Prime Minister, Minister for Defence, Minister for Defence Materiel – Joint Press Conference – Canberra



DATE: 3 May 2012

TOPICS: Defence White Paper; Defence Force Posture Review; Budget; Asylum seekers; Peter Slipper; Carbon pricing; Minerals Resource Rent Tax

PM: I’m very pleased to be here today with the Minister for Defence, Stephen Smith, and with the Minister for Defence Materiel, Jason Clare, to make some important announcements about defence policy and defence capability.

First today we do want to announce that the Government will shortly begin work on a new White Paper and that White Paper will be delivered in the first half of 2013. Now that is around a year earlier than expected. The last defence White Paper was published in 2009 and at that time the Government committed to publishing defence White Papers around about each five years or at intervals no greater than that.

As the 2009 White Paper underlined, defence planning, by its very nature, is a complex business. You’ve got to make careful judgements about Australia’s long term defence needs but at the same time you need to weigh those judgements against shifting circumstances and changing demands and that’s why it is right, periodically, to redo the White Paper.

In 2009, when we did the White Paper we recognised that we would need to periodically and rigorously review the mix and scale of our capabilities to make sure that they’re always appropriate to changing strategic circumstances. Reviews of this nature are essential to our defence planning.

The Government is committed to delivering one of the most capable Defence Forces in our region with the people and equipment we need to do the job. We will deliver the core capabilities identified in the 2009 White Paper, including the Joint Strike Fighters, the new amphibious ships, the new submarines and our air warfare destroyers.

These are enduring threads in our defence policy but equally there have been a number of significant developments domestically and internationally since the last White Paper was published which makes it right to start work on a new White Paper now.

First, the strategic shift in our region described in the 2009 White Paper has continued as global weight has moved to our region of the world. Second, we now know far more clearly the transition time frames for our mission in Afghanistan and our drawdown in East Timor and the Solomon Islands. Third, we now have the Defence Force Posture Review which the Government is releasing today. Fourth, at the time of the 2009 White Paper the global financial crisis was still unfolding, as were its strategic impacts. We need to take stock of those impacts for our defence arrangements and for the Defence budgets of our key defence partners, our allies.

We also need to keep driving the defence reform program and to take stock of what it has achieved and we need to focus on ensuring that we retain the skills in Defence that we need in this stage of our Australian economic growth.

So, for all of these reasons, these six reasons, we think it’s important that we take an opportunity to review our strategic settings and our force structure planning earlier than the first half of 2014.

Now, I recognise that making this announcement today and in recent days there’s been a lot of speculation about Defence matters in the run-up to Tuesday’s budget, and that’s understandable.

The Defence Minister will be making some remarks about capability. We are not dealing with specific announcements about Defence funding in the budget today but I do want to make clear, as Minister Smith has said on more than one occasion, that Defence will be making an important contribution to the Government’s fiscal objectives.

I also want to be very clear today that this contribution has been carefully designed to protect our servicemen and women and our Defence operations and to minimise the impact on core project capabilities. In particular, the budget will protect our men and women on the frontline. They will get all of the kit and support that they need.

Second, there will be no impact on any of our overseas operations including Afghanistan, East Timor and the Solomon Islands. Third, there will be no impact on the equipment provided to ADF personnel on deployment overseas. Fourth, there will be no impact on ADF numbers. Fifth, there will be no impact on entitlements except where changes might already have been recommended under the strategic reform program and in relation to capability, as I’ve said, the core White Paper projects will continue to be delivered, with some savings coming from delays in capability projects that have occurred for reasons other than the budget and Mr Smith will outline those.

I want to briefly mention two matters and then I’ll turn to Minister Smith.

First, the Government is releasing today the final report of the Defence Force Posture Review. This is an important review assessing how our forces should be postured and what might best support operations in our northern and western approaches. The recommendations from the report will form part of the input to the new White Paper.

And finally, the Government is committed and remains committed to acquiring 12 new Future Submarines to be assembled in South Australia. In our strategic environment we need strong maritime capabilities and that’s why we need a potent submarine force. This is a project which will unfold over decades but the early decisions on design questions particularly are the most critical. Today we are announcing that the Government has committed $214 million for the next stage of the Future Submarine Project.

That funding will go to essential studies which will inform the Government’s final decision on submarine design and workforce requirements for this very complex national endeavour which would be the largest procurement project the nation has ever undertaken.

I’ll turn now to Minister Smith for some comments and then to Minister Clare and we’ll be happy to take questions.

MINISTER SMITH: Thanks very much, Prime Minister. As the Prime Minister has said, three significant announcements today, firstly, the bringing forward of the White Paper to the first half of 2013, secondly, the start of the most significant Defence and capital works project that Defence and the Commonwealth has seen and, thirdly, the release of the Force Posture Review.

So far as the White Paper is concerned, as the Prime Minister has said, there are a range of important strategic reasons why it makes sense to bring forward the White Paper to the first half of 2013. There’s a continued strategic shift to our part of the world and, in part, that’s reflected by the United States’ decision to not just continue but to enhance its presence in the Asia-Pacific, reflected in part by the Global Force Posture Review arrangements that we have with the United States but they’re also working with Singapore, the Philippines, Japan and other countries.

Secondly, there’s the drawdown from Afghanistan in an orderly way, in accordance with the International Security Assistance Force transition process but there’s also an expectation and a likelihood of a drawdown from East Timor and the Solomon Islands – our stabilisation forces. So how do we address the aftermath of the drawdown from these operations, in particular a land-based expeditionary force in the Middle East for a decade?

