In Conversation, The Submarine Institute of Australia Conference, Adelaide SA

MICHAEL FITZGERALD, HOST: Thank you. Well there’s been much change since we last spoke in Canberra. But before I start, we just really want to thank you. You’ve been attending these conferences since 2016, I haven't got the SIA bots on the job to review accuracy, but I think you've probably addressed the conference more than anyone else. Always stimulated informed debate, which is our mission. And when I think back to your time, both in opposition and government, they’ve always been most valuable contributions to this conference. So if we don’t get time at the end I wanted to thank you at the start.

RICHARD MARLES, DEPUTY PRIME MINISTER: Well thank you, Michael. And can I thank SIA and all of you, for the contribution really, that SIA makes and this discussion makes to thinking around what is a hugely – well actually the most important platform, most impactful platform that we operate. And I think in thanking you just say that, you know for me, addressing you over the years has been a huge part of my learning experience. Obviously before I became the Shadow Minister for Defence back in 2016, I knew very little about submarines. I'm not professing that I'm an expert now, but I am much better informed today because of my interactions with you. And so let me thank you for that.

FITZGERALD: Thank you. So at last year’s conference, you actually introduced impactful projection, and we were most grateful for that, helps with the publicity for this conference. And we are now privy to much more of the how. The public versions of the Defence Strategic Review, and the nuclear-powered submarine taskforce report, and your government’s response are now both on the record. And no doubt the recently released Intergenerational Report, your government's priorities around tackling climate change, managing our economy, creating jobs in a challenging environment, reform of the public service, the list probably goes on, are all going to be supported by impact, be shaped as we move down this pathway. We've convened this conference with a focus on science, technology and engineering. We definitely are trying to focus on the opportunities that that actually unlocks in a program like this, both for the program and for the nation, as well as addressing the risks. So I'd like to start with your Deputy Prime Minister's hat on and look at the broader picture. And wondering if you might want to explore some of those relationships, the broader government priorities. I mean, quite obviously, the jobs and skills in a challenging environment is an obvious one, and how this program will contribute and how your initiatives in that area going to contribute to the program?

MARLES: Yeah. And it's a really good question. And the Intergenerational Report, I guess the drumbeat of that is every five years, so it's a report that's been done by governments of both persuasions, but it is an opportunity for us as a relatively new government to be thinking more long-term over the next five years. But obviously, it invites us to look more long-term and that – intergenerational. And I think the challenges for – well firstly there are a number of challenges which the Intergenerational Report identifies in terms of pressures that the country will be facing – pressures, changes; an aging population, the (inaudible) growth in the care economy that will come from that, the transformation in technology, particularly digital technology will transform the country in which we live, and all of that happening against the backdrop of climate change, but in the in the national security defence space, a more challenging and complex geostrategic landscape. I think in the broader sense, you know, we talked a lot about this in the lead up to the election, and our challenge, our economic challenge, as a country is to climb the technological ladder. It's really to infuse our economy with science and tech. We have over the last few decades become an economy which has primary industries at its center – that's fine, primary industries that are really important for our country, mining, agriculture are really critical. But we definitely need to have a more complex economy where we are focusing on the kind of human capital side and that does mean having more – doing more science and tech, having more training within our economy, building our human capital. And so you'll see a range of policies that we've got in place in respect of that, increased number of university places, specifically in respect of AUKUS, and us acquiring a submarine capability. The fee-free TAFE. All of this is about trying to build the country’s skill base, so that we then walk down a pathway of a more complex economy, the National Reconstruction Fund, is part of this as well, a more high tech economy.

Now, if that's the broad kind of direction that the nation is going, really thinking on the basis that where goes modernity, so goes prosperity, and we should seek to be as modern as we can be, that means kind of a technological ladder. Well, then you get to this program, which will be a flagship. I mean, building a nuclear-powered submarine will involve the most complex industrial production line which exists in the world today. And what we will see here in this city in Osborne, which is that production line, it will rank alongside Electric Boat, what Huntington’s do in the US, what BAE does in Barrow in the UK, this will be the most high-tech production line we will see. It will see massive skills uplift, it will see a massive technological dividend to the broader economy. So this is going to be one of the great Australian industrial ventures we have ever seen. But all that rolls off the tongue pretty easily, what that then means is there's a whole lot of challenges which go with that. And first and foremost is to get those skills, you know, the human dimension of the part of acquiring the nuclear-powered submarine capability, I actually think is the biggest challenge, both in terms of Submariners who operate it, but the industrial base to build it. And, you know, we've talked about having the Skills Academy here at Osborne, we haven’t really focused on this, but I don't want to understate how enormous this challenge is and that occupies a huge focus of our attention.

