AUSTRALIAN DEFENCE MAGAZINE CONFERENCE

Canberra

Thursday, 22 February 2007

Thank you very much, Paul, I appreciate your very generous introduction and remarks, and particularly given that you don't always agree with our politics, but you always present any criticism in a constructive, thoughtful and well-researched way and for that especially I have a very high regard.

Bruce Billson, my friend, Minister for Veterans' Affairs, the Minister assisting me, has done a very good job on many areas, in particular, developing defence industry policy over this past year. The Service Chiefs and Deputy Chiefs, and all of you from defence industry.

Steve Gumley, I say it again, I get down on my hands and knees every day and thank God that you're in a job as you are at the DMO and, as some of you would be aware, we're undertaking a little bit of (inaudible) at DMO to provide Steve with even more support for the job that he does.

For those of you who are in the defence industry, I have just flown back from Perth and just literally got off the plane to come and speak to you, and I was thinking about the audience and what I might say to you.  And for those of you in the defence industry, I've noticed the tension between the CFOs in the organisation and the engineers who basically produce the capability and I thought you might be amused to be reminded that the comments of one of the first presidents of the Institute of Electrical Engineers, Lord Nelson of Stafford, and there was tension at the time between the counties and the engineers, and so he sought to deal with it at the annual meeting for the institution, and he's put it this way.  He said, every organ grinder is entitled to the services of a monkey, but the monkey's job is to collect the money and keep an eye on it. And under no circumstances should the monkey however grab the handle or try to change the music.

It is a privilege to lead our country in a political, or an economic or a cultural sense, is to live with the uncertainty of making decisions in vast ignorance of the long term consequences of those decisions in a world of fundamentalist intolerance, of unprecedented global, economic, cultural and strategic connectedness.

And how do we, in defence in particular, undertake forward planning which has a horizon well beyond one year or a three year electoral cycle, and certainly even beyond the 10 years of the defence capability plan.

And I thank and congratulate Greg Ferguson and the Australian Defence Magazine for the effort that's gone into this conference in stimulating and challenging all of us to think about that future and to create the future that we want, and not the one that we think is going to be imposed upon us by the rest of the world, by negligence, indifference to the risks that we face.

It is, as Paul said, about a year since I last spoke to you. And in terms of change, and how quickly things do change, I was reflecting on some of the things that have happened over that past year. The government announced that there will be a 3 per cent increase in defence funding after 2016, compounding the 3 per cent real.

We also announced the acquisition of four C-17 Globemasters, the first of which, as you know, has already been delivered. We received the first 18 of 59 M1A1 Abrams tanks ahead of schedule and ahead of budget. We've also announced that we will increase the size of the Australian army by two battalions, taking it from six to eight, essentially motorised battalions.

We have also announced, and I announced in April last year, when the automatic flight control system went down on the Seasprite, that enough is enough. And I've specifically asked the naval leadership and the Defence Materiel Organisation to prepare three detailed options for me to consider, supported with a strong business case in terms of continuing, or alternatively a different kind of capability, or, thirdly, possibly not continuing with the project at all, particularly when you think that you're looking at an interim operational capability 10 years after the original delivery date and that decision will be made very shortly, I can assure you.

We've also has here, quite appropriately, debate about our new air combat capability, and as a lay person coming to your profession – both in terms of defence industry and the uniformed profession of arms – within a few months of acquainting myself with the complexity of the issues surrounding new air combat capability, I was convinced of two things. The first is that the Joint Strike Fighter is indeed the correct aircraft for Australia's needs. 95 per cent of the capability of that aircraft is in the public arena. But it's the other 5 per cent that really counts, and there is no question that is the correct aircraft for us. But our new air combat capability derives itself and relies upon, not only the JSF but also all of the multipliers which go around it.

So as we well know, the airborne early warning command and control platform, the Wedgetail with Boeing is approximately two years behind schedule.

We have significant schedule issues with Vigilare the ground-based network-centric air warfare system. We also have some challenges with the boom on the multi-role air tanker transport, the A330.