Thirdly, the Force Posture Review which draws attention to possible perception that the first priority of the 2009 White Paper, Defend Australia, a perception that that has not necessarily had the prominence that it needs to and whilst there’s no recommendations for wholesale additions of bases there are very strong recommendations about better capability, better logistics, better resources to our north and to our west, to our northern approaches and our western approaches, Fleet Base West, or HMAS Stirling and our Army, Air Force and Navy resources in the north-east, the north, and the north-west.

And finally, there are of course the implications from the global financial crisis which the 2009 White Paper described as unfolding and we’ve seen that occur.

We are very well-placed to do a White Paper over the next 12 months. The 2009 White Paper was the first White Paper since 2000 so that took a considerable effort and that nearly decade-long gap was the reason why we committed ourselves to White Papers over a period not greater than five years.

There are a range of inputs into a White Paper. The Defence Planning Guidance, which is an essential part, has been completed by Defence and is awaiting government consideration. The Force Posture Review has been complete and is released today. The Defence Capability Plan has been reviewed exhaustively including in the context of the current budget.

The budget review which we instituted after Defence’s $1.6 billion underspend has also been completed. The Force Structure Review has commenced. It commenced in November-December of 2011. That is always the last piece of work into the White Paper process so we are very well advanced in terms of completing the White Paper on a 12-month basis.

If I can just indicate by way of aside that, as was the case with the 2009 White Paper, there’ll be a ministerial advisory group to assist on the White Paper. I’ve asked Allan Hawke and Ric Smith, two former secretaries of the Department of Defence who were engaged in the Force Posture Review to help. I’ve also asked Paul Rizzo, well known contributor to corporate Australia but who also has played a leading role in Defence in the Strategic Reform Program and effectively wrote the Rizzo Report on our heavy amphibious lift difficulties, will also form part of that advisory group.

I’ve indicated to all three that if they believe they need any assistance then I’d have an open mind about adding to the ministerial advisory group.

The Prime Minister invited me to make some comments about capability and let me put the capability of the 2009 White Paper in its proper context.

The 2009 White Paper had with it a 2009 defence capability plan. That included some 180 projects. Of those 180 projects a small number, about 10, are no longer being carried out. They have either been cancelled or they have been stopped. The main reason for cancellation or stoppage of those 10 projects is that their capability has been overtaken by the scope of another project so there is a very small number of capability projects in the Defence White Paper 2009 that are not currently progressing and so the vast bulk of capability from the White Paper continues through the system.

As the Prime Minister has indicated, all of the headline capability, the core capability in the White Paper, whether it’s Joint Strike Fighters, whether it’s submarines, whether it’s landing helicopter docks, whether it’s air warfare destroyers, whether it’s Caribou replacement, all of these continue in the system.

Last year we approved 49 projects, 49 projects, a record number of projects, beating the previous record, 36, in 2006. Since the 2009 White Paper was published we have approached $13.5 billion worth of projects and that includes projects and capability that we have added to the 2009 White Paper – two C-17s, HMAS Choules and the Skandi Bergen, our two offshore vessels to assist with humanitarian assistance and disaster relief and over 100 Bushmasters with the potential for more.

And so suggestions that somehow the capability planning in the 2009 Defence White Paper has not been met or is not on track, in my view are wrong.

Let me make some remarks. The Prime Minister has said that we won’t be talking about the budget but she’s invited me to talk about some capability, to inform you of some capability implications that arise as a result of our budget processes.

Firstly, so far as the Joint Strike Fighter project is concerned, you’ll recall that I’ve been saying for some time that we’ll do a number of things. Firstly, we won’t allow a gap in our air combat capability to occur. Secondly, we would make a judgment in the course of this year about any risk to the capability gap. And, thirdly, we’d make a judgment in the course of this year about the timing of the placing of orders for our first 14 Joint Strike Fighters.

We are contractually committed to two and they will be delivered in 2014-2015 in the United States for testing and training purposes. We have previously announced a commitment to purchase another 12 and that commitment will occur but it will occur two years after the previously anticipated timetable. That effectively mirrors the decision which Secretary of Defence Panetta made with respect to over 150 Joint Strike Fighters proposed to be ordered by the United States.

So we are now essentially on the same timetable for delivery of our first batch of Joint Strike Fighters as the United States is.

The budget effect of that is that it takes out of the forward estimates for this year’s budget between $1.5 billion and $2 billion. In round terms it’s about $1.6 billion. So that is an example of where a move, a delay, a deferral of a capability has a significant budget impact.

We remain committed to the Joint Strike Fighter project but we will see the delivery of our first 12 Joint Strike Fighters two years after the previous estimates at a net benefit to the budget of $1.6 billion, putting us on the same timetable, effectively, as the United States.

There is one other project which in the budget context the Government has decided in part not to pursue. We have a project in the White Paper, the 2009 White Paper, with respect to artillery. Part of the White Paper commitment was to have some self-propelled artillery. The Government is not proposing to proceed with the self-propelled aspect of our artillery project. We will of course continue with towed artillery which is also able to be carried by our Chinook helicopters.

That will be at a saving to the budget of some $225 million, a quarter of a billion. That project has had some difficulties and we’ve made the decision advisedly that we will not proceed with self-propelled artillery.

Two other important aspects of the budget in terms of capability. The budget will still allow the Government to make an advised decision in the course of this year with respect to the electronic warfare capability, the Growler. And so the budget allows in the course of this calendar year the Government to make such a decision, as it does the replacement to the Caribou, the tactical military airlift and you would have seen, those of you who follow these matters, interest expressed in the past by the proponents of the C-27 and the proponents of the C-295.

