Sky News Live, Newsday with Laura Jayes

LAURA JAYES: More on our top story now and the Government’s new Defence policies. It shifts away from the strategy that has been taken by the US under the Trump Administration. Earlier I spoke with the Defence Industry Minister, Christopher Pyne, about the new multibillion defence plan, in a bid to make it one of the world’s top arms exporters. I started by asking him, with an industry that already spends billions and billions of dollars – you’ll remember the $50 billion submarines in South Australia – and in these tough budgetary times, why does the defence industry need more taxpayer funds? Yes, they come in the way of loans, but why does it need another $3.8 billion?

[Excerpt]

CHRISTOPHER PYNE: Well, the facility we’re setting up that’s worth $3.8 billion is actually a loan facility. So it only costs as much as is drawn down, and of course, it all has to be repaid through the Export Finance Investment Corporation. So it’s a $3.8 billion loan facility, only used if it’s needed to support significant overseas contracts. Some of these defence contracts can run into hundreds of millions of dollars, if not billions of dollars, and often those kinds of huge contracts are just too large for banks to take on. The actual money we’re putting in to the Defence Export Strategy is $80 million over four years. That’s a huge and unprecedented investment in trying to turn the $200 billion of the build-up of our military capability – the largest in our peacetime history – into a defence industry that lasts through the ages; that sees the industry through the peaks and troughs of domestic demand.

LAURA JAYES: Well, what do we offer the rest of the world? What can Australia offer in terms of expertise?

CHRISTOPHER PYNE: Well Laura, we have a very sophisticated defence industry. Think things like the Hawkei and the Bushmaster protected vehicles that are behind me; as well as the Nulka anti-ship missile decoy; the CEA phased array radar; EOS’ remote weapon systems; Austal’s fast vessels that they sell overseas; the Marand vertical tail fins for the Joint Strike Fighter. We have a very sophisticated defence industry, but we haven’t actually ever made an effort to support defence industry in export markets, and that’s the big, unprecedented change. If you’ve succeeded overseas in defence industry, it’s because you’ve largely done it on your own. The Turnbull Government is investing in expanding that export market, because it means jobs and growth here in Australia, and it means arming our friends and allies around the world with cutting-edge military technologies and capability in order to defeat anyone who might threaten us down the track.

LAURA JAYES: So you say arming our friends and allies. There must be a long list of countries that you wouldn’t sell to then?

CHRISTOPHER PYNE: Well, of course. I mean, we wouldn’t sell to North Korea, for example, but our first priority is the United States, the UK, Canada, New Zealand. There’s real prospects in Europe, particularly given the huge investment we’re making in the submarine contract, which as you mentioned is $50 billion, being built here in Australia, from submarine one to submarine 12, but there’s real potential for parts exports et cetera in those kinds of contracts. And then after Europe, we’ll look at the Middle East and Asia, but only where it entirely fits within our worldview of the way countries should behave towards each other. That’s why we have the most rigorous export permits regime in the world.

LAURA JAYES: Okay, but China is the biggest military spender; it’s also our biggest exporter. Is this a big area of growth? Because I notice you haven’t mentioned China.

CHRISTOPHER PYNE: Well, we have military-to-military arrangements with China, but we wouldn’t normally see China as an export market, no. Our first priority are the Five Eyes countries that I’ve mentioned, where it’s much easier for us to export to those. China is the biggest military spender in Asia. The United States remains by far and away the largest military spender in the world. Every two dollars spent on the military every year, one of those dollars is being spent by the United States. So that’s clearly our first export market and where we have relationships.

LAURA JAYES: Why not China, Minister Pyne?

CHRISTOPHER PYNE: Well, China is not an Australian ally in the way the United States is. We have the, of course, the arrangements with the United States. They’re actually our only treaty through ANZUS, and so we wouldn’t see China as the same kind of potential market as we would see somewhere like the United States or Japan, for example, where we have a very close relationship. Obviously we have excellent relationships with China and with the Chinese, particularly economically. The Australian Federal Police; we have military-to-military engagement, but it’s not an export potential market for us at this stage.

LAURA JAYES: But this is where you get into potential problems diplomatically, don’t you, with the Government getting behind this kind of big push to sell defence exports more widely. How do you think China might see this, or is this sending China a message that we see them as a potential threat?

CHRISTOPHER PYNE: No, it’s really got absolutely nothing whatsoever to do with China. That’s something of a red herring, if you’ll excuse me. The truth is countries around the world, like us, are exporting all the time. Sweden, France, Italy, Spain, the UK, Germany, the Netherlands, the United States – these are major export countries in defence industry. There’s absolutely no reason why Australia can’t do the same thing. It’s entirely expected, and we’ve been underdoing our defence exports in the past. We want to support defence industry, help them see through the peaks and troughs of domestic demand. We can do it, building up the military capability of our friends and allies around the world, and we can grow jobs and the economy here in Australia by expanding our exports. That’s, in a nutshell, exactly what we’re doing, and there’s absolutely no diplomatic consequences, unless, for example, we sold to a country who had a bad human rights record, and we’re not going to do that because we have the export permit regime in place, which is the most stringent in the world.

LAURA JAYES: Okay. Now, you’ve been quite the activist in this area; do you see defence as the future of advanced manufacturing in Australia? And I just ask you because it is Liberal Party philosophy that you don’t pick winners in this area – you don’t subsidise car manufacturing, for example, anymore. So is this a different scenario than other manufacturing? Have you changed your tune in what the Government will subsidise and won’t in terms of these loans?

CHRISTOPHER PYNE: Well, we’re not subsidising anything, Laura, but we are spending $200 billion over the next 10 years in building up our military capability. That’s money that’s going to be spent. It’s being allocated and put aside. The big difference between the Turnbull Government and previous governments is that while capability of our Defence Forces remains the number one priority, the second priority is to grow our economy through that Defence spend as much as we possibly can, and the tremendous thing about it is that it’s advanced manufacturing, it’s high technology, it’s high skills, from the tradesman right through to the scientist and engineer, and we can compete with any country in the world in those kinds of skills and that advanced manufacturing that technology. Defence industry is showing up on the national accounts now as one of the drivers of the economy. Rather than sending our hard-earned taxpayers’ dollars overseas and being the best international customer in the world, we want to have our own domestic defence industry, and that’s not subsidising, that’s just smart government. We’re going to spend that money; why wouldn’t we spend it on companies like Thales, where I am today, as long as they are providing the capability that Army, Navy, Air Force and our cyber security agencies need?

LAURA JAYES: Okay. Just one final question, and it goes to the US and Jim Mattis’ comments over the weekend about the greatest threats to the United States, and the threats to, essentially, one of our biggest allies. He said that Russia and China are bigger threats than Islamic State. Do you agree with that?

CHRISTOPHER PYNE: Well, the National Defence Strategy that the United States has released talks about competition between major powers being the new, very significant challenge facing the United States. [Coughs] Excuse me. Obviously, that competition is between countries like Russia, China and the United States, but clearly, the greatest existential threat right now to Australians in the world is terrorism exported from organisations like ISIS and other terrorist organisations, which we are combatting right now with the United States in the Middle East and elsewhere in places like the Southern Philippines. What the United States is talking about is a different plane of competition – major power competition – and of course, that is true. Russia and China are the major power competitors to the United States in some parts of the world, and in our region, that’s clearly the case. That doesn’t indicate there’s any kind of military threat. The military threat or the terrorist threat is from the Middle East.

LAURA JAYES: Minister Pyne, we thank you for your time.

CHRISTOPHER PYNE: Thank you. See you.