We also have challenges with the radar warning receiver and some other elements that the electronic warfare self-protection system on the F/A-18 upgrade and, needless to say, the man hours and complexity involved in the centre barrels presents a significant challenge

Those and other aspects of the new air combat capability and the vagaries of the US political system in terms of the rate of delivery of the Joint Strike Fighter is such that by halfway through last year I was convinced that Australia should not take the risk – particularly if the F-111s had to be retired prematurely through some unexpected engineering issue – we should not, under any circumstances, take the risk of having a gap. And it is for that reason that we are seriously looking at acquiring a squadron of F/A-18F Super Hornets Block 2.

And I know there's a debate about whether or not Australia should be looking at an F-15 or some other kind of aircraft. The reality is the F-15 is about 30 to $40 million more expensive than the Super Hornet. It is approaching the end of its life. It also has a low observable profile which is not attractive to our country's needs. It also has limited transferability in terms of weapons. We are a Hornet country.

The Block 2-F has maritime strike capability. It can also transmit the JDAM coordinates to an F/A-18. It has about 30 per cent transferability in terms of componentry. It's also off the shelf, so to speak, and the first could potentially be delivered toward the end of next year.

The US Navy will fly it till 2030, and I find it rather interesting that some of the critics of the decision for the government to look at it are the same people that are quite happy to criticise the government for some of the legacy projects in terms of orphan capability.

The reality is that if the JSF and all of the capabilities surrounding the new air combat capability could be delivered on time, it's not an option we'd be looking at and certainly not one we'd be looking at if the F-111s could confidently fly for another decade or more.

The other thing that ought to be emphasised in relation to the JSF, by the way, we knew that the US Air Force would be delaying its rate of acquisition when we made the decision. We expected about a 30 per cent reduction in the rate of acquisition. We still expect the US military however to acquire about two and a half thousand of the aircraft in contrast to the 183, or thereabouts, F-22s that they will have.

We are not prepared as a country of 20 million people requiring a hundred aircraft to sign on for 20 per cent of the global on costs of an F-22, and knowing that as brilliant an air-to-air combat aircraft that it is, that it is not specifically the right aircraft for Australia.

We've also had a significant year of achievement with DMO and I pay credit again to Steve Gumley for what he's done there. I will not defend the indefensible in terms of acquisition and sustainment contracts so long as I'm privileged to be the minister. But equally, I think it's my responsibility to also paint a picture of when things are actually going pretty well.

We closed 93 projects in the three years from July 2003. Ten of them were late and over budget - $131 million - but 53 came in early and below budget, saving us $95 million.

We've also had a year in which we decided to develop defence industry policy and I can confirm that the Cabinet has agreed to the policy. It is largely consistent with the draft that was released with which you are all familiar and I make no apology for saying that there are nine strategic objectives in the policy which I will release shortly. And it includes a requirement on us to work with you to define key defence capability for Australia, to make sure that those projects that are worth more than $50 million, what is the supply chain? Where do the SMEs fit into that supply chain and how do they do it?

In addition, if they're more than $50 million, what is the potential for Australian participation in that project in a formal sense?

We also will be working very hard to build a defence export development program as a part of the DMO, and I emphasise collaboratively in consultation with yourselves.  And you will also see our determination supported by money to bring SMEs into the R&D area of defence and also to see that we have increased seamlessness between trainees from basic apprentices through to high end engineers between the DMO and defence industry and in one of our three services.

We also undertook a review into the clothing section of the DMO. I was suspicious when I was first appointed that Steve and his people were working flat out on air warfare destroyers and F/A-18 upgrades and there might have been a few issues at that end. Once I got some outsiders in to have a look at it, there was no doubt we were right.

We've now well embarked on serious reform in that area and I think it's fair to say that the defence industry that supplies us in that area is a little bit more satisfied with the way things are going.

I also asked Barry Cusack and three others from the outside Defence to join the CFO and the chief information officer in putting together a Business Improvement Board. You will see a ramp up in their activities particularly in looking at ordinance and institutional efficiency and productivity throughout this year.

I expect to receive also Elizabeth Proust's report on the management review into the non-operational aspects of the Department – to receive that certainly by the end of next month – and anyone who thinks that I don't implement reports that I commission and receive should speak to anyone that was involved in the clothing review. And if you're not satisfied with that, have a chat to Professor Dibb when the meeting is over.