The Government is in a position in the very near future to make a judgment about these matters but the budget will not prevent the Caribou replacement from going ahead.

On White Paper matters, can I just mention in passing that this morning I had a telephone conversation with Secretary for Defence of the United States, Leon Panetta. We spoke about Afghanistan in the run-up to Chicago. I took the opportunity of indicating to him that we will be bringing forward our White Paper and explained to him the strategic reasons for that. I also indicated to him the tight financial and fiscal situation that we face and indicated to him so far as the budget was concerned there would be no adverse impacts which the Prime Minister has outlined.

I also indicated to him there will be no adverse impact for the work that we’re doing with the United States on their Global Force Posture Review, namely the marines in Darwin, greater, in due course, air traffic access, so far as our northern airfields are concerned and, third and ultimately, greater navy traffic through HMAS Stirling.

Can I move to submarines. We’re announcing today the next stage of the Future Submarine Project. As a general proposition, as the Prime Minister has said, this will be the largest defence capability project the Commonwealth has embarked upon and, indeed, the largest single capital works project that we have embarked upon.

Given the difficulties that we have experienced over a long period of time with the Collins Class submarine we are being absolutely methodical and exhaustive about our planning for this project. All of our experience is that 80 per cent of the problems in capability are caused in the first 20 per cent of the life of the project so we are being absolutely methodical about that and make no apology for it.

There are four options that we are now exhaustively considering: a military off-the-shelf option, which could be adopted to Australian regulatory standards; a military off-the-shelf option which might be complemented by Australian combat, communications and weapons systems; a derivative of the Collins Class submarine, what has been sometimes colloquially described as a son or daughter of Collins; and fourthly a brand new design. The detail of all of that work is in the materials presented to you and Jason may add to it.

Secondly, there is an indicative timeline which takes you through our current timetable for first pass and second pass which indicates that we expect at this stage by about 2017 to complete the second pass process which would enable construction to occur.

Finally on the submarines, as the Prime Minister has said, we remain absolutely committed to the 12 new Future Submarine Project to be assembled in Adelaide. We’ve also, over the course of the last 12 months or so, had exhaustive conversations with the United States about complementary and inter-operative submarines for security and strategic reasons and, secondly, we’ve had exhaustive conversations with the United Kingdom about assistance on improving our Collins Class maintenance and sustainment.

That’s seen the appointment of the Coles Review and we’re also announcing today that our general manager of submarines in the Department of Defence will be Mr David Gould from the United Kingdom. He will have responsibility both for Collins Class submarine maintenance and sustainment and the materiel aspects of the Future Submarine Project. As a consequence of that, we will use him in the submarine management area and the Secretary of Defence has decided – and I agree with his recommendation – to not proceed with the associate secretary capability position which we announced some time ago.

Finally on the Force Posture Review – and then I’ll hand to Jason for aspects of industry and training so far as the submarines are concerned. Finally so far as the Force Posture Review is concerned, what it does do is shine a light on the need for us to make sure that we are appropriately geographically dispositioned for the challenges of our future. That includes what we have in the north-east, what we have in the north, what we have in the north-west and also importantly what we have in the west at HMAS Stirling so far as our Indian Ocean fleet is concerned.

Those recommendations will now feed directly into the White Paper process and it has been the production of the Force Posture Review which has been one of those factors which in my mind has helped me come to the conclusion to recommend to the Prime Minister that we bring forward the White Paper. I’m sorry that’s taken a bit of time.

I’ll hand over to Jason who will deal with submarine matters, training and skills.

MINISTER CLARE: Thanks Stephen.

To build the new submarines we need to build a new industry and that will require hundreds of Australian companies and thousands of workers. It will require boiler makers and welders, electricians, naval architects, as well as system integrators. It’s a lot of work. It will require workers and the assistance of companies from overseas but a lot of it will be home grown. A lot of those skills need to be developed here in Australia.

In December last year, Stephen and I announced that we would develop a Future Submarine Industry Skills Plan and today I am releasing, with Stephen, the terms of reference for that work as well as announcing the team that will lead that work. It will be lead by Warren King, the Chief Executive of the DMO, with the support and the assistance of an expert industry panel. And that panel will be led by Mr David Mortimer AO.

You will know him as the former chief executive of TNT and the former chair of Leighton Holdings. You’ll also know – many people in the room will know that he is the chair of the Defence Industry Innovation Board that reports to me, and he is the author of the review into Defence Procurement and Sustainment in 2008 known to many in this room as the Mortimer Report.

I’ve asked him to lead this team and he’ll be assisted by a team of people including representatives from Australia’s major naval ship building companies as well as from Australia’s major military systems integrating companies. And their work is to work with the rest of the Defence industry with State Governments and Territory Governments around the country, with universities, academic organisations and think tanks to help us build a plan to build the skills to build for the next generation submarine.

It’s critical work. This is essential work to make sure that the Future Submarine Project is a success and I’ve asked them to deliver this report to me and to the Government by the end of the year and their work – their recommendations will feed into the work that’s being done on the 2013 White Paper.

PM: Thank you. We’re happy to take questions.

JOURNALIST: Prime Minister, I just wanted to ask a quite broad overview –

PM: Sure.

JOURNALIST: The Government always talks about the structural change going on in the Australian economy and we’re seeing (inaudible) particularly of workers and labour to Western Australia. There’s a talk of the shift globally in the economy. You’re putting together an Asian Century paper.

Is there a case at some point to bring all of this work together to look at both the economic and strategic shifts happening in the world – particularly in our region and what it means for Australia?

