grappling with a very difficult portfolio—is, I believe a fundamental mistake has been made by the government.

To say, as Senator Birmingham has said, that we cannot build ships of this size and scale cost-competitively in Australia when we have not even allowed the Australian industry to tender for these ships is a fundamental flaw in the argument of the government. This is what I do not understand: I do not understand why you will not even give Australian industry a go. I understand that the ASC shipbuilding in Adelaide was in a position to deliver these ships in cooperation with an overseas shipbuilder to assist where necessary. I believe they have the capacity to do so, yet they will not even have a chance to tender for these ships, and that is something which baffles me. If, at the end of a tender process, it was simply too expensive or not cost competitive, then I think that Australian manufacturers could wear that. But they were not even given an opportunity to fight for Australian jobs and Australian industry.

Why is it important in my home state of South Australia? It is this: we are losing Holden. We are losing one of the last original automotive manufacturers in the state. We are facing a critical situation in South Australia with manufacturing jobs, and these are good jobs in shipbuilding. There is a transference of skills. There is a transference of decent jobs where people can put food on the table for their families and have good productive jobs. We are losing even the chance to tender for those jobs.

I must say this: I do not have an axe to grind against the Treasurer, Mr Hockey, but what he said last year when he basically taunted Holden—'Are you going to stay or are you going to go?'—was reckless. It was reckless because it destroyed a bipartisan consensus for our auto industry in this country, and I believe it hastened the demise of Holden. Now we are faced with a critical situation where our shipbuilding sector is not even given an opportunity to tender for these two supply ships. The valley of death is a valley of destruction of jobs, it is a valley of destroyed lives, it is a valley of losing skills in this country that we will never, ever get back again. That is why I urge Senator Johnston—a decent man with a good heart—to reconsider this decision as a matter of absolute urgency before it is too late.

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

I rise to make a contribution in support of this resolution. I have just a couple of points very early on. Senator Macdonald, in an earlier contribution today, complained about the lack of honesty and the fact that the legislation did not make a lot of sense. I think that could be appropriately applied in this case to the contribution from Senator Birmingham. The facts are that successive governments have accepted that the building of these ships would involve a premium over and above building them overseas. It has been the decision of successive governments to build shipbuilding capability in Australia—to get the people, train them, get the experience up and build a decent product.

In an earlier contribution on this matter, I raised an issue of the Australian National Audit Office report on this capability. I also raised at the same time the fact that the embargoed report had been written about profusely in The Financial Review the night before, and I inquired as to whether Senator Johnston or his office had anything to do with that. No answer was forthcoming on that. But it is really interesting. The simple facts are that there is an early release of an audit report and a dark cloud of 'blow-out in productivity', and all of a sudden the whole world thinks that the workers are not going to work on time; the workers are not doing the work on time; the workers must be badly trained; or there is some other inherent lack of capacity in the workforce. But when you actually read the audit report you realise that nothing could be further from the truth. Nothing could be further from the truth. The workers who are doing these jobs—these highly paid, high-skilled, extremely worthy jobs—are not at fault in any of this.

The minister's office is not leaping to the front saying what the core of the problems of productivity in this sector is. But, if you just glance at the audit report, you see that the total number of construction drawings for the Hobart class DDG was 2,132, and the total number of revisions issued at October 2013 was 6,071. In this argument, what has been missed is that no-one is seeking to address the core problem. There have been multiple revisions of the plans after the work has been done, and in some cases—about 20 per cent of the time—the work has had to be redone. That has got this aura of: 'We can't do it. Australians can't make it.' Well, we can make it. Very clearly we can make it. And, if you are doing something two or three times and you only have a 20 per cent loss of productivity, perhaps that is not a bad effort.

As Senator Xenophon has rightly said, we are not even getting a chance to tender, despite all of the lessons that have been learnt in this process; despite successive governments, going back a long way, backing this industry to give us the capability, to give us the skills; and despite a very complete audit report highlighting the deficiencies. I accept that design is part of productivity. I hasten to say that you cannot label a workforce as unproductive when it has to do something twice or three times because there has been a change in design from the Spanish Navantia corporation. When are we going to get down to brass tacks here?

