Ministerial Statement on Defence Industry

MINISTERIAL STATEMENT ON DEFENCE INDUSTRY

9 February 2017

I rise before the House today as the first Minister for Defence Industry to provide an overview and to update the House on the Turnbull Government's historic investment of $195 billion over the next decade in Australia’s defence capability.

Particularly, I would like to outline how this Government is ensuring that Australian industry can grow and continue to play a vital role in our Defence future.

Defence industry is our national endeavour - our mission is simple.

To guarantee our national security and ensure that Australia can play its part in protecting peace in our own region; in Asia, in the Pacific and the Indian Ocean.

And to use the defence dollar to drive local jobs growth and a high technology, advanced manufacturing future for this great nation. A vibrant, thriving and growing defence industry sector doesn’t just buttress our nation’s defence it also provides and supports jobs for thousands of Australians. As the defence industry grows new jobs will be created the economy, from naval architects and electrical engineers to plumbers, construction workers, shop assistants and labourers.

A strong Australian Defence industry is key to our economic prosperity, growing and using the skills and innovation that characterise our defence industries to work to form the basis of the smart, high-tech advanced manufacturing of the twenty-first century.

As Prime Minister Turnbull said, “What we are doing in defence industry is completely transformational”.

“Australia is entering the single biggest period of defence construction in its history.”

We recognise the creative, innovative and agile companies in Australia, who engage with our various defence projects either directly or indirectly.

Since re-election in July 2016, this Government has hit the ground running.

Land 400 Downselect

Within days of taking the portfolio, BAE Systems Australia and Rheinmetall were shortlisted to compete for the Land 400 Phase 2 project.

This iconic project will acquire 225 Combat Reconnaissance Vehicles and help us win the land battle.

The total acquisition cost is up to 5 billion dollars.

In August the Commonwealth signed contracts with the two shortlisted tenderers to take part in the Risk Mitigation Activity.

The Test and Evaluation program is now underway and it will see vehicles offered by the two companies undergo blast and ballistic testing to make sure they are good enough to transport our military personnel.

Hawkei

Thales is building the Hawkei, a next generation protected vehicle, which represents an entirely new capability for the Army, providing a similar level of protection to a Bushmaster at about half the weight.

Late last year the project reached a major milestone – the handover to Defence of the first of ten vehicles to roll off the Thales production line in Bendigo.

These pilot Hawkei vehicles pave the way for full-rate production in 2018 and represent a triumph both of defence capability and also the country’s burgeoning defence industry.

Hawkei production will involve around 170 jobs in the Bendigo region.

It's expected approximately 60 additional jobs will be created in Thales' supply chain.

The Turnbull Government is delivering after the $1.3 billion contract was signed with Thales in October 2015 to produce 1100 Hawkei vehicles and more than 1000 companion trailers.

Land Forces Conference

I’ve made visiting key defence industry hubs a priority since taking on this role.

I have already visited Henderson, Brisbane, Newcastle, Bendigo and Melbourne, and plan to visit other locations including Burnie and Bankstown. In August, I was hosted in Cairns by my good friend the Member for Leichhardt, who took me to see the shipbuilding facilities at Norship Marine and Tropical Reef Shipyard.

It’s a highly optimistic sector at the moment, and this was particularly clear at the Land Forces Conference held in Adelaide in early September.

The conference was by far the biggest they have ever held.

It brought together 13,500 military leaders from 22 different armies and innovative defence companies representing 23 countries, and gave over 500 industry exhibitors a chance to showcase their world-class technology.

It was exciting to see so many Australian companies connecting with Defence.

It was also good to see the Member for Corangamite there, who is interested in advocating for jobs in her electorate.

Future Submarines Project

Acting on the findings of the 2016 Defence White Paper the Turnbull Government has determined that Australia needs 12 regionally superior submarines with a high degree of interoperability with the United States; craft that will provide our nation with an effective deterrent and an ability to play an active part in anti-submarine warfare operations in our region.

In September we signed the first contract ahead of schedule with DCNS to mobilise the resources needed to develop our regionally superior Future Submarine and commence its design. At the same time we announced Lockheed Martin Australia as the combat system integrator.

On 20 December 2016, the Intergovernmental Agreement between France and Australia was signed, which defines the principles, the framework and initial means of support and cooperation between the two governments.