PM: Look, that’s a good question. And when we did the specifications for what we wanted in the Asian Century White Paper we were mindful that we didn’t want it to do the work that properly should be done in a Defence White Paper. That is, we didn’t want it to go through hard power capabilities that is the work of a Defence White Paper. But it will make some reflections on the strategic context in which we work and then this new White Paper coming out as it will in the first half of 2013 will then fill in that security picture.

So internally the two are being progressed knowing that, you know, there will be a landing point where the Asian Century White Paper comes out in the middle of this year in the same time frame that we are working towards the new Defence White Paper.

We’ll go – yes, and then to Phil. Yes Andrew.

JOURNALIST: Given the problems in the manufacturing sector and the fact that we are constantly talking about trying to push ourselves into smarter technology, is there a national interest case in ensuring that the – for example, the build of the submarines – the design phase and builders all Australian done so that it might actually inspire a new manufacturing base in Australia?

PM: Look, there’s a national interest case in getting this right, in making sure that the 12 future submarines are right for purpose, that we learn the lessons of the past in relation to the Collins on sustainment and maintenance questions as we go into what will be the biggest ever procurement project that the nation has undertaken.

So we’ve got to get it right. In getting it right, on any of the options that we choose for how the submarine will be designed, whether it’s military off the shelf all the way through to uniquely Australian designed, whatever option we take on that continuum work will be done in South Australia assembling these submarines and then of course there is the continued maintenance over their life.

So, this will be a big injection into manufacturing and into the development of our skills base and that’s good for manufacturing generally. Anything that is lifting skills in one part of manufacturing has the ability to flow through to other areas of manufacturing. That’s one of the reasons the car industry is so important to us. It uplifts skills which then flow through across manufacturing.

So, good for jobs, good for skills, good for the rest of manufacturing and good over time for Australia having some comparative advantage in this Defence work.


JOURNALIST: (Inaudible) the time frame for the sub. When do we envisage and actually look to construct, you know, the final one to be selected, the first one to roll off the dock?

And also, those budget cuts you just outlined about pushing the Joint Strike Fighter back and the self-propelled guns is that all of it or is there going to be more in the budget (inaudible)?

PM: Alright. I’ll go to Minister Smith on that. But can – on the question of when the new subs will be available and what does that mean for capability and for potential capability gaps, we’ve got a number of moving parts here and we’ve got to get all of them right. Moving part number one is the life of the Collins Class submarine. The last of those rolled off the production line – to use your terminology. It was commissioned in 2003 with a 28 year life taking you to 2031.

What we do know from overseas is that it is possible to extend the programmed life of submarines through appropriate sustainment and maintenance. The Americans have had some experience with that with their Ohio class submarines for example.

So, one moving part here is the life – the full life of the Collins. The other moving part is what option we go to for, you know, military off the shelf, modified military off the shelf, and evolved Collins – what Stephen referred to as son or daughter of Collins – or a new uniquely designed Australian submarine. Depending on what decision you make there your production times are different. So, we’ve got to get both right to ensure that we aren’t at risk of a capability gap.

I’ll go to Stephen on these questions and also on the budget question you asked.

MINISTER SMITH: Well thanks Prime Minister. The Prime Minister is absolutely right. The Collins fleet went into the water variously from 1996 through to 2003 and so the design life of type of the Collins was 28 years. And so the on paper life and type of the Collins takes you to 2031. Now, that’s the design life of type.

What we are currently in the midst of doing is to do an exhaustive assessment of whether the life of type of the Collins can be extended. The Prime Minister has said, for example, the Ohio class and I was on the USS Michigan in Stirling last week – has effectively been extended from 30 years to 40 years.

There’s also the factor which I have said before that regrettably the Collins has not been in the water as much as we would have preferred. So, there is that potential for firstly getting the operation days of the Collins better and extending its life. Then there is the choice that we make in terms of the four options we’ve put out there.

So those people who assert that automatically there will be a capability gap are in error. Yes, there was regrettably a capability gap between the Oberon and the Collins Class and we are working assiduously to do everything we can to make sure that there is no capability gap between the Collins and the future submarines.

JOURNALIST: Prime Minister-

MINSITER SMITH: Still got a second part. The second part, Phil to your question was will there be other things in the budget? As the Prime Minister said Defence will make a contribution to the budget bottom line, to returning the budget to surplus. So yes there will be more in the budget.

There is a general proposition, there’s a general rule of thumb. In any budget with Defence if there are movements, if there are savings, if there is an underspend invariably 50 to 60 percent of that comes from capability. And so when you see the budget you will see that there are a range of programs in the Capability Plan which have been delayed or deferred, not as a result of any financial or fiscal imperative but just because projects get delayed as a result of difficulties, as a result of industry difficulties, as a result of technological challenges.

There will be projects in the budget where our financial circumstances have said we have a higher priority. But I won’t go any further into that. I’ve given you a couple of very important ones.


MINISTER SMITH: What we have done with the budget is to make sure that our overseas operations are protected, no adverse implications, that our kit that we give to people about the deploy or deployed is protected, as a general proposition no adverse impact on conditions other than things which are in the strategic reform program, and no adverse impact on the number of ADF members on the military side.

You may have seen some analysis recently which said after Vietnam we made the mistake of reducing military numbers and didn’t think strategically. We’re not reducing military numbers, and the White Paper has as one of its strategic analysis the drawdown of our effort in Afghanistan, the Solomon’s and East Timor.

