CEDA Conference - Australia's place in the world

It’s a pleasure to be here today. CEDA does tremendous work in stimulating debate on a very wide range of economic and social issues. I’m a great supporter and constantly aware of CEDA’s distinguished contributions.

When CEDA was founded  in 1960 by economic pioneer Sir Douglas Copland, and my uncle John Macleod, Chief Economist of CRA, changes and movements in our region were the forerunners of many of the economic and security challenges we face today.

I often note that economics and national security are inextricably linked.

Australia’s economic prosperity depends on the rules-based order and relies upon the volume and quality of our exports.

The vast bulk of those exports require the free passage of goods through our region’s strategic sea-lanes.

This has been the case for all our history.

In 1960, as CEDA was beginning its economic research and leadership dialogues, changes were afoot.

The United Kingdom was turning to its future in Europe. Australia’s privileged trade relationship with the UK was in peril, and transforming.

Australia began to look closer to home for markets for our abundant commodities.

Post-war Japan was looking to us to assist it with reconstruction and supply problems.

It was to soon overtake the UK as our leading export market, placing high demand on our agricultural products and harder commodities.

China, in 1960, was focussed domestically and in the grip of famine. So it was not actively occupied with becoming a global economic superpower.

But some in Australia were keen to test its scope as a major export market, particularly for our wheat.

Conflict on the Korean Peninsula was formally on hold in 1960. Nearly all Australian troops had come home.

Insurgency in the new Federation of Malaya had been largely contained but was well afoot in Vietnam. In 1960, John Kennedy won the Democratic nomination, in an era when there were two superpowers.

Times were certainly changing, but some constants remained.

Defence was central to our concerns, and in this sense, Britain was still family.

The extraordinary weapons research establishment in South Australia reflected our global and mutual defence interests.

The Menzies Government was rightly focussed on the supply aspect of defence capability – as is the Turnbull Government today.

Movements in global and regional security are, as ever, challenging us all.

They are travelling at an ever-faster rate, economically and militarily. 

The 2016 Defence White Paper addressed many of these challenges and outlined, in detail, our strategic environment now and into the future.

The Indo-Pacific region currently has seven of the world’s 10 largest standing militaries. It has five of the world’s declared nuclear nations. 

The Korean peninsula is once again in focus. North Korea is an ongoing threat to regional security.  Its continued provocations and nuclear weapons program are a significant problem.

Terrorism is a fact of life. Attacks by Daesh-inspired groups in the Philippines and similar activity in other parts of the Indo-Pacific underscore this very real threat.

Domestically, cyber security and cyber attacks present major economic and security challenges.

They threaten industry, government and intellectual property.

They affect the Australian Defence Force’s warfighting capabilities.

Such circumstances require a potent, capable and adaptable Defence Force. Which means we must have a world-class defence industry, and a sound, sovereign capability.

Over the next decade, the Turnbull Government will invest 200 billion dollars to strengthen our defence capabilities and evolve and grow an onshore defence industry that fits our strategic requirements.

This investment signals the largest renewal of defence capability in our peacetime history. It will ensure our Defence Force is equipped to meet an increasing range of commitments, and importantly, is ready for surprises.

The Turnbull Government wants a home-based defence industry that is strong and capable, that learns from the best, employs Australians, and is able to keep up with strategic demands

We want an industry aligned with Australia’s global and regional position, but not just for today, for decades into the future.

This must be set up with the right approach, the right intellectual rigour, and the right commitment to keeping ourselves at the cutting edge – for the next 100 years.

It must be an Australian defence industry that can deliver the Australian Defence Force the very best capabilities, on time, on budget and onshore.

This makes abundant strategic sense. And it also creates unprecedented opportunity for Australian industry.

As I said, our strategic and economic security are inextricably linked.

Opportunities from this record investment in defence industry are coming at a very fast pace.  In 2016–17, the Australian Government approved 74 capability related proposals. We had planned to approve 62. Only a few years ago we viewed 46 approvals as a great achievement.

We’re getting on with making decisions.

The time is also right for policy that fits Australia’s major economic challenges.

Some sectors are in transition, while disruptive technologies are producing new growth areas.

