Lowy Institute Q&A

SUBJECTS: Defence industry exports;

QUESTION: … the first question. The arms traders [indistinct] dog eat dog market and the customer is king. You outlined already a couple of areas where Australia has had some export opportunities, like the Nulka missile decoy system, CEAFAR radar being another, but in some of our higher tech collaborations with the United States, the United States has a proprietary lock on some of that, and the United States is also not averse to buying its own equipment. So do you think that- what are the [indistinct] niches where Australia could find export opportunities in the sector?
CHRISTOPHER PYNE: Well, Ewan, we have to work within the confines of what we can and can’t do in the United States. You know, they are the world’s modern empire and they have very clear views about their sovereign capabilities, their defence industry, and how it builds into their dominant position across the world militarily. Still, even with all the hype around the growth of other nations, every second dollar in the world on the military is still spent by the United States. So they have a pretty big interest, proprietor interest as you suggest, in defence industry.
Being part of the NTIB – the National Technology and Industrial Base – is quite a breakthrough, and that was achieved because of John McCain, who’s a great friend of Australia of course, including us along with the United Kingdom in an area that had hitherto only been available to Canada. And what we think it means is that when the United States sees that we have a capability that they would like to use, rather than the old system, which was that the United States would collaborate with that particular company, or buy that company, or insist that it moved to the United States to deliver services or products, that they will not do that. They will say that because Australia’s part of the NTIB, that we’re more than happy to treat them as part of our overall economy in defence.
Now, that could be a very important breakthrough, but there are a lot of other areas where we can sell or export niche products, and significant products: offshore patrol vessels from Austal, remote weapons systems from EOS, targets from Marathon, the
Hawkei and the Bushmaster from Thales. There are capabilities that we wouldn’t export, that we’d want to have them here for our submarines, for example, like sonars and so forth, which we have some significant capabilities in, but Aspen Medical in terms of the setting up of medical services in the battlefield. I mean, there’s quite a long list, and what we’ve discovered in defence industry is that the more you’re in it, the more you realise that we have real capabilities; that a lot of our defence SMEs have actually been exporting, but they’ve never had that extra advocacy, that push from government that you see in Italy and France and Germany and Spain and Great Britain and the United States, where their government ministers, members of the royal family even, in spite of being our head of state as well, will go out into markets and compete and push their products and services.
So that is a sea change in attitude within the Government, that we are going to promote exports of defence where it’s appropriate to do so. We are at the beginning of that. We will, next year, release the Defence Export Strategy. It will be quite a- well, it is a meaty document. It will have significant spending attached to it and a very different way of doing business.
QUESTION: Thank you. Before I go to the floor, just staying with defence exports, because you mentioned that you had visited Saudi Arabia twice recently, where there is an ongoing conflict resulting now in what is, I think, recognised as a humanitarian catastrophe. What safeguards can you assure us will be in place so that defence exports sold to Saudi Arabia will be used properly and not in any way that would tarnish Australia’s human rights record?
CHRISTOPHER PYNE: Well, Ewan, we haven’t changed our approach to the defence export permits architecture. There is still the same five or six criteria required for a export to gain a defence export permit. That part of the portfolio remains in Marise Payne’s bailiwick, if you like. So obviously we do all the promotion of defence exports in my part of the portfolio. I’m travelling the world, trying to drum up business, if you like, to put it crassly, for Australian defence exports, but there’ll be no defence exports unless a defence export permit is available for that particular product or service.
So if a product or a service is being exported into Saudi Arabia, it has had a defence export permit. Obviously the war in Yemen is a significant consideration in that, but there are things we can do with the Saudis in the short term, and probably more in the longer term, which would gain export permits, and I’m thinking right now of Aspen Medical, which is building a new hospital, the Sard(*) hospital in north east Saudi Arabia, and that’s obviously a defence export of a kind. And there are other companies that are competing in Saudi where the export wouldn’t be used in Yemen, but still supports the Saudis. In the Red Sea, for example, in ensuring that they are stopping piracy. So that is very much in our interests as well, the offshore patrol vessels and so on.
QUESTION: Alright. So I see a couple of questions up already. Can you please identify yourself, your affiliation, keep your question as short, sharp as possible. The gentleman there, and then I’ll take Greg Colton from the institute after that.
QUESTION: Chris [indistinct], various things, including Engineers Australia. Minister, you put a lot of emphasis on STEM and attracting people into STEM programs, either for initial education or retraining. On page two of the Sydney Morning Herald this morning is a story of a young woman who was forced to go to a boy’s high school to study engineering, because she wants to do aeronautical engineering and there’s no way of doing it through a girl’s high school. How will defence industry reach out to young people, their teachers, and most importantly their parents to persuade them of the attractiveness of the areas that you’ve mapped out?