JOURNALIST: Prime Minister the-

PM: Okay. So, we’ll go to – I think Laura had her hand up, then we’ll go to Mark then we’ll come back to the front. Laura. Sorry, and then we’ll go to Brendan.

JOURNALIST: Just on the involvement of the US in the region, when will we know whether the Americans are actually going to be making some contribution to the cost of some of these changes including the Cocos Islands, and is that something that you’ve had to think about with the White Paper and also (inaudible)?

PM: Well as we indicated at the time that that story was in the media, this is a conversation that has a long way to go with the US. So, there’s not, you know, an immediate set of decisions there. I’ll turn to Minister Smith for a specific comment on it.

MINISTER SMITH: Well, on Cocos the Prime Minister’s quite right, that’s very much long term. So far as the three priority areas that we have; marine rotation in the Northern Territory, greater access to our air fields in northern Australia and subsequently greater access to HMAS Stirling.

In particular some of our northern fields, for example RAAF Tindall and some of our infrastructure at HMAS Stirling would require enhancement, expansion or improvement to cater for the greater access. In accordance with the finest traditions that is something which we have been and will continue to be in discussions with the United States about what the share of the infrastructure investment should be.

We’ve come to no conclusions in that respect. Those two aspects of the greater operational and practical cooperation are the second and third cabs off the rank. In the first instance there has been no great need or any need to add to our infrastructure in the Northern Territory to satisfy the arrival of the first 250 marines.

PM: Mark.

JOURNALIST: Mr Smith, there are reports recently that the sort of delays you’re talking about in the Joint Strike Fighter program will blow out the costs by between $3 to $6 billion. So are you saving $2 billion in this budget period so a future Government can pay double or triple that amount later on?

MINISTER SMITH: What we’ve done is exactly what the United States have done. We have essentially moved to the right or moved to two years the time in which we will order and receive effectively our first 12 Joint Strike Fighters. Leon Panetta did the same thing a few months ago when he moved over 150 joint strike fighters in a comparable manner. We’ll receive two in 2014/15 in the US for testing and training purposes, and then in two years’ time we’ll make a decision about the arrival of the first 12 which will essentially form part of our first squadron.

Given the problems that the Joint Strike Fighter project has seen we’ve had two problems, two issues. Firstly is the delay of the project, so moving the schedule to the right, which we’ve seen the United States take steps about in the last six months, and secondly increase in the unit cost.

When we embarked upon the project we did a couple of very sensible things; firstly we chose the conventional Joint Strike Fighter, and secondly we put a fair amount of padding in our cost and in our timetable. On the timetable we have been making sure that we don’t end up with a capability gap. We’ll make that decision formally by the end of this year in terms of the capability gap, but my current advice is that the life of type of our 71 Classic Hornets and our 24 Super Hornets is sufficient for our air combat capability, but we’ll make an advised judgement before the end of this year.

So far as cost is concerned the Defence White Paper, the capability plan talks in terms of up to 100 Joint Strike Fighters. I’ve been making the point for some time we’ve ordered 14, any decisions that we make about further orders will be an advised deliberative decision by the Government of the day.

PM: Matthew.

JOURNALIST: Prime Minister if I can just take you off the Defence track just for a minute, with apologies to the Defence writers, just on the budget generally.

PM: Sure.

JOURNALIST: You’ve already – you’re starting to outline the cuts that are going to be made in the budget, there will be more, clearly. You’ve often – you often attack Tony Abbott as being too negative. I’m just wondering following on from what Penny Wong was saying yesterday, given that the Coalition is committed to, as you are, a surplus in this year, do you believe it is possible for Tony Abbott to be knocking back your budget measures without providing clear examples of what his alternative would do to get to a budget surplus?

PM: I think Mr Abbott has put himself in a position that even if he endorses all of our budget measures to bring the budget back to surplus he’s still in a $70 billion black hole. So the Government will be creating a budget surplus, Mr Abbott already has such a big financial mess that he’s basically got to take $70 billion out of services to working families.

Every budget saving we put forward that he doesn’t take adds to that total and adds to the incredible cut backs he would need to make to pensions, health, education, Medicare, right across the board were he ever to become Prime Minister.


JOURNALIST: Prime Minister, you mentioned that the Defence White Paper is coming a year early, that the submarines – the number of submarines would not be an issue, that that would remain at 12 and they’d be built in Adelaide. The air warfare destroyers are being built at the moment, they’re a fait accomplit, the landing ships are a fait accomplit, the only area there seems to be any flexibility is in the numbers of Joint Strike Fighters you might buy.

Is this in fact going to be a very significant White Paper? It doesn’t appear that there’s very much room left for the writers of the White Paper to actually manoeuvre on this seven [indistinct] you’ve set out for it.

PM: Look this will be an evolution of the 2009 White Paper, so we will be relying on work done for the 2009 White Paper and evolving a new White Paper in view of the changes in our circumstances, which I’ve outlined and Minister Smith’s outlined, you know, the increasing evidence of the shift of strategic and political weight to our region, the aftermath of the Global Financial Crisis, what it’s meant for us domestically, but what it’s also meant for the Defence budgets of our allies.

The Force Posture Review that we’re releasing today and the very significant clearer information we now have because we’ve made all of the relevant decisions, in relation to Afghanistan for example, about when draw downs will be happening. Clearly all of that wasn’t available 2009 when the White Paper was being put together.

So, you should expect it to be an evolution. One of the reasons we are very confident that it can be done in this timeframe is that it is evolving from the 2009 White Paper and a number of the key strategic inputs to it are already available including the Force Posture Review we’re releasing today. I’ll go to Hugh.