If we are to take advantage of this, and advance Australia’s prosperity well into the twenty-first century, we must put research, innovation and smart manufacturing to work for us all.

Our 200 billion dollar investment in Defence capability is designed to secure advanced manufacturing jobs here.

This is doable and sensible. Australia’s defence industry boasts a track record of success.  It has supported the capabilities of the ADF and has seen considerable export success.

The Defence White Paper made it clear that a more collaborative relationship between Defence and industry was warranted, particularly in relation to participation by small to medium enterprises.

It identified significant barriers to entry for SMEs engaging with Defence, and this in turn hampered their ability to engage with large international prime contractors. If we were going to extend the benefits of defence industry deep into the economy, the barriers had to go.

The Defence Industry Policy Statement released last year addressed this. It committed to greater support and assistance for smaller enterprises seeking to be involved in large projects.

Through it, Defence has formed a truly collaborative relationship with industry and is taking a long-term view of Australian industrial capabilities.

In February last year, the Turnbull Government released not only the Defence White Paper and the Defence Industry Policy Statement, but the Integrated Investment Program.

Together these papers outline our new approach to Australia’s defence industry. They detail what the Australian Government is seeking to achieve in partnership with industry, and what opportunities are on offer.

I urge you to seek these papers out. They are well worth your time.

Combined with our record investment in Defence capability, such policy statements are designed to provide certainty to industry. Importantly, they provide confidence to industry to make their own investments – to up-skill, innovate and grow.

The Turnbull Government has also established the Centre for Defence Industry Capability. It is helping industry to be “Defence-ready”, and to assist in building the Australian supply chains we need.

The Centre delivers essential support services such as advice on business improvement and Capability Improvement Grants.  It opens doors for smaller enterprises, both to Defence and to major international primes.

I’m excited to say we are seeing results already.

Thomas Global Systems is a fine example. It develops innovative electronic solutions for aerospace and defence and has a fantastic reputation for providing world-class capabilities. Thomas products are found in the flight decks of commercial aircraft and military land, air and sea platforms, globally.

The company worked with the Centre for Defence Industry Capability, which provided assistance through the Global Supply Chain programme and Team Defence Australia. 

The Global Supply Chain program is a proven success in providing entry into global prime platforms.

Similarly, Team Defence Australia offers a great avenue for small and medium enterprises to attend trade shows and missions under its banner. 

This gets companies on to the world stage and into direct contact with customers and other companies.

Such support has helped Thomas Global Systems enter international markets. It has given the company confidence in making its own considerable investments in research and development.

We want more globally competitive companies creating Australian jobs and ensuring the sustainability of our defence industry.

Of course, for the foreseeable future, Australia will continue to acquire many of our major platforms and systems from the United States and our other international partners. 

Their high-tech capabilities are vital to the Australian Defence Force’s success and our inter-operability with our allies.

We welcome international prime suppliers in Australia. 

Not only do they assist in delivering the advanced warfighting capability we need, they also bring intellectual property, expertise and investment here.

This in turn creates Australian jobs, enables knowledge transfer, and provides innovative small and medium enterprises with access to global supply chains and export opportunities. 

We want more from our international partners and contractors, we want them to help us transition.

We understand the power of our defence investment in transforming our defence industry and delivering sustainable, long-term jobs for Australians. We intend for it to accelerate our growth in advanced manufacturing. 

We have recently strengthened the Australian Industry Capability Program to maximise the opportunities available for Australian industry to participate in major capital equipment projects.

We want Australian industry involved upfront, so we can ultimately transition overseas supply chains to Australia. 

The program will also drive greater investment in research and development, help embed small-to-medium enterprises in global supply chains and encourage technology transfer.

The strengthened Australian Industry Capability program is now being used across our major capital equipment procurements of 20 million dollars and above.

We are also making a major investment in innovation, providing more opportunities to harness the best Australian ideas.

1.6 billion dollars has been committed to boosting the capabilities of defence industry and innovation over the next decade, including 640 million dollars to support the development of innovative technologies through the Defence Innovation Hub.

