Speech to Policy Exchange UK

**Check Against Delivery**

Policy Exchange

London, United Kingdom

Monday 12 December 2016

Thank you very much for your warm welcome today.

It’s a great pleasure to be addressing such an influential force in the world of ideas – one associated with so many high-powered figures.

It’s also a pleasure to be discussing defence in the United Kingdom, our oldest ally.

Australia enjoys a rock solid relationship with Britain, one underpinned by our heritage, our common values and strategic cooperation.

As the rules-based global order faces increased challenges, those common values and our shared commitment to defend them are only strengthened.

It has always been that way.

Our defence relationship is of enduring importance to both our nations.

Time and time again we have demonstrated a mutual commitment to stability and peace; first at Gallipoli, then in the great battles of the Western Front in the First World War, in the deserts of North Africa, the skies over Europe and the jungles of Burma during World War II, the rugged mountains of Korea or, more recently, the valleys of Uruzgan and Helmand Provinces in Afghanistan.

I’m well aware of the bonds these battles have created.

The remains of my great-uncle Patrick Thomas Pyne, one of the Anzacs killed on the day of the Gallipoli landings, lie alongside those of his Tommy comrades in arms in the Commonwealth War Graves cemetery that now sits by the shores of the Dardanelles on what was once known as Hell Spit.

The remains of another, Octavius Pyne, rest with those of his British allies who also fell on French soil in the Great War at the Battle of the Somme.

Our shared history makes for an enriching and trusting relationship, but it’s just as important to say that our defence and security ties are modern, forward looking and based on high technology and cutting edge intelligence collaboration.

We cooperate with each other not just because of history but because our armed forces are some of the best in the world and we share in common many strategic views about today's risks and opportunities.

It's a shared strategic view about the value of the international rule of law and our common abhorrence of terrorism and violent Islamist extremism that unites us in our work training troops alongside each other, both at the Afghan National Officer Academy in Kabul and in Taji, in Iraq.

Our cooperation in Syria and Iraq has been a symbol of our close ties in recent times.

Both Australia and Britain know the radicalism and violence of Daesh is the greatest immediate threat to stability in the Middle East and beyond.

Although Iraqi forces are advancing to liberate Mosul and the resolve of the extremists is being tested, much must be done to neutralise the power of their poisonous ideas.

The respect that our nations share for each other – and for our shared democratic values – forms the foundation from which we must respond to such threats.

Our long-standing trust enhances the speed and the depth of our joint response against terrorism.

And long may this continue.

The Australian Government’s Defence White Paper, released in February this year makes it clear: Australia will continue to work with the United Kingdom to tackle common threats and to ensure a peaceful, prosperous, rule-based global order.

We will continue to work as allies to tackle terrorism and violent extremism, to overcome instability in the Middle East.

But we will also work more widely, not just as two nations with approaches to global security that are closely aligned but as partners under the 2014 Defence and Security Cooperation Treaty, a partnership reaffirmed as recently as this September at the annual Australia-United Kingdom Ministerial Consultations.

Mass migration, piracy, the threat of cyber-warfare and tensions in the South China Sea and the Korean Peninsula are all examples of current and emerging issues that will require Australia and Britain to work together for the greater good.

We welcome Britain’s sustained and growing role in the Indo-Pacific region.

Cooperation is the cornerstone of stability and the United Kingdom’s support – such as the contribution to Operation Pacific Assist after last year’s devastating cyclones – is much valued by Australia and our neighbours.

We appreciate Britain’s participation in Exercise OLGETA WARRIOR, our major bilateral exercise with the Papua New Guinea Defence Force under Exercise LOOKLOOK, the continuing short-term personnel exchange between our two nations – and the Typhoon aircrafts you sent just last month to participate in Exercise BERSAMA LIMA.

The Five Power Defence Arrangements continue to be a pillar of regional security and stability. In fact I would say that FPDA is taking on an even more important role in the region precisely because of the tensions in the South China Sea.

Such collaboration between like-minded allies helps to safeguard our collective interests at a time when our shared values and aspirations for the international order seem to be coming under a sustained threat from countries and ideologies more interested in promoting violence and tyranny in different forms.

Australia only benefits from deeper British engagement in our region, and indeed from a deeper dialogue with you about the strategic threats and risks we face.

We think of our security interests in global terms in Australia. Our domestic political opponents tend to want to define our interests more narrowly in terms of our immediate region. But this isn't intellectually tenable in a world where cyber security and access to the commons of space, air and sea bring us all more closely together.