JOURNALIST: Prime Minister this might seem an overly simple question, but given the capital scale of the submarine project can you explain briefly, in terms that people in suburbs can understand, why we need this massive spend, why we need to double the submarine capability?

PM: Well, I’m happy to answer that and then I’ll turn to Minister Smith for some comments too.

When you think of Australia and our defence needs, obviously we need sophisticated maritime capability. And then in terms of sophisticated maritime capability, what submarines do and what they require an adversary to do to defeat you, is of disproportionate use. That is, the submarine capability is hard for someone we were engaged with to oppose. They’re hard to locate; hard to destroy, and consequently take a disproportionate use of the efforts of your enemy if you were in circumstances where you were actively engaged in combat.

So for a nation like ours, an island continent, maritime capability is pivotal. And in the modern world, maritime capability that makes a real difference, submarines do.

MINSTER SMITH:    Well, that’s the perfect answer, Prime Minister. I’ll just add a couple of other things. So far as Australia is concerned, the thrust of the 2009 White Paper was an expanded maritime capability, as I think Brendan or – Brendan I think – the air warfare destroyers, the landing helicopter docks, the submarines.

The landing helicopter docks will transform, for example, our ship to shore capability. And all of this is in the context of a draw down from a decade-long land-based, army-based expeditionary force to the Middle East. So submarines, and an expanded submarine fleet is an essential part of our maritime capability.

And because we’ve seen, as reflected by the 2009 White Paper and of the work we’re doing, a strategic shift to our part of the world – an economic shift, a political shift, a strategic shift, but also a military shift. As countries’ economies grow, they are entitled to modernise their military, and we’ve seen the rise of China, the rise of India, the rise of the ASEAN economies combined, so we’re not the only one in the Asia Pacific who is looking at our modern military capability. For an island country, an island continent, that involves a maritime capability.

So far as the White Paper 2013 is concerned, as the Prime Minister said, we’re envisaging it as evolutionary rather than taking us in a fundamentally different direction. We do have to, in addition, grapple with what the 2009 White Paper described as the unfolding of the Global Financial Crisis. We’ve seen since then very sharp and deep budget cuts so far as the United States is concerned, very sharp and deep budget cut in defence – in Defence so far as United Kingdom is concerned, and in Canada.

So we’re not the only country that has to – has had to grapple with the fiscal and budget demands so far as Defence capability is concerned. What we’re trying to do is to make sure that we continue to have our core capability and that we’re looking for the future. And the Force Posture Review very much has an eye to the future in terms of the ongoing political, military, economic, strategic shift to our part of the world.

JOURNALIST:  Prime Minister, what are the lessons of the Collins Class in a nutshell? And is it realistic to be talking about extending their life when at the moment, you know, it’s only possible to get one, maybe two in the water at any one time?

PM: Well, I think the lessons are number one, the greatest – you need the greatest possible clarity about design questions right up front. So as Stephen said to you a little bit earlier, I mean, 80 per cent of capability problems in putting something together tend to happen in the first 20 per cent of the work. So if you can be crystal clear going in on design and capability questions then that makes a real difference to the delivery of the project. So at first and foremost, that’s been a lesson.

Second, we’ve learned some things about, as a nation, and of course, this question of the Collins Class has gone on under two decades now, so certainly under governance of all political persuasions. Another lesson has been about sustainment and maintenance, and what you need to do to keep submarines in the water doing what you want them to do, and what that implies for workforce and skill levels as you go through their full life cycle.

So I’d say they’ve been the key lessons. I’ll turn to Stephen too.

MINISTER SMITH Again the perfect answer. The only thing I’d add is two things: firstly, the big mistake of Collins in addition to some design deficiencies was we did not take into account at the time – and I say – by we, I mean the Commonwealth, did not take into account at the time what the burden of maintenance and sustainment would be. So we’re not making that mistake with the Future Submarine.

And so those people who say there’s no relationship between Collins Class submarine and a Future Submarine Project are wrong because one of the fundamental mistakes made with Collins Class was not taking into account the burden of maintenance and sustainment – we will not make that mistake again.

Secondly, so far as our submarines are concerned, my most recent advice from the Chief of Navy, which was yesterday – so we’ve got two in deep maintenance to Adelaide, we’ve got two in regular maintenance in Western Australia which adds to the Prime Minster’s answer on your question about manufacturing and skills. We envisage that the Future Submarines would be based wholly, if not substantially at Fleet Base West which would see the regular maintenance occurring at HMAS Stirling and Henderson.

And thirdly, we have two submarines, one is already on an operation – an exercise operation. The second is about be deployed to that effect.

JOURNALIST: Prime Minister, could I ask about Julie Bishop? She’s been in Indonesia and got a rather hostile reception. I just wanted to ask what your impression of her ventures overseas have been. And secondly, what do you say to backbenchers who are rather anxious at the moment? Are they being simply ‘Nervous Nellie’s’ or do they have legitimate concerns about the polls?

PM: Well I’ve conveniently brought with me the Acting Minister for Immigration, so I’ll get him to deal with your first question.

MINISTER CLARE: Well this is another criticism made of the Opposition’s policy to turn back the boats. It’s been criticised by the former Chief of the Defence Force, by the Chief of Navy. It’s been criticised by Indonesian police. It’s been criticised by the UNHCR. Most importantly, it’s been criticised by the men and women of the Australian Navy. It was published in The Australian a couple of months ago where a senior naval officer said that doing this sort of work puts the lives of Australian military personal at risk as well as asylum seekers.