Senator Birmingham will go over, ad infinitum, five or six years of Labor's allegedly poor decision making. That is not relevant, nine months after the coalition winning government, to those people who work in this industry. It is not relevant to those companies seeking to make an investment in this industry. What is relevant is a government that actually allows the industry to compete. Why would they not be allowed to competitively tender? They may have the answers to some of these problems that have come up in the Australian National Audit Office report. They may well have learnt very good and valuable lessons, so those mistakes will not be replicated in the next round. But they will not be given a chance.

What is it about this government that it so dislikes manufacturing? What is it about Senator Birmingham in particular, who shows no empathy for the workers in his own state? I think one of the things you need to do in the Senate is bring your home game. You have to bat for your state. You have to bat for South Australian jobs—or, in Senator Carr's case, Victorian jobs—and, as a senator, for all Australian jobs.

But Senator Birmingham comes in and gives us about seven minutes of his time, not talking about the way to fix the problem, the way to go forward and actually get good Australian well-paid jobs and successful companies into our economy to build and grow our own home states. He talks about the alleged failings of the previous government, and then he spends a little bit of time saying, 'We have to make some tough decisions.'

You have to make tough decisions, but at least tell the truth. Are you changing the philosophy that successive governments in this country have had about building Defence capability, about building Defence warships, about building submarines? Are you throwing all of that out? Is the work of your predecessors, the contribution of those South Australian senators of the conservative variety who really did get this, who really did want to make South Australia the Defence state, all to be thrown out the window, Senator Birmingham, because you need to make a hard decision?

All government decisions are essentially hard decisions, but they should be made in the clear, cold, hard light of day, taking into account all of the things that need to be addressed. And very clearly what needs to be addressed in this arena is this audit report. It would seem to me that it is heavily weighted to those a bit further up the food chain. The problems are coming from people a little bit further up the food chain than the actual workers in South Australia, who go to work, do a damned good job, really take pride in their work, want their company to be successful, want their workplace to grow and want to achieve an outstanding result for Australia's Defence forces. The disgraceful fact that they are not even allowed to tender for additional work is almost beyond the pale.

Not to give Senator Xenophon too much credit, but he probably is a little bit on the mark here. Have they such a hatred for manufacturing that they told GMH to go away and now they are not allowing good Australian workers, good Australian companies, spread right across this country to even tender. They are not even allowed to put in a price. These are people who have actually done good work, who have learnt valuable lessons, who have only one motivation and that is to be successful at the job they are doing, in a successful company, getting a successful result for the defence industry.

This government should be ashamed of itself. It will not even allow people to tender in those circumstances. The workers in these places will hear Senator Birmingham's contribution, but they will treat it as nothing more than a speech about partisan politics. It does not address the issue. Look at the audit report, fix the problems and build these ships here.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

I rise to address this urgency motion, in three areas. One, to just rebut some of the political points that have been made by speakers opposite. Second, to talk about some of the areas of shipbuilding where this coalition government is already taking steps to put shipbuilding onto a sustainable footing. Third, to talk about some areas of defence reform that we need to be looking at to ensure defence industry is on a sustainable footing into the future.

Firstly, I go to the political points. We have just had a speech from Senator Gallagher where one of his main points was that Australian industry did not get a chance to tender. Can I take him back to JP 2048, phase 3 of the Amphibious Watercraft Program, which was the only naval construction program for ships that the Labor government, under Prime Ministers Rudd and Gillard, approved. And that was sent to Spain. I deliberately asked in last estimates whether ASC and others had the opportunity to be consulted, to talk about it, to put in a bid. Senator Gallacher is walking out; he does not want to hear this. What was confirmed by ASC was that they had no chance, that work was not tendered in Australia. The ALP sent that work to Spain, as opposed to allowing Australian industry to pick it up.

