Defence + Industry Conference

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Senator the Hon Linda Reynolds CSC

Minister for Defence

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Nicky Hamer (Minister Reynolds’ Office): +61 437 989 927

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15 October 2020

***Check against delivery***

Thank you for that warm welcome, and good morning to you all.

Firstly, I acknowledge the traditional owners of the land from where I am speaking today – and that is the Wadjuk people of the Noongar nation. I pay my respects to their elders, past and present.

And also, as Minister for Defence, I pay my respects to Aboriginal and Torres Strait Islander men and women who have served, and continue to serve our nation with such great distinction. The Defence and Industry Conference is a keystone event for our sovereign partnership.

A partnership that is driving our joint commitment to maintain and strengthen a capable, agile and potent Defence Force – here at home and abroad. A partnership that underpins Australia’s national security – in the face of current and emerging strategic challenges.

In preparing for this event, I was struck by its title – ‘Defence + Industry.’

I found myself asking, if this is a sum, what does it equal? And how can we maximize the sum of the parts?

For me, the answer has three distinct and interconnected elements.First and most importantly, Defence + industry equals world‑leading capability for our ADF. Secondly, Defence + industry equals economic benefits for Australian industry and Australian jobs. And, thirdly, Defence + industry equals strategic advantages in the pursuit of our national interests.

I will now speak in detail on these three elements. And I will make clear how this Government is building a resilient and a sustainable sovereign defence industrial base.

Today, the whole represented by Defence plus industry is greater than the sum of its parts. But we can do – and we must do – much more.

First, and most importantly, Defence + industry equals world leading capability for our ADF. Just four years ago, the Government published a detailed and fully-costed plan to ensure our ADF could the meet strategic challenges facing our nation.

That plan was the 2016 Defence White Paper and the accompanying Integrated Investment Program. For the first time ever, these plan were accompanied by a comprehensive industry engagement strategy: the 2016 Defence Industry Policy Statement.

Since then, we have released additional, and more detailed guidance, on how Defence is implementing the statement. We continue to deepen our commitment to transparency and to consistency for industry.

When I became Defence Minister, I set three priorities for Defence. Strategy, Capability and Reform. Earlier this year, the Prime Minister and I launched the 2020 Defence Strategic Update and Force Structure Plan which delivered the first two of my priorities.

The Defence Strategic Update paints a very sobering picture of Australia’s deteriorating strategic environment. These challenges are being exacerbated by COVID-19.

As the Prime Minister has observed, we must prepare for a post COVID world. One that is poorer, one that is more dangerous, and one that is more disorderly. Our long-held capability edge in the region is being challenged by the technological progress and regional military modernization.

The Update also recasts Defence’s priorities around a much tighter regional focus and three new strategic objectives: to shape Australia’s strategic environment; to deter actions against Australia’s interests; and to respond with credible military force, when required.

To meet these objectives, we are enhancing the capability of Navy, Air Force and Army. And we have created two new domains: Space, and Cyber and Information Warfare. This is an unashamedly ambitious plan that requires the support of Australia’s defence industry to deliver. A defence industry that is a true fundamental input to capability.

Australia needs a defence industry that can leverage our nations’ leading-edge science, technology and research, one that can train and grow its workforce, one that can utilise small and medium-sized businesses, and one that can generate sustainable long-term capability. To deliver the effects set out in the Strategic Update the Morrison Government is doing three things.

Firstly, we have secured long-term funding for Defence and Australian Defence industry. $270 billion dollars has been locked in for Defence capability over the next decade. Defence’s funding has reached 2% of GDP, in keeping with our commitment in 2016. Defence spending has been decoupled from GDP to avoid the need to regularly adjust plans and purchases in response to GDP fluctuations.

All this provides the funding certainty that Defence and defence industry rely on. This has never been more important than it is today. Strong budget management underpins our unparalleled rejuvenation of Defence.

Defence, as the custodian of this taxpayer investment, must make affordable capability investment choices based on the highest strategic priorities. This includes flexibility in managing the Defence budget– so we can be responsive to the changing strategic environment.

This achieves a balanced outcome across capability, sustainment and personnel. Defence and defence industry must demonstrate to the Australian people that our investment is being spent wisely. Australians would expect nothing less. In relation to my third priority – reform – we are in the process of transforming the way Defence does business.

And I will have more to say on this later this year. The second way this Government is delivering on the Defence Strategic Update is by investing in building our industry capacity here in Australia. Over the next decade, Government has allocated $3 billion dollars for defence innovation, science and technology. This will be mainly delivered through the Next Generation Technologies Fund and through the Defence Innovation Hub. Initiatives such as the National Shipbuilding College are ensuring students of today are ready to join our industrial base tomorrow.

We also continue to expand our wide-ranging grants programs. These programs not only enhance skilling, but also support the development of sovereign industrial capabilities and facilitate new export opportunities. The third way we are implementing the Defence Strategic Update is by maximising opportunities for Australian businesses in defence projects. These build on the significant steps this Government has taken since the 2016 Defence White Paper.

Minister Price will shortly talk about the steps she and I have taken to improve the Australian Industry Capability Program. These measures demonstrate our Government’s commitment to cementing the role of Australian industry as a Fundamental Input to Capability. Now, I turn to how Defence + industry also equals economic benefits for all Australians. An innovative and sustainable defence industrial base is not only in Defence’s capability interests – it also makes a significant contribution to a robust national economy.