I can assure you that we mean business in this regard and that is in the sense of fully respecting the finest cultures and traditions of Defence whilst at the same time seeing that every single person that works in it - civilian and uniformed - is doing a task that is appropriate to their skills and training and which maximises the support we give to our 3000 people that are out in the field.

It's also been a year in which I said one of the objectives was that we would discharge our statutory obligations financially. We've now got $19.6 billion of your money in defence as our budget and that represents, as you well know, a 7.3 per cent increase on last year. And for the first time, we've now gone from a no opinion disclaimer from the Auditor-General to a true and fair, except as you know for some areas in ordinance and general inventory and we've got some flow on effects from the income statement.

But significant progress has been made for which the former secretary Ric Smith and the CFO, in particular, should take special credit, but I can assure you we've still got a long way to go.

It's also been a year in which we've seen the North Koreans attempt to launch a Taepodong-2 missile and set off a nuclear explosion. It's been a year in which we've seen the Iranians further push the envelope on its nuclear aspirations.

In our own region, we saw a meltdown in East Timor toward the end of May. At one stage we had 3,000 of our people providing security to the country. We've now got 840 and we don't yet know what this year will hold.

We had a coup in Fiji. We had a tragedy involving one of our Black Hawk helicopters on Kanimbla. We went in and out of Tonga with unrest there. We are about to deploy a fully formed reserve unit to the Solomon Islands. We had West Papuan asylum seekers come here seeking asylum and it would be not unfair to suggest that there is a move for a degree of separatism by some of the people who may be behind that sort of move and everything that that means for our relationship with our neighbours in Indonesia in particular.

We've also seen a year in which the Japanese self-defence agency has moved to a ministry and Japan will become increasingly assertive in our region particularly for peacekeeping and humanitarian work and a tri-lateral agreement between us, the United States and Japan – you'll see much further development over this coming year.

It's also been a year in which there has been significant change in both Afghanistan and Iraq. We brought our special forces and commandos back from Afghanistan at the end of September. They've done a magnificent job up through the Chora Valley, Baluchi Pass and central and northern Oruzgan.

We put our 270 engineers and tradies in there and a company to support them and protect them. We partnered with the with the Dutch, which has been an extremely beneficial and productive project, but all of our intelligence suggests that the Taliban will this year mount a significant do or die offensive across Afghanistan including Oruzgan. And the government has made a decision that we will send a small group to Oruzgan to specifically scope the risk, have a look at what is involved and if we do need to redeploy Australian Defence Forces to Afghanistan, we will.

And the reason we will do that is for the same reason that we're not about to abandon Iraq prematurely.

The announcement that was made overnight by Prime Minister Blair in relation to British forces in south-east Iraq is one that we have been working with the British for well over six months. And it's interesting the way in which uniformed elements in the Australian media, and some who profess to lead in politics who should and I think actually know better, seek to misrepresent it.

This time last year when I spoke to you we had 480 soldiers in Al Muthanna province protecting Japanese engineers. And it was about this time that I foreshadowed that some time through last year we would move to what we describe as an operational over-watch, that in other words we would hand responsibility for security from Australia and the coalition to the Iraqis in Al Muthanna, and that our job would be to increase our training effort of the Iraqis and, at the same time, engage the tribal leaders, the governor, the police forces and then in extremists to provide support for the Iraqis if they couldn't cope.

We did that in July, we transferred in Al Muthanna and then in October we slightly increased the size of our battle group to make sure it was robust enough to take it up to 520 and took on responsibility for both Dhi Qar and Al Muthanna provinces.

The British late last year said to me – my counterpart, the British Defence Secretary, Des Browne and Sir Jock Stirrup – to me and also to Air Chief Marshal Angus Houston, and as I discussed this when I was in Iraq myself; the British plan was that they too would do the same thing in Maysan and Basra when the conditions were right.

And all of us know that Basra has been particularly difficult for the British. It is different from Al Muthanna and different from Dhi Qar and it's different from Baghdad. The 18 provinces in Iraq are all different and they all require a different kind of approach.