Our collaboration includes intelligence cooperation that is closer and more effective than ever before.

Our intelligence sharing – both bilaterally and through the Five Eyes alliance – not only offers immediate benefits to security but is also enabling a more efficient exchange of concepts, doctrine and lessons learned.

And as our militaries undertake complex high-end procurement and modernisation programs there are also opportunities in land, air and sea for similar and mutually beneficial engagement and reciprocity.

Maintaining our two nations’ capability edges will be easier if we share the burden of technological innovation and advancement.

And training and development collaboration between Australian and UK personnel will improve the capability of our armed forces and deepen our partnership for years to come.

The Australian Defence Force’s use of RAF Base Akrotiri in Cyprus to support operations in Iraq shows the extent of the interoperability between our forces and the depth of confidence in each other’s professionalism.

We value our abiding connection with the United Kingdom – and we look forward to future shared endeavours.

These endeavours may take new forms and provide new opportunities for both our countries.

For the Australian Government has placed defence at the forefront of our policy agenda.

This is reflected in my appointment as Australia’s first Defence Industry Minister.

We understand that we must be strong today – but also that the strategic and operating environment of tomorrow will provide new challenges.

Our Defence White Paper calls for an Australian Defence Force that will be more potent, more capable and able to succeed in a more dangerous operating environment.

Our future force must not only continue to be capable of conducting independent operations to defend Australia and protect our interests in our immediate region.

It must also enhance our ability to make an even greater contribution to broader operations as part of an international coalition.

Australia has already demonstrated a commitment not just to lead peacekeeping efforts within our region, but a willingness to participate in global combat operations.

That willingness not only makes Australia an ally, but a very useful one.

Our government’s decision to acquire significant new weapons, platforms and systems will only enhance our position.

We will not only be a very useful ally, but a far more effective one.

Alongside the Defence White Paper, this year has seen the Australian Government release the Integrated Investment Program and the Defence Industry Policy Statement.

The government intends to use these two vehicles to deliver our new defence capability.

The Integrated Investment Program not only provides a capability plan to position the Australian Defence Force for the challenges ahead.

It details our major acquisitions and our investment in information and communications technology, infrastructure and the associated works they need.

And it gives industry clarity and certainty for the future by bringing together for the first time all our defence capability related investments over the next decade.

This is significant in itself. It underlines the importance we place on our defence industries, our faith in their capacity – and our determination to see that they succeed.

But it is even more significant as Australia is beginning one of the largest defence expenditure programs in the world.

We intend to spend 195 billion Australian dollars across the decade from now until 2025-26 renewing our defence capability.

This largest ever investment in capability will see us grow our defence budget to two per cent of gross domestic product by 2020?21.

It will be backed by an increase in the size of the Australian Defence Force.

The permanent ADF will expand to over 62,000 across the decade, returning its ranks to their largest size since 1993.

This will include more personnel in air, land and sea combat roles and in intelligence, cyber operations and enabling capabilities.

But we will only be successful in this great national endeavour if we work in partnership with our friends and allies.

And we know that we will need a stronger, more resilient and capable sovereign defence base to deliver the Integrated Investment Program and underpin our new defence capability.

The Defence White Paper tells us that the ADF will be operating in a more contested environment in our immediate region in the future.

We will need to be far more active and have a higher operating tempo seeking to shape a positive regional environment.

We know we will also be operating in a more dangerous environment, where states and non-state actors will have unprecedented capabilities to damage our forces and our interests.

It will be far more challenging to operate, sustain and repair the ADF.

This means we must have a stronger, more resilient and more capable Australian defence industry.

The changes in our strategic environments mean we will need a defence industry that is ahead of the curve.

We need an industry that can deliver the capability demands set out in the Integrated Investment Program as early as possible so they are there when the need arises.

Australia already has incredible examples of technologies and equipment we have created and built which we continue to support.

The government intends to take this further, broadening and enhancing our skill base and driving innovation to create a defence industry that is not just the equal of any in the world but can lead the transition of industry more generally to the new smart, high technology manufacturing of the twenty-first century.

The UK Defence Growth Partnership and Defence Industry Policy Statement both recognise the need for a shared investment in the future of industry to promote both national security and prosperity.

Australia has looked to both of these – particularly in developing our approach to partnering with industry to develop and enhance our defence sector.

We have sought to bring the federal government, our state and territory administrations and industry together in a way that will guarantee both national security and national prosperity for decades to come through the Defence Industry Policy Statement.