CHRISTOPHER PYNE: That’s a good question. Fortunately, I’m not responsible for the decisions the State Governments make with respect to single-sex schools or stream schools. New South Wales has its own approach to those things, and that’s a matter for the State Government. I’m sure they’re doing an excellent job; they’re a Liberal-National Government.
But the more broad question is a really important one. As Malcolm and I often talk about, there’s no point in promoting people into science, technology, engineering and maths unless you have jobs for them to do. So these two things work together; they’re two sides of the same coin. The big build-up in our defence industry capability in Australia, which will lead to tens of thousands of jobs, and the June quarter alone, spending in defence industry jumped by 22 per cent, which is the biggest jump ever. So it’s starting to show up in the national accounts as driving the economy. The jobs are going to be there now and into the future, and we need STEM-trained people.
Previously I used to be the Minister for Education. We talked a great deal about STEM, but a lot of young people say, well, you know, I’d love to do science, technology, engineering and maths, but I also want a job in Australia. Well, now we’ve given them the opportunity to have those jobs in Australia.
The campaign we’re running at the moment called the Workforce Behind the Defence Force is designed to do two things. It’s a $20 million campaign. It’s designed to encourage young people to think about careers in defence industry, and to think about those careers not just as being high-end, high-education, masters degrees and undergraduate degrees that they are thinking of doing, but pointing out that 60 per cent of the jobs in defence industry are trades jobs, but they are skilled tradespeople doing specialist work, and that they’re important. So the campaign has- the first aspect of it is to encourage young people to talk about defence industry in a way they perhaps haven’t considered before, and to convince their parents and their grandparents [indistinct] in spite of being a father of four teenage children, they do sometimes take my advice and listen to their parents, and more so their grandparents, thinking about their careers. And we want older people, parents and grandparents of the young people to say, have you thought about a job in the defence industry? You know, you’re interested in engineering, you’re interested in science, or maths, or trades, or welding, or fitting and turning, or electrical; you should do that, because you’ll get a job in the defence industry.
We want people to see the defence industry as a career for life, not a career for a project. In the past, it’s been project by project, and we’ve never been able to get that ballast that keeps the industry going through peaks and troughs and means that people will stay and be able to keep getting jobs in the defence industry if they make that career choice.
Now, the second aspect of the campaign is to convince business that if they haven’t thought about the defence industry, that they should be thinking about how to get into the defence industry. Not every SME is going to be able to be a supplier in the defence industry, but we want them all to ask the question: do I want to do that? What capabilities do I need to bring in to my business? What infrastructure spending do I need to do? What investments do I need to make? And if that is not the area that they want to be in, fine, they can make that choice. But we want them to be thinking about being in the defence industry, because in my view, that breeds more work, more activity, more syncing work, so when the United States - whether it’s a Raytheon or Airbus from France or whatever it might be - think about the capabilities in Australia, there are defence industry businesses that can provide those capabilities, and they don’t think we’ll have to bring somebody from France or the US or the UK, because those capabilities don’t exist yet.
So, that’s what we’re doing. We’re creating the jobs that mean that young people have a purpose for doing STEM, whereas previously they might not have had those opportunities.
UNIDENTIFIED SPEAKER:Minister, I’m just going to ask you to halt your answer so we can get two questions in together. Greg Colton and then Peter [indistinct].
QUESTION: Thanks, [indistinct]. Greg Colton from the Lowy Institute. Minister, major platform acquisition consumes a large part of the Defence budget, but it also takes a significant amount of time in identifying a need through to the delivery of a capability. In an era where new disruptive technologies are being unveiled at an unprecedented rate, how can the Department of Defence and Defence Industry future-proof the development of capabilities so that they are not obsolete prior to or shortly after delivery, without causing the large cost and timeline blowouts that we’ve seen in the past?
QUESTION: Peter Scott, Defence NSW. You mentioned the CRC for Trusted Autonomous Systems, Minister. So firstly, I’m wondering if you can give us an update on when we might expect a decision on where the headquarters for that CRC would be announced. Also, what linkages do you see between the work of the CRC and the Export Strategy?
CHRISTOPHER PYNE: The CRCs or the CRC?
QUESTION: Well, the CRC on Trusted Autonomous Systems.
CHRISTOPHER PYNE: That’s the only one in Defence at the moment.
QUESTION: Yeah, at the moment.
CHRISTOPHER PYNE: Well, that sounds like special pleading from New South Wales for the headquarters of the Trusted Autonomous CRC.