As a crucial part of the process we have already commenced work to maximise the opportunity of Australian industry involvement in the project and early planning for the construction of the submarines here in Australia.

Future Frigates and Offshore Patrol Vessels

The Government has announced plans to build nine anti-submarine warfare frigates which is set to start construction in Adelaide by 2020, which will cost $35 billion.

The Future Frigate and Offshore Patrol Vessel programs will directly create over 2500 jobs for Australians and will indirectly support the jobs of many thousands more.

The 3 to 4 billion dollar program to construct 12 Offshore Patrol Vessels will begin in Adelaide in 2018 and transition to Western Australia.

The OPV project remains on track with the Request for Tender being released on 30 November 2016.

This will see the designer’s team up with Australian shipbuilders to try and win this iconic project.

We are delivering on our commitment – spending money locally where possible, boosting growth, creating jobs and giving our military the best equipment we can.

Workshops

We are committed to giving Australian companies as much opportunity as possible to be part of our future defence projects.

Over the past few months and for months to come, local companies are being given the chance find out more about the opportunities available during a series of Land 400, Future Frigates and Offshore Patrol Vessel workshops being held nationwide, including in the Member for Swan’s electorate [FF/OPV workshop on 2 Nov].

Thousands of Australian small and medium-sized enterprises have registered to participate in the Defence facilitated showcase workshops – this is a chance for Australian suppliers to get their slice of a very big pie.

It’s critical we provide Australian companies with opportunities to enter this supply chain.

Naval Shipbuilding Plan

The Turnbull Government will release a Naval Shipbuilding Plan imminently that brings together all of the elements of the Government’s continuous naval shipbuilding strategy.

The Government’s unprecedented commitment to continuous naval shipbuilding will support the strategic and capability needs of Defence, provide a viable, permanent shipbuilding industry, provide certainty for the shipbuilding workforce, deliver value for money, build commercial confidence, and promote the use of global best practice.

Defence is conducting a strategic review of the workforce, skills and infrastructure needs at Osborne and Henderson shipyards to inform the Naval Shipbuilding Plan’s development.

The Government is committed to maximising Australian industry involvement in the naval construction programs for Future Submarines, Future Frigates and Offshore Patrol Vessels.

I look forward to revisiting Austal’s shipyard at Henderson in the near future with the Member for Canning to see the rollout of Australian defence capability. I also acknowledge that the Member for Canning as a former serviceman has a deep interest in defence industry opportunities for his region and for his constituents.

ASC Separation

To that end, in mid‑October the Government also announced the structural separation of ASC into three entities.

These three new companies will support the key capabilities of shipbuilding, submarine sustainment, and infrastructure.

The separation of ASC will deliver a more flexible approach to managing the investment required in shipbuilding infrastructure to support the Government’s historic continuous shipbuilding program.

The new submarine sustainment and shipbuilding companies will continue ASC’s important role in the sustainment of the Collins Class submarines and the finalisation of the Air Warfare Destroyers respectively.

The creation of these three new companies follows a strategic review of ASC, which was conducted in 2015.

Work has already begun on the separation of ASC into the three new companies, with the full separation expected to be completed in mid 2017.

International visits

In my first international visit as Minister for Defence Industry, I visited the United States and the United Arab Emirates.

I met with key defence officials in Dubai to highlight the capacity and capabilities of our defence companies.

In the US I had the pleasure of meeting with key defence companies operating in Australia as well as Pentagon officials including the then US Secretary for Defence Ashton Carter to sell the merits of Australian defence industry.

The recent US election has seen a President elected who during the campaign committed to a massive expansion of around half a trillion US dollars to their defence budget.

This result could bring with it an expansion of opportunities for Australian defence companies.

Joint Strike Fighter Maintenance and Sustainment Hub

Following my visit to the US, I was pleased to announce on 7 November that Australia had been successful in the first round of assignments for work maintaining the componentry of the global fleet of Joint Strike Fighters. Successful companies include H.I. Fraser which is located in the Member for MacKellar’s electorate, and Rockwell Collins Australia, located in the Member for North Sydney’s electorate.

The award of this contract acknowledges that Australia has the skill base and capacity to take on one of the most technically complex and expensive defence projects ever produced, as a maintenance and sustainment hub for the Joint Strike Fighter aircraft.