The other side of the argument, which the ALP do not like to recognise, is that when we realised a new icebreaker was required, they let a tender. In this case they put out a RFT and it included Australian industry. Two companies came back and said, 'Yes, we can build the ship, but it will be built overseas.' The Labor Party never even got around to funding it but nor did they require that that ship be built here in Australia. My rebuttal of the key argument around the fact that we have not allowed Australian companies to tender is not supported by the ALP's own actions when they were in government.

I hear Senator Xenophon's view around the valley of death and the impact on my own state of South Australia. I, like other senators here from all sides, am a passionate advocate of seeing good, high-skilled jobs retained in South Australia in manufacturing, as well as in other areas. Again, in estimates I asked the head of ASC about the time line for the project of their warfare destroyer and looked at the peak of the workforce, which is on us now—almost past it—and asked about the decision points that led to that.

In 2005 the Howard government chose ASC to be the builder of the air warfare destroyer. In 2007 Navantia was chosen to be the designer of the ship. We are now in 2014. If we are concerned about a valley of death in 2016-17, then decisions had to be made years ago, not months ago. That is one of the key flaws in the argument from the opposition on this matter. Both speakers today have talked about the fact that the coalition has now been in government for nine months, so why isn't there follow-on work? It is because the time required from decision, and commitment to funding, to having people actually cutting metal and building ships is measured in years. Take the air warfare destroyer as an example. That is between five and seven years.

Why has the government taken the decision that the best way to get Australia onto a sustainable footing for shipbuilding is to look at the Future Frigate program. It goes to the issue of productivity. Unlike the comments from Senator Gallacher, the criticism is not of the workforce; it is of the enterprise as a whole. Whether you look at the UK, the US or Australia—even the Anzac program, which was correctly mentioned before, was very successful in Australia—the first ship is horrendously expensive. It happens in the US, in the UK and here. Over time, with enough ships in the fleet, you bring down that cost, which is why DMO, when they put together the Air Warfare Destroyer program. set a target of 80 man-hours per tonne, which is still 20 above world's best practice, but that was the target they set for the program. So they realised it would take some time to bring that target down. The issue with short builds—just one-off ships or maybe two—is that you do not get the chance with a new design to bring that target down. With Anzac, we did. Over time we brought that down and Anzac ships were being produced at a productivity that was better than world's best practice, better than benchmarks. That is where we can also end up with the air warfare destroyer.

The government, by bringing the $78 million forward for engineering a design work, is allowing us to look at the option of taking the Navantia hull, which is being used for the air warfare destroyer, originally designed for a vessel to be a subhunter and, once that design work is done, to look at the integration of an Australian system, CEA's CEAFAR radar, and at the option of integrating Australian design and supported ship control systems like those produced by Saab in South Australia. Then we can start bringing forward the manufacture of hull blocks, because the hull is the same design as the platform. That means that we can continue to draw value from the investment we have made in infrastructure and, more importantly, in the skills of the workforce not only those on the production line but in the design area. By building on that air warfare destroyer program for future frigates, over time we will drive that productivity right down and, like the Anzac class, to world's best practice benchmarks. That is how we put Australian shipbuilding onto a sustainable footing. Setting people up to fail and costing the taxpayer a motza in the meantime is not a way to gain the confidence of the public, the media or the parliament around shipbuilding in Australia.

How we move forward for defence as a whole I believe fundamentally comes back to rethinking how we look at defence industry. For far too many years across both sides of politics defence industry policy has sat separate to defence's capability planning. Defence, in their capability development manual and procurement approach, look at what they call the fundamental inputs to capability—the people, the organisational structures, the training, the equipment and the doctrine that is required. One of those fundamental inputs is industry. The way that we will put defence industry onto a sustainable footing is not seeing it as a job-creation place, not seeing it as something that is there for its own benefit; we will put it there by saying, 'What does defence capability need over time?' Then when we take first and second pass decisions to government, built into those cases should be a clear articulation of the skill sets within industry, the manufacturing and repair capabilities within industry, that we need such that government procurement decisions are informed as opposed to saying, 'We want this particular piece of equipment and we will decide down the track whether Australian industry has a role.' That should be fundamental part of our decision process as to what we will buy and how we will buy it.

