Rex Patrick (SA, Centre Alliance) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table an explanatory memorandum and I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This Bill, the Defence Amendment (Sovereign Naval Shipbuilding) Bill 2018, will inject the concept of sovereignty back into Australia's purported 'sovereign' Naval Shipbuilding program.

The aim of the Bill is to ensure that Australia continues to develop and sustain a sovereign naval shipbuilding capability.

The Bill will amend the Defence Act1903 to require that new vessels 30 metres or more in length, that are to be built for the Commonwealth of Australia for use by the Royal Australian Navy, must, except in times of defence emergency or in time of war, be built in Australia by a well-established, high performance Australian owned and controlled shipbuilder.

The Bill will apply to all major naval construction including patrol boats, frigates, destroyers, submarines, supply ships, or aircraft carriers.

The Bill reflects an understanding that Australia's uncertain strategic future requires a much greater measure of national self-sufficiency as a Pacific naval power, supported by a sovereign naval shipbuilding and support sector.

Construction of Royal Australian Navy vessels in Australia by Australian owned and controlled shipbuilders will serve Australia's national security interests and maximise the economic benefit of the naval construction program to Australia.

When the government released its Naval Shipbuilding Plan on 16 May 2017, it stated:

This national endeavour is the most significant nation building project Australia has ever undertaken. Larger and more complex than the Snowy Mountains Hydro-Electric Scheme and the National Broadband Network, the Naval Shipbuilding Plan that the government is delivering will engage all states and territories through their contributions to naval shipbuilding and sustainment of both current and future naval vessels, or as contributors to industry supply chains, or providers of national workforce development and skilling to meet the growing need for skilled naval shipbuilding workers across the sector.

Centre Alliance is fully supportive of the Federal Government's $90 billion continuous Naval Shipbuilding program, but a significant change in approach is required in the interests of our national security and to maximise the economic benefit of the program to Australia.

This Bill is very deliberately designed to counter the approach taken by the Defence Department's procurement bureaucrats in the Future Frigate program whereby Australia's two established and highly capable shipbuilders, ASC and Austal, have been excluded in the tender documents from having responsibility for the build.

Instead the Government has invited three foreign ship designers to bid for the job, offering them a taxpayer-funded shipyard in Adelaide and a $35 billion contract to establish themselves to compete with the long standing Australian companies.

The Government may imagine that this approach will yield some cost savings but it will ultimately sell out our wider national interests.

There has been an unambiguous shift away from the use of local shipbuilders in Australian naval and maritime construction programs:

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It is hard to avoid the conclusion that the bureaucrats advising Government are determined to see the quiet death of a sovereign shipbuilding capability in Australia and its replacement with foreign entities operating on Australian waterfront real estate.

It is hard to imagine how the Government imagines Australia will develop a sovereign shipbuilding capability with our future submarines being built by the French company, Naval Group (formerly DCNS), and now our future frigates being built by a British, an Italian or a Spanish company.

Ultimately a sovereign shipbuilding sector will need to be largely self-sustaining.

This point has been made by Austal's chief executive, David Singleton, who has observed that:

… we need to work on creating an industry that stands on its own two feet, free of government subsidy. We cannot afford for the naval shipbuilding industry to be addicted to government welfare for its survival. The key lies in exports and the key to exports lies in Australian companies owning the intellectual property behind every ship they build. The ability to conceive new ship designs, develop them and build them in Australia needs to be a clear focus of the future Australian shipbuilding industry.

It is absolutely vital that through our very large investment in submarines, frigates and patrol boats, the Federal Government secures the intellectual knowledge in the minds of Australians, resident in Australia and working in Australian companies, so that we have the capacity to design new ships for ourselves and for our export markets.

Yet the Government's approach is to see foreign companies take the lead in these nationally significant programs; foreign companies that will control the programs, foreign companies that will install their own management teams in Adelaide and elsewhere, foreign companies that will control the intellectual property and determine our shipyards' strategic direction.

When an export opportunity arises, it won't be for the Australian shipbuilder and shipyard to determine if we can export; the decision will be made in the context of the corporate plans of executives in Paris, Rome, Madrid or London. These will be decisions that will be made on the basis of the global commercial perspectives of those companies without Australian government consultation or control.

The Government's decisions to implement our naval construction programs in this way have been fundamentally flawed. This has to stop, and it has to stop now.