This places Australia as the regional hub for maintenance, repair, overhaul and upgrade for the Joint Strike Fighter fleet, potentially bringing hundreds of millions of dollars and supporting hundreds of Australian jobs for decades to come.

Just this morning I had a phone call from the newly appointed Secretary of Defence, James Mattis. In the call I congratulated Secretary Mattis on his recent appointment and noted his keen interest and personal history with Australia. I expressed my enthusiasm and strong desire to work closely on our shared defence interests as a key ally of the United States. Secretary Mattis reiterated his strong support for the Joint Strike Fighter programme as a key strategic capability for the United States and allies across the globe.

We talked about the fact that the price for the lot 10 of the Joint Strike Fighter has been recently announced and has dropped below $100 million for the first time. For Australia this is hugely significant and represents a 25 per cent reduction from the price of the fighter in 2014, showing the program is on track in terms of delivery and efficiency.

Poseidon Aircraft

On 16 November, I, along with the Prime Minister and the Minister for Immigration and Border Protection, took delivery of the first of 12 P8‑A Poseidon aircraft.

The Poseidon is a cutting edge piece of military technology

These aircraft will support a full range of tasks, including anti-surface and anti-submarine warfare; maritime and overland intelligence, surveillance and reconnaissance; electronic support; as well as providing a search and rescue capability.

Operated from RAAF Base Edinburgh, this will create more than 35 highly skilled jobs for South Australia.

Centre for Defence Industry Capability (CDIC)

The Government is committed to working with industry to build our innovation potential and ensure Defence maximises its opportunities to develop cutting-edge technologies.

In December last year I opened the Centre for Defence Industry Capability, which has been funded at $230 million over the decade, a close collaboration between the private sector, Defence and AusIndustry.

Headquartered in Adelaide, the CDIC is designed to have a national reach to ensure flexible access for industry across Australia.

At the same time I opened the Defence Innovation Hub.

The new $640 million Innovation Hub will bring together Defence, industry, academia and research institutions to collaborate on innovative, creative and cutting edge technologies that can deliver better Defence outcomes.

We will invest $730 million over the next decade in the Next Generation Technologies Fund (NGTF) . The NGTF will provide opportunities to better position Defence to respond to future strategic challenges and develop the next generation game-changing technologies and capabilities to enhance national security into the future. I will provide more information on this new funding in early 2017.

Closing

This government has put the defence of our nation and the build of our defence capability at the very centre of our national policy agenda.

We are determined to use the defence dollar – $195 billion over the next decade – to assist in transforming our economy, driving and growing local jobs.

In spending this it is critical that we get maximum value for money. That we learn from the mistakes of the past. Projects like the Air Warfare Destroyer, which was taken back from the brink by this Government must not be allowed to happen again. In the future we will use world’s best-practice manufacturing and shipbuilding techniques to ensure success.

This will mean that we will not just hope that our processes and systems work, but rather that they are tried and tested. This will be through utilising a range of cutting edge techniques including 3D planning, building a prototype ship of the Future Frigates and ensuring that the workforces are trained to the highest standards.

The Government will do this while meeting the timeframes that we have committed to and create the jobs that we promised to deliver. The Offshore Patrol Vessel project will start in 2018 at Osborne in SA before it moves to Henderson, WA when the Future Frigate project starts. It will create more than 400 jobs. We will “cut steel” on the Future Frigate Project in 2020 which will create 2000 jobs at Osborne. The Future Submarine project will start in the early 2020’s and will create 2800 jobs.

After years of Labor’s neglect, we recognise that Australian industry is crucial to maintaining and developing the future ADF.

Good relationships with industry are fundamental to developing a sovereign defence capability and that’s why we are seeking to build closer ties between the military and industry – this will provide innovative solutions and capabilities to the ADF.

Currently 25,000 Australians are employed in defence industry, and there are over 3000 small to medium enterprises all around our country – they provide essential capability, services and support to the ADF.

We recognise the importance of our national endeavour.

There is no time to waste in implementing this great national endeavour, there is no opportunity that should be ignored and there is no limit to what Australian defence industry can achieve with the right business framework and appropriate Government advice and support.

This government under the leadership of Prime Minister Turnbull will ensure that the growth of the Australian defence industry as a national enterprise in providing defence capability for the protection of our nation also becomes one of the most important industrial sectors in our national economy.

[ENDS]