One of the critical things to enable that to work is to overcome the objections of the central agencies when they consider best value for money, which at the moment looks at an off-the-shelf price and compares that to the price of the enterprise here in Australia. That is not an appropriate comparison. If you look at the work of people like Professor Goran Roos, it is very clear on a global scale—from work on things like the Anzac project, the Collins here in Australia, or shipbuilding in the UK, or KPMG in Canada, who have done good work—that for every dollar spent on a defence project, particularly something large like shipbuilding, the taxpayer, over a 10-year period, gets a substantial return. So the true value-for-money comparison has to be done on the 10-year return to the Commonwealth and to our society—all those spill-over effects or second-order effects in terms of training, other industry opportunities, improvements in quality. That is the comparison.

When you put that together with a defence capability plan that sees industry as one of its fundamental inputs, we then start to get to a place where we will have a procurement plan, a defence capability plan, that will look at sustaining the skill sets that Australia needs—not only to make sure that the men and women in our defence force have the very best capability but also to make sure that we retain the sovereign capability we need to make the decisions that are in Australia's best interests about our defence equipment and the skills of our defence and industry personnel.

John Madigan (Victoria, Democratic Labor Party) Share this | Link to this | Hansard source

What we see today is what we see every day in this place—the blame game unfolding before us and two sides attempting to outdo each other on who is less responsible for the damage being done to our nation and, in particular today, to our shipbuilding industry. I am not speaking in favour of this motion; however, the government should not take that to mean that I support the lack of clear vision they seem to have for our shipbuilding industry. The fact of the matter is that this motion attempts to chastise the government for not building these vessels in Australia in order to protect our industry from the valley of death. However, my understanding is that building two supply vessels will only go a little of the way to saving the shipbuilding industry in this country. As much as I believe that we must build the future submarines in Australia, the way this government is going it will not be them who even makes the decision. Submarines are still years away.

What we need to be talking about today are other potential options—bringing forward the Future Frigate project, replacing the Armidales with steel-hulled boats built in our shipyards. We need to be talking about how our shipbuilding industry can be competitive on a world scale so we can also export. A strong shipbuilding industry does not simply rely on a strong skills base. We need to make sure that energy is affordable as well and that infrastructure at the yards has been upgraded and modernised to meet the requirements of the new multibillion dollar projects that are before us.

So, as much as I think today's motion is a cheap shot across the bow, I believe that this government must take all meaningful steps to help our shipbuilding industry to grow so that, when the time comes for the building phase of the submarine project, Australia will seem the most likely sensible option. What we need are long-term strategic decisions to be made and commitments with a 10-, 20-, 30-, 40- or 50-year vision—vision that was displayed by Ben Chifley with the Snowy Mountains project. We need to think of the abilities and skills that have been built up at the naval dockyards at Williamstown over generations and at the Australian Submarine Corporation in Adelaide. We need to be thinking about upgrading the slipways. Infrastructure such as this takes years to build and to design. It is not just about skills, as in the tradesmen; it is about the benefits to real people, communities and the nation. (Time expired)

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I support the motion. I am concerned that the government's decision with regard to the procurement of these two vessels entirely from overseas suppliers without Australian industry being given the opportunity to even tender, suggests an approach to industry policy which we have seen reflected in so many decisions by this government to date. The most powerful comparison of course is the government's approach to the automotive industry, but we have also seen it in the food processing industry, in other transport areas and we have seen it in the statements by the Treasurer about his view that support for building industry capabilities is really a version of corporate welfare. We have seen it argued by the Treasurer that the government's job is not to level the playing field. There is almost an acknowledgement that the playing field is not level, but the government's attitude—the attitude of the North Shore Sydney bankers that run this government—is that governments should not intervene to level the playing field.

