Defence Connect Budget Lunch, Canberra

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Thank you Sarah for that wonderful introduction and for what you’re doing to support Australian SMEs in our defence industry.

Thank you also to Phil Tarrant, Momentum Media and the team at Defence Connect for hosting what is another fantastic Budget event.

Thanks to Matt Keogh, the Shadow Minister for Defence Industry, for your dedication in taking part today while battling COVID. You’re a real trooper Matt!

I would like to acknowledge and thank you to all the past and present ADF personnel in the room today.

I am so very grateful for your service.

Like every Budget week, this has been a very big week for our Government.

And as always the Prime Minister and the Treasurer have led from the front.

It has also been a significant week for you, our defence industry.

Because the Budget has shown that we, as a Government, are as committed to you as we have ever been.

Budget weeks are extremely busy for everyone at the best of the times – lots of media attention, lots of functions, plenty to talk about.

But when an election looms on the horizon, they take on a whole new level of significance.

They help remind you, the voters, of the level of support you can expect from a returned Morrison Government. 

That we have a plan for continued growth and prosperity.

And there were no shortage of examples to measure us by.

As Minister for Defence Industry I want to see us continue to support our great defence industry well into the future. Because I am proud of our record over the past three years.

•           The enhanced AIC contractual framework…

•           The AIC Audit Program…

•           Changes to Commonwealth Procurement Rules…

•           The establishment and building the Office of Defence Industry Support…

•           The implementation of the ASDEFCON review…

•           Establishing the Defence Industry Secondment Program…

•           And setting up the Defence Industry Pathways skills Program.

The Budget has built on those measures we have put in place.

I can announce today that we will restart a revised and competitive version of the Sovereign Industrial Capability Priorities grant program.

Updated guidelines will be released later today, with applications to open very soon.

We will invest more than $80 million over the next five years to build greater sovereign capability within Australian SMEs. This is not a nice to have. This is essential investment.

Starting on July 1, the Capability Improvement Grant Program – to be renamed the Defence Readiness Grant program – and the Global Competitiveness Grant Program will both restart.

This will enable us to better position businesses in the industry to win Defence work at home and abroad.

All of our grant programs will revert back to their original pre-COVID co-contribution levels of 50-50.

All of this comes after we have already invested $82 million in industry through these programs over recent years.

Our Government is also investing another $20.3 million into SADI – the Skilling Australia’s Defence Industry Grant Program.

And we have changed the guidelines to build up greater capability in industry.

SMEs can now apply for up to half a million dollars in grant funds for eligible training activities.

And industry associations can get up to $500,000 in grant funds for training activities for their own staff.

They can also apply for funding for activities that could be used to train the multiple businesses that they represent.

There is no denying that Australia’s defence industry continues to develop and evolve in line with the threats that our country faces.

Cyber protection is a good example.

Cyber-attacks are rising at an exponential rate.

Our soldiers are on the frontline in the cyberwar against state actors and organised criminal figures seeking to attack the Australian public.

We have a plan to keep this country safe.

Undoubtedly, the most significant Defence commitment in Tuesday night’s Budget was our $10 billion dollar investment over the next decade in new national cyber and intelligence capabilities.

Project REDSPICE – what a fantastic name – is the largest ever investment in the capabilities of the Australian Signals Directorate.

REDSPICE will substantially bolster ASD’s offensive cyber capabilities, strengthen its ability to detect and respond to cyber-attacks, and introduce new intelligence capabilities.

It will create more than 1900 new jobs, almost doubling the size of ASD.

This investment recognises the deteriorating strategic circumstances in our region.

It acknowledges that the nature of conflict has changed, with cyber-attacks now commonly preceding other forms of military intervention – most recently demonstrated by the offensive cyber activity against Ukraine.

As I mentioned earlier, our strong track record of the past three years includes changes to Commonwealth Procurement Rules, which have benefitted Australia’s defence industry.

And the Budget has built on this.

Importantly, it revealed that our Government has introduced new Commonwealth Procurement Rules to provide more opportunities for SMEs. This is dear to my heart.

These reforms are game changers that will remove barriers for SMEs.

The changes include a requirement for procuring officials to consider the unbundling of large projects into smaller procurement packages, appropriate to the size, scope and risk of work that is needed.