I remember only a couple of days into this job, when I was first appointed Minister for Defence Materiel in 2010, I went to Darwin and met with the men and women of that patrol in the Adelaide – sorry, in the Armadale Class vessels. And I asked one of the Commanders of the vessels about the work they do. And he said look, I’m glad that you guys won because I was worried about what this would mean for the men and women under my command, about the dangers that it would put them in. This is advice given to me unprompted.

And that’s the real reason why we are worried about a policy to turn back the boat because of it putting the lives of Australian sailors at risk, and putting the lives of asylum seekers at risk.

And remember what this is all about: four days into my appointment as the Minister for Home Affairs, I had to report to the nation that 200 people had died off the coast of Indonesia. A hundred washed up onto the shores, 100 still at the bottom of the Java Sea. In February we had 11 more people die off the coast of Malaysia. Now we can stop this happening, but it requires legislation and that means it requires us to work together. Both parties support offshore processing – we’ve proposed Malaysia. The Opposition has proposed Nauru. We have offered to do both.

Now what you’ve seen in Indonesia today is another criticism of the Opposition’s policy; they’ve described it as arrogant. I guess my message here would be it is time to pass this legislation. It is time to reduce the risk of people dying at sea. We need to put our swords down and pass this legislation before more people die.

JOURNALIST: And on the second question?

PM: And on the second question, of course this is a time of political pressure as we continue to deliver very big changes for the nation’s future, including carbon pricing coming on stream on 1 July. So I understand people feeling a sense of political pressure. Our job though is to get on with doing what’s right for the nation, and that’s what I intend to do. And actually, that’s what we have been doing throughout this whole period.

We have in even recent weeks announced an aged care policy which means more older Australians will get to stay in their home, and which meets the challenges of an ageing population. We’ve clarified for the Australian people what is the most recent view we have about our mission in Afghanistan and the likely timeframe for that mission to be brought to an end.

We’re here today speaking about our defence needs into the long-term future and how we will shine a spotlight on them through a forthcoming White Paper. And during all of this time we’ve been rolling out the NBN, building infrastructure, improving schools, improving hospitals for the Australian people and working to support their families. So that’s our job in the national interest and we’ll keep doing it.

JOURNALIST: Prime Minister nonetheless there’ve been a number of diversions including most recently the issue of Peter Slipper and his troubles. Do you regret having moved to put Peter Slipper in the Speaker’s chair?

PM: Look, I’ve dealt with these questions when I made the announcement that I did on Sunday. Clearly you know, clearly I have become concerned – I was concerned about the implications for the Australian Parliament and community views of it of the combined weight of matters involving Mr Slipper, and matters involving Mr Thomson, and so I acted.

So dealt with that on Sunday, and I have acted. My answer to the question before was of course about all of the other things that the Government is doing and the job that we’re getting on with.

And to be, you know, frank with the people who generate many of these stories, you know, clearly over the past few days there are stories about deadlines and all of that kind of thing. If I was someone given to keeping newspaper clippings, I’d have filing cabinets overstuffed and toppling over with stories written about deadlines. So you’ll have to excuse me if that’s not my focus. My focus is getting on with the job in the nation’s interests.

JOURNALIST: But you’d also have, wouldn’t you, your filing cabinets toppling over with promises made by people in the Government of when things would get better when the carbon tax legislation passed, you know, when you brought the budget to surplus, when you dealt with Kevin Rudd.

Haven’t the points at which people in your government have said things would get better passed without things getting better?

PM: Well, you know, my view has always been – and I’ve said this to you consistently – we govern in the nation’s interests. We’re Labor people. We’re Labor people driven by Labor values and driven by a vision of this nation’s future. And it’s not always easy. You don’t in accord with those great Labor values just get to do the easy, popular things. Sometimes you have to do the outright, very very hard things, the downright hard things.

The Hawke Government showed that, the Keating Government showed that, under the Rudd Government we did some difficult things, and this Government has been called on to do some very difficult things, most particularly the big big change of carbon pricing.

So you know you recognise that those things aren’t easy and they aren’t popular, but they are right, and they’re in the great Labor tradition. We’re not a political party that tells people to be afraid of the future. We’re a political party that says we can manage this future together and we can do it in the interests of working people whilst being fair to working people even in days of great change.

And I do note that for working people, as soon as the next few weeks, people will start to see additional money flow to them to help them through.

JOURNALIST: Prime Minister, do you believe the Coalition is involved in a cover-up in the Peter Slipper James Ashby allegations as suggested by Craig Emerson yesterday? And secondly, have you spoken to Joel Fitzgibbon about his support or lack thereof to your Prime Ministership.

PM: Well you’re referring to a story which generated a tweet from Joel Fitzgibbon where he denied its contents, and for the record I wasn’t contacted about that story at all before it went to air.

Number two, on the, you know, questions involving the Liberal Party, look, I’ve just been a bit surprised that Opposition people haven’t been prepared to answer the questions put to them.

PM: We’ll just take the last three questions then we’ll go. Michelle.

JOURNALIST: Mr Smith, going back to the Defence cuts. Sometime ago, the Defence Department was asked to find very big cuts in terms of being more efficient and so on. Are these cuts that we will see in the budget out of that process, or have you had a new separate process to look at today the Defence Department and its spending?

MINISTER SMITH:   Well in last year’s budget Defence made a contribution to the budget bottom line of some $4.3 billion, 1.6 of that was an underspend – $1.6 billion of that was money that Defence was not able to spend. And so for example in the current budget arrangements you might find the capacity for us to spend $1.6 billion on the Joint Strike Fighter project, but that’s been pushed to one side and therefore there’s no need or reason or utility having that in the budget for that purpose.

