TRANSCRIPT: INTERVIEW WITH LYNDAL CURTIS, ABC24
TRANSCRIPTION: PROOF COPY E & OE
DATE: 27 SEPTEMBER 2012
TOPICS: HMAS Choules; Defence Budget; White Paper.
LYNDAL CURTIS: Stephen Smith, welcome to ABC News 24.
STEPHEN SMITH: Pleasure.
LYNDAL CURTIS: If I could start by asking you about the amphibious landing ship HMAS Choules, it was bought from the British because Australian ships had so many problems there were none available for relief operations during Cyclone Yasi, the Choules had a problem with one of its transformers in June, it's now found all, I think, six transformers have problems of premature aging, did the British sell us a lemon?
STEPHEN SMITH: No, we don't believe so. We've obviously been in very close consultation not just with the British for their experience but also with the manufactures of the transformer. And so we are working our way through that very carefully.
The premature aging of those transformers is obviously of concern and we're now looking at whether we seek to fix those as a job lot. But we've got a ship which we believe is in good condition and if we had our time again we would proceed down the same track but we have had this unfortunate problem with the transformers which we've been working very hard on for the last couple of months.
LYNDAL CURTIS: Is this likely to be a multi-million dollar fix when it comes?
STEPHEN SMITH: Not multi-million dollar, it will be expensive. We'll obviously, as I say, because we're in discussions with the manufacturers of the transformers over premature aging there may well be some consequences down the track so far as the manufacturer is concerned but we'll work our way through-
LYNDAL CURTIS: So they might have to pay for it?
STEPHEN SMITH: We'll work our way through those issues. We have detected, regrettably, premature aging of those transformers but we've got - in addition to the Choules we've of course recently purchased the Ocean Shield and we've been doing a lot of heavy maintenance work on the Tobruk. So we remain in a position where we are covered, but obviously we'd like the Choules back in the water as quickly as possible.
LYNDAL CURTIS: While you were away Tony Abbot outlined an aspiration to return to real funding increases in Defence of three per cent a year. That was a promise your Government made in the 2009 White Paper, when will you deliver on that promise?
STEPHEN SMITH: We've made it clear that it's been very difficult in light of the aftermath of the global financial crisis to meet the on average budget increases set out in the 2009 White Paper and we've been very frank about that. I don't even describe what-
LYNDAL CURTIS: And in fact you've cut the Defence budget in the last two budgets [indistinct] last budget in May cut it by five and a half billion dollars over four years.
STEPHEN SMITH: Yes, that was a significant contribution that the Defence organisation made to bringing the budget back to surplus. But I don't even describe the Tony Abbot's speech when I was in Japan as an aspiration. On the one hand he is not committing himself to reinstituting the money that we took out in this budget, on the other hand he's saying that he's going to take more out on the civilian side.
LYNDAL CURTIS: But what about your side of politics, you're in Government at the moment. Can you absolutely rule out that Defence will be called on again for savings as you seek to return the budget to surplus?
STEPHEN SMITH: Yes, we are in Government at the moment and that's why we are taking these things, because they're national security issues and dealing with difficult fiscal climate we're taking these things seriously and not just issuing press releases because it seemed like a good idea at the time when I went to a particular conference to make a particular speech.
What Tony Abbott's contribution, if you can put it as high as that, doesn't acknowledged is what Leon Panetta describes as the fiscal reality, the new fiscal reality where Australia, the United States, United Kingdom all comparable countries are having the same difficulty so far as defence expenditure and restraint is concerned. But we're - our approach-
LYNDAL CURTIS: But will that fiscal reality mean that Defence is called on again to find savings in order to return the budget to surplus?
STEPHEN SMITH: I'm not going to get into the rule in rule out game for budgets down the track, but again while I was away in Japan the Finance Minister unveiled some further efficiency savings across the board, Defence was exempt from those because Defence had made its own substantial contribution.
So people should not get ahead of themselves. And in the meantime what we've done with Defence expenditure is to make sure that our core capability continues to be protected, that our overseas operations, in particular Afghanistan, continues to be protected, that our military numbers continue to be protected. And that is a sensible way for moving through what is a difficult but nonetheless a manageable situation.