QUESTION: We’ve certainly made a submission [indistinct].
CHRISTOPHER PYNE: So Jim McDowell is the chairman, and I have a call to return to Jim from yesterday, and I think it’s about where he wants to put the headquarters. So, I’m not interfering in his process. We appointed Jim for a good reason, and he’s doing a great job in narrowing the areas for the Trusted Autonomous Systems CRC, where they’re going to put their focus. It’s about $50 million, which sounds like a lot of money, but you can spend $50 million in defence pretty quickly, as you know.
So in terms of the headquarters, I guess it’ll be pretty soon. And anything to be announced between now and Christmas is a bit lost at the moment, there’s so much happening, but I think people would probably quite like to know, and so I think it’ll be quite soon. As soon as Jim lets me know, as soon as I return that call. Which you’ve reminded me, so I’ll do it on my way to the airport this afternoon. ComCar driver will be the first to know.
[Laughter]
ComCar drivers know everything. You want to stay friends with the ComCar drivers at all costs.
In terms of the timelines, look, there is a lot of stress on the Department of Defence because we are doing a great deal quickly. I have to say that Defence has been terrific. Dennis Richardson really faithfully implemented the Peever Review of how we do business in Defence. That’s having a really demonstrable effect inside Defence, so while we’ve dropped about 4000 public servants in Defence, they’re actually bringing out a lot more output. People in Defence are now much more likely to make decisions and take responsibility for those decisions, whereas I think previously the culture was less likely- people at the top had to make decisions, but a lot of people on the way up didn’t want to. I think they’re now feeling quite empowered.
I go down- or go up to Russell Hill quite often, and go out to some of the other places at Brindabella, to thank them for the good work they’re doing, whether it’s the offshore patrol vessels team for doing everything on schedule in terms of the tenders. I mean, it wasn’t that long ago that Defence said that they were going to deliver something in a particular month; they meant it could be that month, or it could be another month. Now when they say we’re going to deliver something to you in April or June or October, I keep them to that promise, so now they’re very careful about what they’re promising to do, but they are actually doing it. Now, so far I’m not seeing any slippage in the schedules for these major projects, or the minor projects, for that matter, which is an achievement of its own.
In terms of the future, it’s not easy to predict. We have a great team of people within Defence. The large primes have their own terrific teams that think about how all these projects, all the timelines, how they all work together. I can’t guarantee that everything will always stay on schedule or on budget, for that matter, but we’re certainly doing our darnedest to do both.
I’ve got great confidence in Steve Johnson and Greg Sammut and Tony Dalton. We just changed a bit of the structure of our shipbuilding, so previously we didn’t have a shipbuilding enterprise tsar – which, of course, is not a technical or official term – but Steve Johnson is now the naval shipbuilding enterprise tsar, so he’s responsible for the whole of the enterprise. And then Tony Dalton is doing ships and Greg Sammut is doing submarines, and that system, that structure’s working really well.
So I can’t give any guarantees, I’d be foolish if I did, but I can tell you that so far it is going very well. It’s on schedule, it’s on budget, we will cut- we did cut steel on the Pacific patrol boats on time. We will cut steel on the offshore patrol vessels on time. We came up with a quite innovative solution, I think, to the offshore patrol vessels. We did the same thing with the naval combat systems. It’s the first time we’ve ever had a navy-wide enterprise approach to combat systems, which means that Saab, CEA and Lockheed Martin [indistinct], which is what they wanted. But Australian industry will have a huge part because of the CEA and Saab, and of course, Lockheed Martin Australia’s Australian operations.
So, we are thinking, I think, cleverly, and challenging past methods of doing things, and I hope that we’ll be able to stay on schedule for everything, but if I’m still the Minister for Defence Industry in 10 years, that would be quite a surprise, not because I’m assuming something’s going to happen to me, but the cycle of polls is such that very few ministers are ministers for a decade or more. But we are setting up the foundations so that whoever comes in the future in Defence Industry has a very solid foundation on which to build, and, unusually, I’m including Richard Marles in a lot of my briefs and discussions about what we’re doing, because while I don’t want a Labor Government at all at the next election, and I believe that we won’t get one, I think we will win again the next election. But at some point down the track, he might well be a Minister for Defence or Defence industry, and I want him to know why we’re doing these things, because I don’t want all this effort that I see all these people in the room have been putting into defence industry and seeing this new renaissance that we’ve been creating, if the Government changes in three years or six years or nine years or whatever it might be, a new government saying [indistinct] whole different approach, because there are a lot of people who’ll say that was our opportunity to make it a bipartisan area for the economy, for Defence capability, and now it’s lost.