The British have reached the point where they believe that within a few months they will be able to reposition their forces in Basra, transfer control to the Iraqis themselves and provide over-watch in Basra and they do not need 7100 troops in order to do it.

Their belief is that if they stay at the Basra Palace for the foreseeable future, they will need about five and a half thousand, and then the British will go down to just below 5000 and stay at that number until such time as the United States, Britain, Australia, the Iraqis and everybody else decides that essentially that the Iraqis are up to the task of providing for their own security.

Anybody should know that Iraq is not going to be some sort of Jeffersonian democracy or some sort of peaceful utopia, as much of all of us and particularly Iraqis themselves dream in the near future. Indeed, it is going to take a very long time. But the most important thing for us is whatever any of us think about the decision to rid the world of Saddam Hussein and his regime, which tortured and murdered on average 200 people a day for 15 years, whatever any of us think of that, if we leave that country before the Iraqis are in a position to basically look after themselves, we will leave behind a humanitarian disaster which makes what happens today, particularly in Baghdad, look like a Sunday school picnic.

I find it extraordinary that the people that are arguing that Australia, the United States and Britain and everybody else simply leave Iraq and set some artificial deadline for it are not demanding the same thing in East Timor. So I don't use the expression, exit strategy. I've seen how Neil James describes it. But if you want to use the term exit strategy, why is it that no-one's demanding that we leave the Solomon Islands, other than Sogavare? Why isn't anyone demanding that we leave East Timor? For the simple reason they know that if we leave that country prematurely, that we will see a return to the events that led to Australia going back in there with New Zealand in May last year.

Why is it that some people in our country think the Iraqis have lesser right to that security and support than do East Timorese or indeed even Australians? And why is it that Mr Rudd thinks that it's important to fight al Qaeda and terrorist networks in Afghanistan but for some reason we shouldn't be fighting them in Iraq?

In 1942 no Australian needed convincing Australia had a problem in terms of our own security. We had bombs falling in Darwin and Townsville, we had a gripping struggle on the Kokoda track, the battle of Isurava and the repulsion of the Japanese in Milne Bay, the Americans were flat out in the Coral Sea. No one needed convincing Australia’s interests were at risk. But today we face something which is no less a risk to our culture, our values, our freedoms and way of life than was presented to us in 1942.

It is a different risk. It’s harder to see. It’s harder for the average Australian trying to feed their kids their cars loans and their mortgages to appreciate. They know the importance of giving the neighbours a hand when they’re in strife, but it’s a bit more difficult to understand the direct relevance of what happens in Afghanistan and Iraq to us, but it has everything to do with us. Our generation is facing something which is a real threat to us. We are seeing a struggle between liberal values and a return to totalitarianism which is different but no less a threat to us than fascism or communism in the past.

It is extremely important that we understand that we are facing people that are not only anti-American but they are fanatically opposed to countries whether they’re Judeo Christian, Jewish or Muslim countries that are open to other human beings. They have an attitude to women that is incompatible with the peaceful world, let alone a civil society. They’re committed to building a violent political utopia. They’re also people who are fanatically opposed to the liberating effect of education. Why? Because education is basically the key to dealing with ignorance which is basically the root of all evil.

It’s extremely important that we have the moral musculature to endure. These people can’t outblast us, but they can outlast us.

You have to ask yourself where is our moral musculature in the year 2007. These people would clearly love to see government across the world that would only use what Tony Blair recently described as soft power – aid, development and engineer and all of those things rooted in education.

Equally it’s important that we have the courage to have and use hard power as Tony Blair recently described it. We can’t do anything in Afghanistan without the absence of violence. And the question that needs to be put to my generation in particular is - do we have the moral musculature to endure, to prevail?