The Hub has been greeted enthusiastically with over 300 innovation proposals since it was launched last December.  More than 13 million dollars worth of innovation contracts have already been signed off with Australian industry.

Such innovation is vital to our long-term success in translating world-class technologies into warfighting capability and advantage for the ADF.

I might now turn to naval shipbuilding.

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The Turnbull Government is making a record 90 billion dollar investment in naval shipbuilding here in Australia.

For decades, Australia’s shipbuilding industry was plagued by boom and bust cycles that prevented industry from achieving its potential.

Under six years of Labor, not a single order for a naval shipbuilding vessel was placed with an Australian shipyard.

That era is over.

The Coalition Government’s Naval Shipbuilding Plan commits to a long‑term continuous build program. It includes the delivery of 12 submarines, nine frigates and 12 offshore patrol vessels, and 21 Pacific patrol boats for our neighbours, and runs from now until the middle of this century.

In short, we are on the cusp of a naval shipbuilding boom. By the middle of the 2020s we will need more than 5000 workers just in Osborne working to build the Future Frigates and the Future Submarines. We will need quadruple that number again across the supply chain.                    

Benefits from the Government’s record investment have already started to flow. Recently Hoffman Engineering were chosen by Fincantieri Australia to provide the bow thruster to the Landing Platform Dock for a Middle Eastern Navy. This is the start of work which could lead to up to 250 million dollars worth of work for Hoffman Engineering over the next five years.

Under the plan, we are strengthening the capabilities and capacity of Australian industry, providing greater opportunities for small and medium enterprises. We are supporting technology transfer from international ship designers and builders to Australian companies.

This is truly a national endeavour, and to succeed we will need the expertise and resources of industry, every state and territory, and the education and training sectors.

Our Naval Shipbuilding Plan will not only deliver the ADF the naval force it needs, it will also help secure the economic future of the Australian defence industry.

That, as I cannot say often enough, helps secure Australia’s strategic position and the economic future for every Australian.

Australian workers will undertake this national endeavour, in Australian shipyards supplied by Australian resources. 

We look to our industry to step up in its capability, productivity, and innovation to help deliver this far-sighted continuous shipbuilding program.

Future steps

The Government will release the Defence Industrial Capability Plan early next year, outlining the Government’s ten-year vision for growing defence industry.  This is a very exciting step.

The Capability Plan is designed to give industry the tools to help inform its future decisions, and will outline our initial Sovereign Industrial Capabilities.

These are the industrial capabilities so vital to Defence’s operational mission that they must be developed and sustained by Australian industry.

They must also be technically and commercially feasible for Australian industry, and affordable to pursue.

Of course, not everything will be identified as a sovereign industrial capability.

In today’s global environment, Australia – indeed no country – can be entirely self-sufficient, and even if it were technically possible, we couldn’t afford it.

The sovereign industrial capabilities will be a subset of a defence industry policy that focusses on maximising opportunities for Australian industry to meet all of our defence capability needs.

This plan is another step in the Government’s broader defence industry policy. It strives to expand domestic involvement across the acquisition, operation and sustainment of our defence capability.

Positioning us as a high-tech manufacturing nation rests on our ability to develop and export globally innovative products.

This is why the Government will release its Defence Export Strategy by the end of this year. The strategy will provide a comprehensive roadmap for our defence industry to enjoy greater success overseas. 

This is critical to our objective of building the resilience and sustainability of our defence industry to meet our capability needs, and to securing long-term growth and jobs for Australians.

Conclusion

As ever, Australia’s position in the world is shaped by global economic and strategic forces often outside our control. 

It is also determined by the decisions we make as a nation.

I have sought to demonstrate that the Turnbull Government will not be sitting on its hands, pondering what it might do to secure us strategically and economically. We are taking action.

We are actively, unapologetically, leveraging our Defence investment to ensure the country’s economic prosperity.

This will be complex and difficult.  It will attract critics. So it will require not only the Turnbull Government, but industry and opinion leaders such as yourselves and CEDA to ensure this vital mission unfolds as it should.

I know that all in this room are equally invested in securing a competitive and secure position for Australia, in its region and the world, for the decades to come.

Thank you for joining me in this great national enterprise.

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