FITZGERALD: Something that’s come out of the discussion both in this room and in previous days, (inaudible) our American colleagues that we can look at the capacity issue and we’ll probably still underestimate it. It’s such a hungry beast this type of program.

MARLES: Correct.

FITZGERALD: Perhaps going a little bit closer to your own portfolio in Defence, date check so we can have talk about it next year, the independent analysis of the Navy surface combatant fleet is due with you by the end of this month?

MARLES: Well, so I said earlier this year that we will get this review before Geelong won the Grand Final. Some have now said that, okay, so we've got four or five years before we get that. The spirit of that comment was that we would get this done by the Grand Final, which is Saturday week, and that's on track. So we expect to receive the independent assessment by the end of next week. And obviously, we've been talking with the surface fleet review team, so that's not going to be a surprise to us, we have a sense of what's coming. And in that sense, when we announced it coming out of the DSR, we said it would be a, you know, relatively short, sharp review and it has been that. And we're very thankful to the review team and the work they’ve done. What now? Obviously, it's the government's response to that. Our intention is to provide our response to that, meaning the decisions which come from that, in really the first part of the first couple of months of next year. We’ll try and get this out the door as quickly as we can, but that's essentially the timeframe that we're working on. And in the process of providing that government response, we’ll obviously – I mean, a lot of the review exists in the classified domain which people will understand, but we will provide as much of the review as we can at that time.

FITZGERALD: So we’ll put that one down before GWS win the Grand Final?

MARLES: They’re a show. They are a big show. But you know, I understand it's quite a sore point in this town so.

FITZGERALD: I think a lot of you spoke at the industrial base, and so I think the other side of the DSR that people in this room are most interested in the progress of is the Defence Industry Development Strategy, and whether we’re going to see that by the end of this year (inaudible)?

MARLES: Yeah, well, that remains the plan. And that's being led by Pat Conroy. In the, I guess, coming to government and really trying to do what ultimately has been a pretty comprehensive assessment – reassessment, if you like – of where Defence is at and the direction that we seek to take Defence going forward. This was a really important companion piece to the DSR and to the announcements that we made in relation to AUKUS and the pathway for acquiring a nuclear-powered submarine earlier in the year. So the plan is that that will be released by the end of this year. I mean at the heart of that, it ends up being a longer conversation and it will form part of what is ultimately said, but coming out of the DSR really is a call which is exactly right, and I think people in this room will feel it, that we need to have a procurement system and with that a relationship between procurement and industry, which gives rise to a much quicker and more nimble procurement process.

Now, I'm really mindful that people that have sat in this chair over a long period of time have been uttering those words. And I think industry would say that it is not a quick process, and so those words coming from me now may also be seen in the context of that long history of defence ministers saying this, so I don’t ask you to judge me on me saying it, judge us on whether we put this in place over the course of the next few years. But the only point I make is that we are not going to meet the moment, I mean by that the strategic moment, unless we crack this nut. I mean, we have got to get our procurement processes happening in a faster, more nimble way, and at the heart of that, this will be in the defence industry report as well, is a greater acceptance of this. And I think, I was having a conversation on exactly this earlier today, but you know, at the highest level I think there is a sincere acceptance of those principles across Defence. The much harder point which is what must be managed if things are to change, is what that looks like in practice. What does that mean, when we say that there needs to be a greater acceptance of risk? What does that actually look like? What decisions and steps does that mean people will take in a way that will be different to what has happened in the past? I think there is some culture here which needs to be changed, there are some processes which needs to be changed, but there must be change. I'm really mindful of that, and we're really mindful that all the words in the world said on a stage such as today is fine, but you've heard it all before. What makes a difference is if we create a difference, and that's what we intend to do.

FITZGERALD: And industry policy has been a bit of a journey over many decades. But the one thing I will say is you've asked the right questions (inaudible) the quality of the answer is something I think most in this room will be looking at very closely, because they’re the right questions, but not necessarily easy questions.