The rest of the $4.3 million was essentially reprioritisation of the Defence Capability Plan. Now that was last year. This year in response to the underspend we effected a review of our budget arrangements to get better the budget, the Defence budget estimation processes. And that’s detailed in some of the papers that you have.

And so we’re not anticipating or expecting an underspend of that nature, but we have to get our estimation processes right. Secondly, we have done an exhaustive review of our Defence Capability Plan and that’s been done in a normal – in the normal course of events, but it’s also been done in the budget context.

As I think I said to Phil when the budget papers – when the budget is unveiled by the Treasurer, associated with the budget papers from Defence will be an indication as to where projects in the Defence Capability Plan have moved. Have moved to the right, to use the jargon, or have been delayed. And that brings a saving to the forward estimates.

Some of that will be projects which have just been delayed in the normal course of events because of difficulties, some will be as the result of our judgment that that is coming from non-priority projects which can be deferred which can make the contribution to the budget bottom line.

There are savings in other areas. I’m not proposing to detail those today. That would be inappropriate. But in terms of how we have tried to manage defence in a time of fiscal constraints – the Prime Minister has very importantly underlined the key areas that will not be adversely affected.

Our operations overseas, whether it is Afghanistan, East Timor, or the Solomon’s. The kit and the provisions provided to people deploying, or about to, people deployed or about to deploy. No adverse implications as I said to Secretary Panetta for the United States global Force Posture Review arrangements. No adverse implications in the main for conditions in entitlements of our men and women in the field other than things that might have been in the Strategic Reform Program.

What we’ve tried to do is to reflect a tight fiscal period by doing things which when fiscal – a better fiscal environment returns we can bring back to the same level things that we have been doing. For the detail of that you need to wait until Tuesday. I’ve given you a goodly snapshot of capability, other areas you’ll have to be patient on.

PM: Okay, we’ll take the last two questions.

Now hang on we… okay. Well we’ve got to be fair to people who haven’t had a question yet. It’s a Labor tradition too, yes.


JOURNALIST: Back to the carbon price for a minute. The legislation is in place. You’ve got all kinds of (inaudible) and other advice about (inaudible) scheme or whatever else, but the scheme is in place. I can’t see how you could undo under it even if you wanted to, and you’re not giving any indication that you want to.

But are voters likely to see any enhancement or sweetener or addition to perhaps the compensation or are sectoral groups affected by the carbon price, likely to see any enhancement of the compensation to them between now and the election?

PM: Well first and foremost the scheme has been designed with assistance to families as part of it, and people will see that assistance flow as soon as in the next few weeks. They’ll see you know payments of money for families flow, they’ll see payments for pensioners flow, and then people will see tax cuts from 1 July. So supporting working people every step of the way is already in the scheme, already designed, and people will see the cold hard cash very very soon.

On carbon pricing in general can I say this: I mean, we are a nation that does need to tackle this challenge of climate change. And the only policy that’s on the table, the only policy that’s on the table to make any difference to our carbon pollution and tackling climate change is the Government’s plan and the Government’s legislation.
Everybody who has been called upon to analyse the Opposition’s policy – reputable economists and reputable climate change scientists know that it is rubbish. The only plan that’s on the table that can lead this nation through to a clean energy future is the plan starting on 1 July, and it comes with assistance for families.

JOURNALIST: Prime Minister, what do you say to Rio Tinto this morning suggesting it’s reviewing its investment, and Australia’s too high a cost country. Do you believe some of that criticism of the mining tax?

PM: Well look I had a direct conversation with Mr Tom Albanese – need to keep your Albaneses straight here – with Mr Tom Albanese during the course of the week where he described as an around the world phenomenon increases in the capital costs associated with mining. So I think we’ve got to bear that context in mind. Rio is experiencing capital cost increases around the world, and it’s a global company and mines in many nations. So he said that to me.

We did not have a discussion about the Minerals Resource Rent Tax. I’m sure Mr Albanese has views about it. And I don’t mean to suggest that he shouldn’t put those views forward publicly. But he would also I’m sure be very well aware that it’s legislated and it’s starting and it’s starting on 1 July, and it’s about getting Australians a fair share of this resources boom.

And to link your question to Kathryn’s question – there are lots of Australian families out there who know that our economy is strong by the standards of the world, who hear about the resources boom, but then say to themselves gee, I don’t reckon I’m seeing anything from this boom, where’s my share, what’s happening to me? You know, all this boom talk, strong economy, when’s it going to make a difference to me? Well we obviously believe in supporting families, and they’ll see money flowing through very soon – as I indicated before. And we have consistently said we believe the benefits of the mining boom should be shared.

I’ll take the last question.

JOURNALIST: There’s an outfit in New South Wales called Australian Power and Gas which this week has warned that they expect to raise their charges for power by 25 per cent – the strong suggestion in their argument is that they’ve blamed the carbon price for that. What is your reaction to a statement like that, and what protections will consumers have against any companies that seek to gouge out extra money as the carbon price looks at that.

PM: Well firstly people should only make statements that are accurate. Australians are entitled when claims are made about carbon pricing to know what actually the truth is and the likely implications for them. So number one.

Number two, in many parts of the country electricity pricing is regulated, and you have seen the statements of the regulators in New South Wales and Queensland, for example, where the statements they have made about the impact of carbon pricing are bang square with what the Treasury modelling showed which means that the money that will flow into people’s hands in coming weeks and months has been designed right to help people with the impact of carbon pricing.

And we deliberately designed that money so millions and millions of low and middle-income Australians will end up better off.

Thank you very much.


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