And that benefits all Australians. It benefits all Australians because Defence capability is truly a national endeavor. There are now over 15,000 companies and 70,000 Australians benefiting from our investment in Defence. And this number is increasing during COVID-19. Our projects and operational bases are located right across the country, including in regional Australia. Defence’s demand for local services sustains thousands of jobs, creating strong demand for local services across every state and territory. Increasing exports is critically important for the sustainability of the Australian industrial base.

That is why the Government launched a comprehensive Defence Export Strategy two years ago and set up the Australian Defence Export Office. Exports strengthen the resilience of our industrial base. And as our companies move into international market, Australian firms innovate and sharpen to remain competitive.

We have seen many significant export success stories, a $70 million contract secured by Austal to deliver patrol boats to Trinidad and Tobago; a $1 million dollar contract secured by Tasmanian small business Pivot Maritime as a result of attending the Team Defence Australia stand at Euronaval in France. Not to mention the impressive success of 50 Australian companies now contributing to the JSF global program – with contracts worth over $1.7 billion dollars.
The Innovation Hub continues to grow Defence’s investment in new technologies to ensure the ADF maintains its capability edge. In just four years, the Hub has invested more than a quarter of a billion dollars in Australian industry. 84 per cent of these grants have been invested in small to medium-sized businesses.

In the last financial year alone, the Hub awarded 52 contracts to industry worth over $105 million dollars – a 32 per cent annual increase. All states and territories are benefitting. So, what does this all mean for you? Today, many of you are dealing with the many challenges COVID-19 has posed for your business. You are facing the impacts of disruptions to supply chains and to travel. But you have adapted to new ways of working and delivering Defence projects.

And you have restructured your workforce and business to continue operating in uncertain circumstances. The partnerships between Defence and industry have never been more important than they are today.

This is why Minister Price and I – and Defence – have responded so quickly to these challenges. At the start of the pandemic, we set up a COVID-19 Industry Support Cell – to provide quick advice to defence industry on managing the challenges presented by the pandemic.

We then accelerated invoice payments to help with cash flow. Since March, Defence has paid more than 190,000 supplier invoices early, totaling over $13.4 billion dollars. And in August, the Prime Minister, Minister Price and I announced $1 billion dollars in economic recovery initiatives.

These provide wide-ranging support to defence industry and to 4000 Australian workers. Additional industry initiatives include – funding for innovation, industry grants, skilling, micro-credentialing and cyber training.

The package will accelerate important ADF sustainment and capability development projects across the manufacturing, construction and high-tech sectors. It brings forward investment in infrastructure and estate initiatives, with a total additional spend over the next two financial years of $300 million dollars. These initiatives are not only delivering benefits for your companies. They are also delivering benefits to the many other sectors of the national economy that our defence industry touches. A multiplier effect.

And lastly, defence + industry equals national strategic advantages. The strategic advantages of the Defence-industry relationship are vital to the ADF’s ability to deliver on the Defence Strategic Update.

Australia has a clear need to develop sovereign defence industrial capabilities and durable supply chains. The Government has identified ten sovereign industrial capability priorities. We are issuing detailed Industry Plans for all ten. Three so far, and the remainder by year’s end.

These plans provide detailed information on the capabilities Defence is looking to industry to deliver. And they put us on the front foot responding to supply chain disruptions. No single nation can do this alone.

Our international partnerships offer important safeguards and extended secure supply chains. Our US Alliance is a great example of shared technology access. I am working to leverage this into tangible collaboration through our involvement in the US National Technology and Industrial Base.

At AUSMIN in July, Secretary Esper and I committed to working together to break down obstacles to industrial base collaboration – including supporting greater Australian participation in US supply chains. I note this here because industry – especially US primes – stand to benefit from greater buy-in and participation from Australian companies.

Our Alliance with the United States – and our relationships with other Five Eyes partners – bring unique advantages. Successful industrial base collaboration also extends to other close partners including France, Germany, Japan and South Korea.  

This collaboration provides the opportunity for greater supply assurances and support in times of crisis. They also offer a buffer against rising costs and the complexities of cutting-edge defence capabilities.

So, in conclusion.

This Government’s first priority is to keep Australians safe. We cannot have peace without prosperity. And we cannot have prosperity without peace. The Prime Minister and Treasurer faced unprecedented challenges as they drafted this year’s Federal Budget.

But I am so proud to be part of a Government that unashamedly has faith in Australian industry and in Australian workers. And I have faith that with the Government’s unprecedented stimulus, these Budget measures will help drive our nation’s recover from the economic impacts of COVID-19.

In this context, the relationship between Defence and industry must be – and remains – dynamic and adaptive. This Government is enabling industry – just as we look to industry to enable our Defence capability. For this partnership to be dynamic and to adapt over the long term we need to maintain the closest possible alignment.

The Force Structure Plan is very clear on our future capability requirements. Our servicemen and women must have the best possible training and equipment. This is not negotiable. Our capability requirements will be met through innovative and cost-effective solutions.

At the same time we are maximizing opportunities for Australian industry participation. That means primes bringing more small and medium-sized businesses into their supply chains. These outcomes are key to the successful delivery of our defence industry policy – and our nation’s recovery from the economic impacts of COVID-19.

We must be realistic about what we can achieve on our own domestically, given the relative size of our defence sector. But we cannot afford to stifle our ambitions. Our strategic environment leaves us no choice but to develop sovereign capabilities, exports, and secure supply chains.

The great news is that Australia is well-placed to do this, having weathered the pandemic better than most other nations. But we still have much work to do. The relationship between Defence and Industry has never been stronger.

And conferences like this are a great opportunity to reaffirm and build on these relationships Defence + Industry has to be greater than the sum of its parts.

Thank you.





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