MARLES: Well if they were easy questions it all would have happened – well put it this way, if the answers were easy, it all would have happened. I mean, I think we are asking the right questions, but I also think others have asked these questions in the past as well. So you know, I suppose what I'm trying to convey is we come to this with some humility. I mean, this isn't easy. But, you know, I think the difference now, relative to those who have sat in my seat in the past, is the, I guess, the urgency, but the seriousness of the strategic landscape that we face today. You know, I've probably said this when we last met, but all of us in government, but I think particularly those of us in the national security space, really feel the consequential moment in time in which we've come into power. You know, there's a heavy weight to that, really. And because a lot of these things that we're currently thinking about, it'd be better if we could do X or Y, now we really must do X or Y. It’s a difference, the weight of the moment is what we actually must respond to, but the weight of the moment is actually what I hope does drive change.

FITZGERALD: And I think that's a great segue to talk about submarines and impactful protection, the big question mark moving forward. But also, just this morning you’ve talked about the immense challenge and complexity of a nuclear-powered submarine program, and the immense sense of urgency. And no doubt you'll be aware of an article today in The Australian, claims that nothing much is happening about AUKUS in the political universe. But likewise, earlier in this conference, we’ve heard the quickest way to build a workforce is slowly. And so there's going to be this ongoing constant tension between balancing the need to hasten slowly, you know to do things right, and to get it right. So (inaudible) we're going to be setting up systems, processes and tools, and you have arrangements and fora, which are absolutely necessary moving forward. How would you see – what would you say to the delegates in this room whether they be from academia or industry, about how to continue to prepare for the next phase of the journey, as we move out of this preparation phase?

MARLES: Yeah. Firstly, criticism is important it forms part of our kind of system of open government and that’s fine. And we will embrace it. But from our point of view, as a Government, all we can do is be as clear as we can be in terms of laying out the pathway, in terms of the subs, being clear in terms of the pathway that we are laying out, which we've done, or the timelines about that, which we've done so people can see. And therefore, people will also be able to see whether those timeframes and timelines are met, or whether they slip. And in a sense we have met that, well, I hope, very plainly and clearly. But we’ve very consciously done it in a way which does set up a framework by which we can be held to account. I mean, we have talked about making sure that we have an increased tempo of visits of nuclear-powered submarines to this country. As of now, that is actually happening. As every one of those we've had – in December we had USS Mississippi, in March we had the USS Asheville, a month ago we had the USS North Carolina – two Virginia class, one LA class submarine, but all nuclear-powered. Each one of those has involved bigger kind of parcels of work that Australian personnel have engaged on them, which is the pathway to building familiarity with the machine, with the capability. That was the most immediate step, it's happening, we're doing it. We're talking about having the submarine rotation in place in the latter part of this decade, people will see whether or not that happens. We're talking about having an Australian flagged Virginia in the first part of the next decade, again, people will be able to see whether that happens. So, you know, it's there for all to see, we've done this consciously, we haven't set a trap for ourselves. We're trying to set up a construct where we as a government and governments in the future can be held against that timeframe. And so I guess from an industry point of view, you can look at that and make your own judgments.

I suppose having done that, and then being the initial government to try and meet that timeframe, what I would say to you is that, again sitting in my chair, that I feel that the time pressure acutely. This does not feel like we've got forever and a day to do this, it feels like we need to be getting our skates on right now. Questions around infrastructure in WA which will allow this to move forward at a pace, questions around the consolidation of Henderson and the strip which was one of the recommendations coming out of the DSR must happen, must happen quickly. Or you know, how do we organise WA in terms of evolving that operational capability won't happen on time. Here in South Australia, making sure that we've got the physical infrastructure in place to get the land and the site at Osborne in a position where we can start to build. All of these, you know, there are negotiations going on in respect of everything that I've just said, and decisions being made constantly in respect of all I’ve said so that we keep to the timeline, because one of the things that's really clear to me is if we start losing that timeline early on, the whole thing blows out. Now, in fact, right now, we have – well first thing to say is we’re right at the start. But the things we said we would do is that we have done, and they are there. So we've laid out a map, we've given the first step, we've taken the first step, and we’ll take the second step. And people will engage in the criticism as we go along, as they should, and that's fine. But from the Government's point of view, we will maintain our pace and our adherence to the timeline and the pathway.