LYNDAL CURTIS: You are in the process also of putting together a new Defence White Paper, are you being told that the funding envelope you're trying to work in won't deliver the Defence Force you want?
STEPHEN SMITH: Well we haven't yet got to that point of consideration. Obviously the White Paper in the first half of next year will need to have some very careful financial parameters around it. But I'm not putting the cart before the horse. This White Paper will deal with the array of issues and challenges that confronts Defence. We're drawing down from our three overseas operations, Afghanistan, East Timor and the Solomon Islands, what implications does that have for the future of Defence in the South Pacific and in South-East Asia? For the first time in 25 years-
LYNDAL CURTIS: But broadly-
STEPHEN SMITH: For the first time in 25 years we've - if you let me finish I can explain it to you.
For the first time in 25 years we have affected a Force Posture Review which looks are how we are geographically postured in our own country. And I see in Tony Abbott's speech he's saying that we need to have a look further north. The only two occasions in which an Australian Government has done that was in the mid 1980s with Kim Beazley and with me some two years ago so that's taken care of.
So the White Paper will cover a vast array of challenges for Defence and for the nation in light of changing strategic circumstances and our financial challenges will be one of those but it won't focus only and exclusively on capability and finances which was what the 2009 White Paper did because that was the first White Paper we'd had after nearly a decade of neglect from our political opponents.
LYNDAL CURTIS: As I understand it no White Paper has come with a firm plan to attach dollars and how that money will be budgeted for in the future, in order to guarantee that what is promised in the White Paper can actually be delivered instead of things being put aside or shoved out into the future as has happened with so many White Papers, should this White Paper come with a funding document attached to it?
STEPHEN SMITH: What it will certainly come with, or in association with, will be a funding document for the forward estimate years. One change that I have made in recent times is to make sure that the so called Defence Capability Plan, which is a 10 year plan, now has two parts to that. The Defence Capability Plan which is for four years which has the forward estimate budget figures allocated to that and then a guide for the following six years and that's been warmly received and welcomed by Defence.
One of the great challenges for any Government whether it's in Australia or overseas is how do you seek to give both Defence industry and Defence itself security of planning and security of finances when you know that you are going through now and into the future the potential for difficult fiscal times. The 2009 White Paper-
LYNDAL CURTIS: [Indistinct] way to do that not to keep cutting the budget?
STEPHEN SMITH: Well the 2009 White Paper made it clear that the single biggest challenge facing Australia was the aftermath of the global financial crisis. I think most punters are now saying that the adverse consequences of that are lasting longer than anyone would have wanted to, particularly the aftershocks in Europe. And that has seen adverse implications for Defence expenditure in Australia as its seen adverse implications for Defence expenditure in Australia as it's seen adverse implications for Defence expenditure everywhere else.
Leon Panetta talks about the new fiscal reality, he's the Secretary of State for Defense and he's taking out a minimum of $498 billion over a 10 year period, nearly half a trillion dollars over a 10 year period and that's before the congress potentially requires him to do more so we're not orphans here, we're doing it in a sensible way around a new white paper in 2013 but in a way in which we not just protect our core capability, we've been able to, despite the difficult circumstances purchase more. Whether it's Growler, whether it's our military tactical lift planes the C-27s or whether it's Bushmasters, 200 of which we've ordered after the budget in May of this year.
LYNDAL CURTIS: One quick final question, there was a report recently that you made changes to your Defence White Paper team, why did you make those changes?
STEPHEN SMITH: I didn't make any changes to my Defence White Paper team, my Defence White Paper team are the two former secretaries, Rick Smith and Allan Hawke together with Paul Rizzo who form my advisory team. The Department made some arrangements, and subsequently change those as the scope of the White Paper has become clearer.
So we'll be doing, and we are very well placed because a lot of the work that we need to do for the white paper has already been substantially addressed. For example, the force posture review and the review of our capability plan and the like.
But we'll be doing all of the things that we need to do to make sure that by the first half of next year, and I expect April, May, June around that period we'll publish a White Paper which will set forward the strategic challenges and the way in which Australia can meet those in a sensible response, mature way, unlike the press release contribution we saw from Mr Abbott during the week.
LYNDAL CURTIS: Stephen Smith, thank you very much for your time.
STEPHEN SMITH: Thanks.