This involves building skills and diversification in the defence industry that will maximise opportunities for Australian businesses with newly enhanced competitiveness in our domestic defence efforts – and also enhance export potential.

Marand, a precision engineering company in Australia has had great success in exporting Joint Strike Fighter vertical tails to Lockheed Martin under contract to BAE Systems UK. They have also provided ground support equipment for the removal of the F135 engine and fan lift and secured various tooling contracts specialising in composite layup tools.

Exports have provided new aerospace markets for Marand and benefited subcontractors including AW Bell, Electromold, Ronson Gears, Barden Fabrications, Quickstep and BAE Systems in my home town of Adelaide.

We have demonstrated our ability to develop world-leading technology, such as the CEA Active Phased Array Radar.

This huge step forward is already being exported to the United States.

One of our major defence companies, Austal, has two significant contracts with the US Navy.

The first is for 11 Literal Combat Ships, worth approximately four billion US dollars.

Already two of these vessels have been delivered and the remainder of the project is running on schedule.

The second, worth two billion US, is for 11 Expeditionary Fast Transport Vessels.

Again, this project is on schedule, with seven craft already with the US Navy.

The Nulka system, another successful Australian export, is also one of our largest regular defence exports. Developed by the Australian Defence Force with BAE Systems Australia, it has earned us more than 1 billion Australian dollars in overseas sales. But more importantly, its innovation has saved hundreds, if not thousands of lives.

A US warship, the USS Mason, was recently attacked while off the coast of Yemen by Houthi rebels with what was believed to be land?based anti?ship cruise missiles. Fortunately, the ship was equipped with Australian-made Nulka decoys which were deployed, and the missiles crashed into the sea.

With our technological skills and ability to support major international contracts, Australia does not want to be just a valuable and reliable ally.

The government intends to transform our defence industry so we can become an equally significant supplier.

For the first time ever, the Defence Industry Policy Statement recognises industry as a fundamental input to capacity.

We are explicitly acknowledging the vital contribution industry makes to our defence capability and treating it like any other critical input.

This clarifies and assures better-aligned acquisition and procurement objectives and whole-of-life capability engagement with industry.

The continuous shipbuilding program announced earlier this year is a prime example of this approach.

Defence is not only recognising the capability requirement, but the underpinning industrial base it depends on.

Just as the UK is doing with the National Shipbuilding Strategy, we have developed our own plan to transform our naval shipbuilding industry and put it onto a sustainable long-term path.

This will be the most complex and expensive undertaking in Australia’s history; one of unprecedented scale, cost, complexity and risk – but one, I believe, thatwill offer major rewards.

Over the coming decades Australia will build 12 offshore patrol vessels, nine anti-submarine frigates, 12 submarines and up to 21 Pacific Patrol Vessels.

We will do as much of that work as possible in Australia, promoting and sustaining a significant sovereign defence industry base.

Two critical components of the Defence Industry Policy Statement come into play her: the new Defence Innovation Hub, and the Centre for Defence Industry Capability.

The CDIC and the UK’s Defence Solutions Centre have a shared purpose, developing the industrial base needed to support each country’s future defence capability needs.

The CDIC, which I opened in Adelaide just a few days ago, will work to breach the barriers that stand in the way to promoting a strong and nation-wide approach to capability development and innovation.

Under the chairmanship of both private sector and defence representatives, it will provide leadership developing Australian industry’s capacity to meet our strategic needs.

The CDIC will not only provide advice to help Australian businesses support the ADF it will have a sharp focus, seeking to build a sustainable, innovative and internationally competitive industry.

It will have an eye on partnering small and medium enterprises with primes, both locally and internationally, and developing export opportunities.

The CDIC will operate as a key part of the Australian government’s new approach of partnering with Australian industry to deliver the capabilities Australia needs in a way that can harness the best we have to offer.

It will act as a spur to economic growth in Australia’s broader industry and innovation base, reaching businesses who traditionally have not worked on defence opportunity.

We will not only create jobs and growth for the Australian economy, but investment opportunities for British companies.

The shared focus of our two governments on defence innovation will also provide new opportunities to multiply the impact of our individual resources by working together to deliver common objectives.

Both Britain and Australia recognise the need to back innovation with a long term funding commitment.

Just as the UK has committed to an innovation fund, the Australian government has established a new Defence Innovation Hub backed by 640 million Australian dollars across the decade.

The Hub will unite defence with industry, academia and research organisations to collaborate on the technologies.

This will provide leading edge capability.

It will also bring the disparate range of innovation programs managed by defence under a single program.

The Hub will run a range of projects across different technology readiness levels.