FITZGERALD: So I'd like to open the floor to questions. While they think of one, we just don't want to forget Collins. Because as we’ve heard as recently as this morning, the optimal pathway is through Collins, it is not replacing Collins and, you don't actually hear a lot about LOTE anymore. I'm sure the work's all going on behind the scenes, but there's all sorts of things being talked about. Are you happy with the progress of LOTE, is it happening as you'd like?

MARLES: Yes, it is. I mean, I don't want to be kind of flippant about that either, because you're right, extending the life of Collins is a critical part of the pathway to acquiring a nuclear-powered submarine in a manner in which our submarine capability evolves, as in, increases from this day until we have the full fleet of Australian-built, nuclear-powered submarines. And so, the life of type extension of Collins is a fundamental element of this. And it's complex.

FITZGERALD: You talk about the second and third step (inaudible)

MARLES: Totally right.

FITZGERALD: And once it’s in the water

MARLES: And so an evolved and fully capable and better (inaudible). So the answer to your question is life of type extension is absolutely happening. It is on track, there is a lot of work going on to make sure that it happens at the pace that it needs to happen, and that it does deliver that evolved capability as we go forward. You know, that that will require as much attention as anything else that we are doing in terms of the journey of evolving capability. And I want people in this room to understand that we see this as, as a deeply serious element, right now.

FITZGERALD: I think there's some feedback that I took all the time last time, so I’ll opened to the delegates now. And we’ll just use the microphones today. So if there are any questions, just wait till the microphone comes to you.

QUESTION: Good morning, Deputy Prime Minister (inaudible). BAE systems have described a nuclear-powered submarine as a vessel more complex than the US space shuttle. Clearly that requires some global talent to start the Australian program, from the AUKUS partners. Is the government looking at producing or developing a visa that might attract the talent from the UK and America? And also looking at the security implications and clearances for those personnel to work in the program?

MARLES: That's a really good question. So I’ll come (inaudible) specifically not answer the question about visas. Let me more generally say that it's a really good question. We don't get this capability without a very close interaction with BAE but with the US as well. And that is happening right now in both directions. And you and I guess, I suppose the, in raising the question about visa, you're implying people movement, that's totally right. There's going to need to be people moving, again, in both directions so right now we've got Australian submariners, for example, during the nuclear propulsion course, naval reactors in the US, they’re doing really well. So that’s submariners, but we will be looking at exploring ways in which this will happen. And we’ve been talking with our American and British counterparts, how people throughout the kind of skill spectrum, you know, from training through PhDs, can have the opportunity to work in the US and the UK on their programs to gain those skills. But equally, you know, you're right, we are going to need to be getting the talent from both countries, from the US and the UK, applied to the production lines that we've put in, that we'll build here. And then I think there’ll be a dimension of that inevitably in relation to sustainment as well. So I suppose the sort of high-level answer of your question is, we definitely understand that we need to be looking at talent from overseas as well as developing our talent from here. There is a people movement piece which is implied in that and we are thinking very carefully about how we put that in place. And there are discussions that we're taking, we’re having with both the US and the UK.

QUESTION: I’d like to pose a question to you that (inaudible) at least two weeks ago, namely that there appears to be quite a bit of concern here in Australia, as to what happens when you begin to retire your Virginia-class boats, 30-35 years down the road. The current agreement appears to be that the nuclear waste will have to be disposed of here in Australia. And the US had already has the infrastructure to do that sort of thing whereas Australia would have to start from scratch. And it would seem more efficient, if that waste could be disposed of in the US. Is there any chance that negotiation be reopened?

MARLES: I don't think so. I mean, (inaudible) I certainly understand the point that you're making. To be frank, they were all conversations that were had, during the course of making the announcement that we did in March, but we've had those conversations, we've reached agreements, we made the announcement March, and we're proceeding on that basis. And that does involve Australia being responsible for the disposal of the reactors of the Australian-flagged Virginias that we operate. So we are moving forward on the basis of developing that facility and that will, it's not just the reactors in relation to the Virginias but ultimately the reactors that come out of the submarines that we build here in South Australia as well. So we're going to need to have a waste facility which can deal with reactors (inaudible), we have some time to put this in place. Again, that time elapses much quicker than people imagine. We are very focused on thinking through the process by which we will ultimately determine a location. I think the hardest part of this and (inaudible) building the facility that goes with that. Australia has some natural advantages here in terms of being both politically and geologically stable. And so I think that one can think through how to do it (inaudible) Clearly this will happen on Defence land, be it part of the current defence estate or the future defence estate. We are absolutely walking forward on the basis of being responsible for this at the end of the day, and a point that was made which I think is a point that we accept, the responsibility of being a nuclear steward is profound. That's what we are going to be in terms of operating this capability. We take this very seriously. And part of the responsibility that goes with being a nuclear steward is to be responsible for, to be responsible for the ultimate disposal of that high-level nuclear waste. We've set that responsibility as well.