Consequently, the Bill contains a provision that will mean the law applies from the date it was announced—as has been done for other Government bills. This will have effect on both the Future Submarine Program, for which no build contract has yet been signed, and the Future Frigate Program.

With regard to the specific provisions of the Bill, these will apply only to agreements by the Commonwealth for building new vessels intended for use by the Royal Australian Navy, and do not apply more generally to government vessels. However, this Bill does not prohibit the Government from choosing an Australian shipbuilder for other government vessels.

The Bill only applies to vessels of over 30 metres in length. The length overall of 30 metres will cover all major vessels for the Navy including patrol boats similar to the Pacific class patrol boats, offshore patrol vessels, corvettes, frigates, destroyers, cruisers, aircraft carriers, amphibious ships, submarines, supply ships, and auxiliaries, but will exclude smaller vessels such as launches, rigid-hulled inflatable boats, lifeboats, small landing craft and barges.

The Bill specifies that the Commonwealth may only enter into an agreement for the building of a vessel intended for use by the Navy with an entity that is incorporated in Australia, and that is not a subsidiary of a foreign entity, nor controlled by foreign persons within the meaning of the Foreign Acquisitions and Takeovers Act 1975. This is to ensure that Australian naval construction will only be undertaken by Australian shipbuilders incorporated in Australia and under the control of Australians.

The Bill will not prevent foreign shipbuilders tendering to be the prime contractor in any shipbuilding program, but they will need to sub-contract the entire build to an Australian-controlled shipbuilder that meets minimum experience and performance thresholds.

The Bill is consistent with the provisions of Australia's free trade agreement obligations which exclude much national security-related procurement from their non-discriminatory provisions, including procurement of naval vessels, small craft, pontoons and floating docks, as well as naval marine equipment.

The Bill provides that an agreement for the building of a vessel intended for use by the Navy must provide for the provision, grant or conferral by the entity, or the Australian shipbuilder, to the Commonwealth of intellectual property rights relating to the vessel for the purposes of maintaining, repairing or modifying the vessel. This provision ensures that the Commonwealth will retain the ability to ensure ongoing maintenance, repair or modification of Navy vessels in Australia.

The Bill requires that the Commonwealth must be satisfied that the Australian shipbuilder has demonstrated its capability to deliver an ongoing shipbuilding or upgrading program and to build or deliver major upgrades to vessels intended for use by the Navy, and demonstrates international competitiveness, compliance with relevant industry standards, and financial viability. These conditions are consistent with the standards that have already been applied to Australian shipbuilders engaged in major naval shipbuilding programs for the Commonwealth.

The effect of these provisions will be to ensure the know-how from major taxpayer-funded naval construction programs is transferred to Australian-controlled companies, not to subsidiary companies of foreign entities.

Australian shipbuilders will be able to assure export customers that they have the confidence of their own Navy.

Foreign shipbuilders will not have veto power over any export opportunities Australian shipyards could engage with.

There will be reduced exposure to foreign corporate risk in relation to naval construction projects of great importance to national security.

Profits from Australian naval construction will be made in Australia by Australian shipbuilders.

The benefits in terms of national security and economic development are unquestionable.

While the Bill will allow overseas procurement of naval vessels in time of a defence emergency or war, it will provide an unambiguous legislative direction that Australian naval construction must take place in Australia by Australian companies with the consequent benefits for our defence industrial base and long-term strategic self-reliance.

Nearly one hundred and ten years ago the then Prime Ministers Alfred Deakin and Andrew Fisher committed the funds and signed the contracts for the acquisition of the first vessels for the Royal Australian Navy.

Contrary to the wishes of some who argued that the Navy's new ships should be built at the cheapest possible price in British shipyards, the Deakin and Fisher Governments took a different path.

While those early contracts provided for the purchase of a number of vessels from British shipbuilders, they were also designed to lay the foundations for naval construction in Australia by specifying that one of Australia's new ships, a torpedo boat destroyer, HMAS Warrengo, would be assembled not in the United Kingdom but at the Cockatoo Island dockyard in Sydney, thereby ensuring the transfer of new shipbuilding skills and capabilities to Australia.

It was recognised then, by Deakin and Fisher, that the new Royal Australian Navy had to be supported by a sovereign Australian shipbuilding industry.

More than a century later, this Bill seeks to give effect to that vision—an Australian Navy built in Australia by Australians.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.