We have, essentially, an approach to industry policy which demonstrates a profound ignorance of the way in which manufacturing works and the requirement to sustain manufacturing capabilities in an advanced industrial country such as ours—an attitude that is not held by any other advanced industrial country. These are not the rules the Americans use. These are not the rules the Europeans use. These are not the rules the Japanese use. These are certainly not the rules that a country like China would use. We have this abstract notion that, somehow or other, Australia will not be able to be competitive or be capable of providing these industrial skills because of cost disadvantages or productivity or whatever the argument happens to be—it varies from place to place. But in essence there is a neoclassical assumption that, in a perfect competitive market, Australia does not measure up. That is, of course, nonsense, because, in real-world economics, the textbook theories of the university seminar just do not apply. In the real world, in terms of strategy and social and political constraints, particularly when it comes to defence procurement, those perfect competitive market scenarios simply do not apply.

This government is trying to suggest that our economy is not able to provide economic diversity in its way of life or its economic capacities and that we should concentrate on mining, tourism and agriculture—this idea that we can be a farm, a quarry and a beach. The reality is very different, because all competitive advantage is built. In every country in the world, that is how it works. You actually have to go out and develop the strategic capabilities. They come about as a product of real investment, real innovation, the development of new technologies, education, research, building industrial clusters and ensuring that the appropriate networks are in place so that you have the advantages that build upon experience. The reality of real-world economics is that, the more you do things, the better you get at them. This notion that we can somehow or other just go offshore and get, off the shelf, a major defence platform, and that will not have any real consequences for Australia, is something that I very strongly reject.

Last Thursday I was at Hoffmans in Bendigo. Hoffmans is an advanced engineering firm that has been attracted to Bendigo as a direct result of government support. It has taken over part of the Thales plant, which used to be ADI. It has renovated equipment and developed skills and is able to participate in the ship repair work that is so important for the Collins class submarine. There, on the floor—it was wrapped up, ready to be delivered—was the drive shaft for a Collins submarine, developed out of Bendigo. Those capacities are built, developed by a large number of people working cooperatively together to ensure that we are able not just to build ships but to repair them. Those capacities can only be developed as a direct result of government action and ingenuity and innovation to have the capacities of our workforce developed in Australia. Shipbuilding is at the cutting edge of science, technology and innovation. That is why it is so important—just like in the automotive industry—that governments invest in these capacities, so that we can constantly adapt, design new solutions to problems and ensure that we have the very best kit this country is able to produce and the skills necessary to ensure a way of life for many thousands of people.

I reject the notion that is often put on the other side, that this is all about job creation. It is about the development of this nation and ensuring that we can do things independently of other people, particularly in defence industries, in times of acute crisis, when we will not be able to rely on other people, when we have to rely upon the capacities in this country. That is why I find this attitude so extraordinary, where the government tries to suggest, 'Oh, we'll look at it in the future; we'll try to do something in the future.' When they had the decision before them, they took the option to offshore the jobs, offshore this particular contract, rather than saying, 'As part of the ongoing process, we need to develop the capacities in this country so that we have the skills and the technological applications to do the things necessary for this country and, in times of real crisis, we can sustain them.'

We know how innovative shipbuilding is. We know that the manufacturing sector benefits enormously from it in skills development, new applications, new discoveries and high-performance capacities. It can only do that if the Australian government works with industry to ensure that those skills are able to be developed. I take the view that this government essentially wants to turn its back on manufacturing. This government has a notion, in terms of the model economic theory, that it does not really matter. That is a position which essentially is economic vandalism. If the government were genuinely committed to our naval strategic plan, we would be in the business of ensuring that these crucial industries were developed so that the skills were kept in Australia. This is the attitude—this reckless North Shore Sydney merchant banker attitude—that cost us the automotive industry. This is the attitude where the government has turned its back on food processing. This is the attitude where the government now seems to be in the process of turning its back on advanced ship manufacturing and ship repair. It is to the long-term detriment of this country that such an attitude is pursued by this government, and it is not just— (Time expired)

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Where, oh where was Senator Carr when as industry minister in the last government he presided over the greatest decline in manufacturing that Australia has ever seen. The man you have just been listening to, with all those fine words about developing Australia's capacity in manufacturing and in defence procurement, was the minister in charge of manufacturing when Holden, heading towards bankruptcy, shut down, and when Ford shut down, when manufacturing across Australia went overseas because the then government completely priced Australian manufacturers out of the game with their carbon tax, their mining tax and all the other taxes. Where were Senator Carr's fine words when he was the minister able to do something about it? Where was Senator Carr when his government singlehandedly destroyed what had been, for 20 to 30 years, a very vibrant, successful and prosperous shipbuilding industry in Cairns?