QUESTION: Minister, thank you, Sarah (inaudible) and also I sit on the National Board of the Australian Industry Defence Network. I think you've got a great challenge ahead of you both scaling up to the very long term nation-building initiative and plugging the more urgent gaps that are called out in the strategic review. Given that Australian sovereign industry is an instrument of national power, and small to medium businesses can provide that connective tissue to help scale up both in the short and the long term, how is government thinking about addressing the issues that those small and medium businesses are facing today, many of whom are losing confidence in the defence sector, particularly in the dual-use case, and moving into to other industries?

MARLES: Good question again. I’d certainly accept that a lot of the premise of your question which is that I completely accept the idea that our defence industry represents one of the sovereign assets that we have, and the medium and small businesses in this sector form a really important part of it. And I would say an important part of the kind of contribution of Australian ingenuity to our defence industry landscape. I guess by that, I mean, you know, we have a number of international primes who are here (inaudible) playing a very important part in building the capacity of our (inaudible). I think a lot of the ingenuity of Australian business we see in the defence industry space does come from small and medium enterprises, and companies which employ under 1,000 people (inaudible). And they can be quite small and still do amazing work in terms of their inventiveness. And all of that is really important. It's important because, as I've kind of articulated over a long period of time now, it seems to me that why defence industry matters, and why we should be a part of it, why Australia should be a part of it, goes to the opportunity of exporting Australian know-how, and therefore working very closely with the defence industries of other countries and the strategic opportunity that that provides. And I think our small and medium enterprises are a really critical part of that. So I accept all of that and we will talk more about this in the defence industry economic strategy, but and again, these are things I've said in the past, Defence is a very big animal. Sometimes it doesn't play well with smaller animals. And we've got to kind of, you know, and it's kind of understandable. It is a massive animal. And it's, you know, it is easier, kind of conceptually easier for Defence to be operating with other big companies to do whatever is going to be done. But we simply have to come up with ways in which we, through our procurement and the way in which Defence engages, we are able to foster the sector that you've described, because I think it is a really critical part of the Australian landscape. Now, there are some really spectacular examples of Australian companies, which I would say that employ less than 1,000 people who've done amazing things and have had a great journey in terms of their relationship with Defence. So I wouldn't suggest that it never works. That's not right (inaudible) but it's just to say that we do definitely need to harness that part of our defence industrial base if our defence industrial base is going to be the sovereign asset that we want it to be. So, again, there’s sort of a lot of detail that will come out in relation to that. But the need to do that is very clear.

FITZGERALD: I think we have time for one last question if there are any.

QUESTION: Minister, is that the Australian Submarine Agency has been set up in a very timely and effective manner. We now await the nuclear-powered submarine safety regulator. Would you please confirm that it will report directly to the Minister for Defence and will be quite independent from the Department of Defence in other respects and of course from the Australian Defence Force?

MARLES: I want to give myself some wriggle room in terms of the absolute way in which you ask that question. So I'm trying to formulate the phrase which will give me the wriggle room. In essence, what you've just said is right, it will be independent, and it will be independent of Defence. And it will report to the minister. We are working through the precise kind of governance arrangements associated with it. Perhaps this is the way to put it. We are working through the precise governance of it so that it meets the spirit of what you asserted in the question. And what you asserted in the question is exactly right, that is how it needs to operate and what it needs to be. I hope I kind of answered that in a way which (inaudible) there’s a bank of TV cameras down there which have recorded every word I've just said.

FITZGERALD: Chris does ask questions (inaudible).

MARLES: It was a very good question. And the spirit of it is 100 per cent right.

FITZGERALD: So I think I think our time unfortunately has come to an end. But just very briefly, thank you for being here (inaudible) we really appreciate you supporting us. I enjoy hosting you and we hope you're back to another one of our events very shortly.

MARLES: Most definitely.

ENDS