We’re doing this in Afghanistan because we are now at the crossroads to the modern world. If we allow these people to prevail in Afghanistan where as we know Hambali, Muklas and Samudra trained who then murdered around 100 Australians, we will live in a world where our children are going to be hostage to forces that they may never control. And what any Australian and what any of you think of it, under no circumstances is my children’s generation going to look back at mine and ask why did we not stand up against this when we had the responsibility and opportunity to do so. That is why we are doing it and we will not leave Iraq prematurely. It might be politically expedient, but we are not going to do it. We will not leave a humanitarian crisis, we will not leave a significantly destabilised region in the Middle East. The biggest threat to our country is that if the United States prematurely retreats from Iraq then the United States may then follow a policy of isolationism. Whatever anybody thinks about the Australia-US Alliance, it will be damaged if the United States leaves Iraq in a situation where al Qaeda and others are able to say that they have prevailed over the United States. There is no such thing as victory in Iraq and the Iraqis who have shown enormous courage to vote on three occasions to elect their own government, they should be the inspiration for what we do. The most important thing we need to do is see the Iraqis have control over their own destiny and have the moral fortitude and courage to see the job through. It may not be politically popular in our country but it’s something that a good government and good leadership needs to be followed through.

The Australian media are a little bit like the kids in the back seat of the car – they say are we there yet? When are we going to leave? It’s very hard to define but we’ll know it when we are there.

So thank you very much Paul. It’s very important to put into perspective what we’re doing it and why we are doing it.

Thank you.

(applause)

Facilitator:

Questions?

Question:

(inaudible)

Dr Nelson:

There were two conditions – in fact, there were three conditions which I put to my own officials before signing the PSFD MOU and I said the first is that there will be a well-developed, well-considered contingency option available for me before I sign anything, and I think you've seen the outcome of that.

The second thing is that we would be satisfied on, and guaranteed on industry access and we have a formal agreement which Steve Gumley has signed to that end, and we are indeed using all of the leverage that is available to us – I won't say anymore than that – to see that we open up further access for Australian industry. And the third thing that was a pre-condition of course was technology and data access and I'm not in a position... it would be irresponsible for me to give you further detail on that one, but all I can say to you is that Dr Gumley has just returned from overseas and the level of access we have is stunningly appropriate.

Facilitator: 

Anybody else?

Dr Nelson:  

Is someone going to ask me if we're there yet?

Question:   

... and probably not overseas, and that question was asked why can't we attract them to the Defence Force. Do you have some views about attracting young people, young people meeting this recruiting gap that has been a big subject this morning?

Brendan Nelson:

Yeah.  Well look, I didn't... you know, the list of things that we've been dealing with in the last year, you know, take a couple of days to go through but I didn't mention recruitment and retention. But I've had a look at it and, as you know, when I was appointed I took on responsibility for recruiting and Bruce Billson's given me a lot of help in this regard but we basically have got a target group of 3.5 million. It will peak in 2014.

We know from our surveys that we've got a group of about 770,000 that are disposed to a career and there are a number of things I've discovered. Last year we spent $28 million advertising. GMH spent $70 million trying to sell us Holdens, Ford spent $60 million trying to sell us Fords and Optus spent $60 million advertising. We've got a $20 billion budget.  Defence of our country and its interest is our number one priority, we spent $28 million. Manifestly inadequate.

Second problem we've got, and reflected in that I might add is that five years ago when we spent $42 million, in '01 dollars, we had 156,000 enquiries. Last year we had 95,000.

Second problem we've got in my view, I'm no advertiser, but I think our mealy-mouthed advertising is inappropriate. I think defence jobs, yes, we've got lots of jobs but BHP's got lots of jobs, Origin Energy's got lots of jobs. It's important that… and you're about to see some new advertising which will significantly increase in volume but also a change in style.

You would like to think that all of us are idealistic and I'm still accused of being an idealist and I take it as a compliment. But young people in particular are altruistic and idealistic and I think it's extremely important that our marketing be based around the values that are represented by each of the three service uniforms.

Nobody joins the ADF.  People join the Navy, they join the Army or the Air Force and all that that represents. We've got to get them emotionally committed to understanding the importance to our country and who we are. The way we relate to one another and see our place in the world is represented by that uniform and then say to the young people, oh, by the way we've got all these jobs. In other words we've got an extra bonus.