It will seek to be far more agile than anything before in taking innovations from proposal to contract stage and managing intellectual property.

It will tackle the challenges of converting ideas into practical capability when they are needed to deliver a battleground advantage.

This work will also be supported by the 730 million Australian dollar Next Generation Technologies Fund, designed to foster innovations that offer longer-term war-fighting advantage.

Australia and the United Kingdom already share a long-standing relationship of collaboration in defence science and technology stretching back over 70 years.

As this continues into the future we are seeking partners from British industry and universities to join us delivering game-changing capabilities across a range of domains.

These will include space and undersea warfare, cyber and electronic warfare and integrated intelligence, surveillance and reconnaissance projects.

There will be further opportunities to collaborate on transformational technologies such as trusted autonomous systems, enhanced human performance, hypersonics, quantum technologies and multidisciplinary material sciences.

Australia is among the world leaders in development of technologies such as hypersonics and is the world leader in quantum computing.

We already have much to offer, but are keen to work with our allies to tackle defence challenges that defy conventional solutions.

This approach will enable us to deliver programs more quickly and at lower cost, provide better capability advice to both our governments, reduce technical risk and improve the interoperability that will only enhance our already strong relationship.

As you may know, Australia has an Industry Capability Program, which requires tenderers for major defence projects to maximise opportunities for Australian industry to be involved.

We are substantially strengthening this program to drive the development of the Australian defence industry.

We will expect our international partners to maximise their involvement with Australian industry and actively seek opportunities for involvement in innovation and export spin-offs that will be generated through their work.

Australia also has the Global Supply Chain Program which, under arrangements with multinational primes, facilitates access to international supply chains and opportunities for development that promotes our global competitiveness.

BAE Systems is one prime committed to the Global Supply Chain Program, actively pursuing opportunities for our small to medium enterprises to bid for work on the UK’s Type 26 Global Combat Ship.

We understand that defence exports are critical to a sustainable defence industry.

The Australian Government is increasing its advocacy in support of Australian industry – and we are reviewing our programs and broader support for creating opportunities for Australian businesses.

We are very much aware of Britain’s success as a defence exporter, and I would welcome the opportunity to discuss approaches that have delivered for British industry.

Ladies and gentlemen, what will be very apparent from my comments today is that our two countries share so much in common in terms of the way we think about defence and defence industry, the priority we put on sustaining our own industry capabilities, and the capacity we have for innovation and creativity.

There will be occasions when we are competitors, particularly when we are seeking to develop markets. That's perfectly reasonable; indeed, the competition will only make both of us better.

But more often than not, I think we will be cooperating more than competing, and indeed our industries are so closely entwined that we are part of each other's value chain.

I think we can and should make more of this common industry base and our shared and similar defence industry experiences.

So today I want to put to our industry friends the challenge of working out how Australia and the UK can extract more value by working more closely together.

Should we develop a more formal exchange on defence industry collaboration? Should we more systematically share lessons learned between our government defence procurement agencies? How should our Parliaments cooperate more closely to assist industry cooperation?

I would be delighted to hold a government and industry meeting between key UK and Australian players next year. An Australia-UK defence and industry strategic dialogue would only strengthen our shared interests.

And where better than my home town of Adelaide, increasingly the epicentre of Australian defence industry capability?

Ladies and gentlemen, the best alliances -- like the Australia-UK relationship -- are most effective when we continuously look to improve, where we never rest on our laurels, but are always looking for the next opportunity to advance and do better.

That's the future for our relationship, one where our defence industry and Defence Forces work increasingly closely, promoting our shared national interests in a more risky strategic world.

The Australian Government is embarking on a great national endeavour, its largest ever investment in our defence capability.

We are not only determined to meet the challenges of the emerging strategic environment, in our region and wherever our national interests are at stake.

We are also determined to use the heft of our defence dollar to drive a high technology, advanced manufacturing future for our nation.

We know the long lead times much of this process will have leaves us with no scope for complacency.

Money and time wasted at the beginning of a project is rarely successfully made up for at the end.

That means we must get things right from the start – hence my portfolio of Defence Industry.

We are determined to build a closer, more strategic relationship with industry to deliver better capability outcomes for defence.

As part of this task we have emphasised the importance of Australian defence industry and innovation in delivering the military capabilities we need to play our part in ensuring regional and global security.

At the same time, however, we know the bilateral relationship between Australia and the United Kingdom is of enduring importance to both our countries.

We look forward to continued cooperation with Britain in the years ahead.

Thank you very much for having me today.