I know Senator Carr has a thing against Cairns. Just last week he slagged off at James Cook University of Townsville and Cairns, saying it was not a university capable of doing good research work and saying the grant for the Australian Institute of Tropical Health and Medicine—a world-class facility—to build upon JCU's world-class reputation in tropical research, was 'pork barrelling'. If anyone were inclined to believe anything the previous speaker said, they should just look at his attitude towards Townsville and Cairns in the university area. More importantly, they should look at what Senator Carr did when the Labor government in Queensland and the Labor government in Canberra shut down what had been a very successful shipbuilding industry in Cairns.

Senator Carr comes in here and sheds crocodile tears over the demise of the shipbuilding industry, but where were you, Senator, when you could have done something about it? Where was your colleague Senator McLucas when the Australian shipbuilding industry in Cairns was brought to its knees by a deliberate decision of the Labor government in Queensland and the Labor government here? Perhaps I am wronging Senator Faulkner who was at the time the defence minister because I know that Senator Faulkner was prepared to sign the contract for Cairns to build certain sections of the hulls of the air warfare destroyers—the shipbuilding work with which the 'southern rust bucket states' are currently experiencing difficulty in building. Cairns was going to be part of that and on the eve of signing the contract with North Queensland Engineers and Agents, the company which had built the patrol boats and had built survey craft and had done a lot of shipbuilding work, the Queensland Labor government pulled rug out from under them, withdrawing the bond it had been asked to pick up, a lousy $20 million. And did we hear one squeak from Senator Carr when that vibrant shipbuilding industry was sent to the wall? There was not a word from Senator Carr and regrettably not a word from Senator McLucas, who claims to be based in the City of Cairns, where this very vibrant shipbuilding industry was based. I would love Senator Carr to explain why, despite all the fine words he has just delivered in support of Australian manufacturing, he did not put his words into action when he was the minister and could have done something about it? And where was Senator Carr when the Cairns shipbuilding industry, which employed lots of skilled workers in the shipbuilding trade, had the rug pulled out from under them by the Queensland Labor government and by the federal Labor government? It is okay to get up here in the chamber and deliver all these fine words about what should be done with shipbuilding in Australia and what should be done with manufacturing, but Senator Carr, who just spoke on those things, was in a position to do something about it. He was the minister who, as I said, presided over the greatest ever downturn in the manufacturing industry in Australia. So how can anyone take any notice of what Senator Carr has said?

I say to Senator Madigan that he would be pleased to see that this government has brought forward the proposals to get proper drawings done for the Pacific Patrol Boat program and some other shipbuilding work, things which the previous Labor government should have done but did not get around to doing. Senator Madigan, you should be congratulating Senator Johnston and this government for what they have done in relation to getting some work for the Australian shipbuilding industry. I conclude by again asking Senator Carr: where were you when you could have done something about it? Where were you when you singlehandedly destroyed the Cairns shipbuilding industry? And where was Senator McLucas, a Cairns based senator, when she could have done something to help the Cairns shipbuilding industry.

I have a few seconds to go but I may stop now. I suspect people have not come into the chamber to hear my oratory. I finish this speech with some sadness in acknowledging that it precedes what I know will be a fine speech from a fine Australian, a fine Queenslander, a guy who has done so much for all Australians. It is a great pleasure to be a colleague of Senator Boswell's and to be in the Senate to hear what I know will be a magnificent valedictory speech.

Question agreed to.