The third problem we've got is that we've got a bureaucratic constipated recruiting system. We've got 16 recruiting centres across the country; we are not using other government agencies, for example, like the Job Network. Average recruiting time is 31 weeks. If my son agonised about joining the Navy, he decided to join, if he hadn't heard anything back in 20 weeks, if he hadn't already got another job I'd kick him up the backside and tell him to get off the couch.

So we have already announced a $1 billion just for Christmas of a range of initiatives, one of which is to significantly re-engineer the recruiting system and so that we will basically process most of our lower ranks within six weeks, three months for officers. You know you've got a problem when at the national forum that I convened with Bruce Billson last week, when a recent Air Force recruit says, well I was lucky, it only took five months you know you've got a problem.

The other problem that we've got, I notice is we have 95,000 enquiries, we have 38,660 that actually turn up for the job options and assessment day. We then lose some 11,000 who don't turn up for the fuller assessment day. I've said to the defence people, people ring Aussie Home Loans, John Symond sends a limo out to peel the grape. We need to be managing the customers.

We need... now, all of these things are now happening by the way so I'm just painting a flippant general picture which is unfair in many ways but nonetheless, that's our problem. I then find a 22 per cent drop out on the day so I say what happens on the day that puts them off?

We lose 12 per cent on the psyche assessment. Under no circumstances will that be changed; if anything, it will be hardened up. We a lot of people on the medical, tattoos, former drug use, a variety of things which I discussed last year, we're changing those things. And I noticed that we also lose 20 per cent on the defence interview. Bottom line is, we get 7,100. So we've got a whale carcass that starts over here and then we pull it through a shark pool and by the time it gets to the other side we've got 7,000. I'm absolutely convinced we can get this right.

It requires the government to support our defence recruiters, get the right uniformed people into the recruiting side of it, alongside our private people, and we've got a whole lot of ideas which we've just received and which we are developing. 

And then retention, with an 11 per cent separation rate, the Air Force has got it right, 8.6, but Army's only just over 12 and Navy 11.4. We... a one per cent reduction in that separation rate is equivalent to 500 recruits and so there have been some things already announced. Next year we'll have the first 1,000 young Australians start the gap year. But the pay structure and the level of that pay, the superannuation arrangements, the way in which we manage those careers, the defence housing assistance program, all of those and other things need to change, and if they don't, I'll tell you we will all be in big trouble.

There are many people in the education portfolio that were very pleased when I was appointed to defence.

[Laughter]

Many people here would be happy to see me reappointed I suspect.

[Laughter]

The next area for reform which I had identified was the training of the teachers and you can't teach what you don't know. And in the 34 university education faculties they've basically become quasi-sociology departments and it beggars belief when someone can go through... go into teaching with a tertiary entrance rank of 50 and if you're a parent of anyone that's done the year 12 exams recently and you reflect on what they got and what 50 means, you'll know what I mean.

And then to go through four years of your training and not, for example, have had to have been examined in any sense in maths or science, you start to get a bit of a feel for the problems we've got.

To expect those graduates to then go into teaching workforce and inspire young people in areas such as science is basically mission impossible in my view. By the way in the defence industry policy, you'll see some changes which I think you will like, to the skilling Australian Defence industry program and including some funding changes.  But I think what's required is we need teachers who have appointments and secondments to industry, classroom teachers who spend one or two days a week in industry. I think we need teachers who have university appointments.

Half the people that taught me medicine for example, were not academics, they were clinicians. And yet I find the people who train our teachers don't see themselves as members of the teaching profession. And the other thing is, as Julie Bishop has been emphasising, you cannot possibly maintain any kind of quality when the most mediocre disengaged, disillusioned teacher that turns up late and goes home early gets paid exactly the same as the one that's in early, home late, on the phone all night to parents, working at weekends,       heavily involved in her own professional development, you cannot expect that to be a sustainable situation.

And those teachers with those qualities of course they don't remain in the profession. And as I think I may have said before in terms of our international competitiveness and the defence of our country, it's not just about air warfare destroyers and the JSF and how many battalions we've got, it's about the levels of education that our country has and our ability to compete, particularly in knowledge-based industries with the economic and technological revolution in Asia, India and China in particular.

Facilitator: 

Thank you Minister, I couldn't agree more.

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