This change will provide more opportunities for SMEs to bid for Government work, by unbundling work at a scale that allows greater competition in the tender process.

The changes we have made also strengthen the spirit of risk sharing to ensure risk is fairly endured by the party best placed to manage it.

This change prevents excessive risk transfer by the Commonwealth to suppliers, to ensure insurance requirements are reasonable and enable participation by more suppliers.

Up-front tendering costs and red-tape for suppliers is also reduced by making it clear that, in most circumstances, tenderers should not be required to take out insurance until a contract is awarded.

This has been a major complaint of defence industry businesses for some time.

We will also be providing faster cash flow through supply chains, by extending our ‘pay on time’ policy to all suppliers. We will pay e-invoices within five days and other invoices within 20 days, or pay interest.

It is this Government’s expectation that by paying our invoices within 20 days, major contractors will pass on the benefit of this to the SMEs in their own supply chain. This will ensure cash is put into the hands of SMEs more quickly.

And to further support our efforts to build local sovereign capabilities as part of these CPR changes, the existing SME exemption has been amended to allow direct engagement of an SME for procurements valued up to $500,000. This is up from the previous $200,000.

This means we can now limit Defence tenders valued up to $500,000 to Australian SMEs only.

Clearly this is fantastic news for SMEs and will continue to strengthen our sovereign defence capabilities.

Because make no mistake – we are in a hurry to build our sovereign capabilities. And it is initiatives like the CPR changes that will get us to the finish line quicker.

To go further in our support for small business, I can also announce that we have established, effective immediately, a Small Business Advocacy Team within the Office of Defence Industry Support.

The team will help lead the cultural change within Defence to benefit Australian small businesses.

It will be responsible for addressing commonly reported concerns and challenges raised by small businesses and help remove procurement barriers within Defence.

So with all of these measures, we must always ask ourselves, why are we doing this? What are we trying to achieve?

The first duty of any government is to keep its citizens safe and secure.

Every Defence program we have invested in, and every decision we make going forward, is with a focus on building our sovereign industrial capability to keep us safe.

With that obligation clearly front of mind, our Government recently revealed that we will strengthen the size and capability of the Australian Defence Force.

The number of ADF personnel will increase by about 30 per cent by 2040, taking the total permanent ADF to almost 80,000 people.

To support this growth, it is imperative that we work with industry to ensure that we are equipped to face the challenges posed by a deteriorating security environment.

Because right now, the world is facing one of its most significant challenges in decades.

Each morning, as we turn on our TVs and read the headlines in newspapers and on our mobile phones, we are left astounded, trying to comprehend the latest brutalities inflicted upon the people of Ukraine by Russian Forces.

We have provided significant support to the Ukraine government, and this morning the Prime Minister confirmed we will also fly our Bushmaster armoured vehicles, designed and made in Bendigo, in Globemaster C-17s to Ukraine to make sure they can be there to support Ukrainian forces.

Closer to home, we are contending with tensions in our own region, the Indo-Pacific.

China’s coercion, directed at many countries, is well-known.

Nations of the Indo-Pacific have also witnessed China’s high-speed military build-up in recent years.

This week you would no doubt have read about the concerning situation in the Solomon Islands.

In late 2021, Australia, together with our Pacific family partners, PNG, Fiji and New Zealand, responded swiftly and effectively to Solomon Islands’ request to support the Royal Solomon Islands Police to restore calm following civil unrest.

We firmly believe the Pacific family can meet the security needs of our region.

We are concerned with the decision of the Solomon Islands Government to proceed with a security arrangement with China.

We remain committed to continuing to support Solomon Islands security needs.

Solomon Islands will always be a valued member of our Pacific family.

We respect the right of every Pacific nation to make sovereign decisions about its national security and foreign policy.

We have asked Solomon Islands respectfully not to proceed with this proposed agreement with China.

We are concerned that the security agreement with China is not necessary and will undermine stability in our region.

More broadly, the fracturing of peace in our region as a result of any outbreak of conflict would be disastrous.

That is why we must not only condemn aggression, but also act to deter it, whatever its source.

To this end, the build-up of sovereign capability, with robust and resilient Australian supply chains in key priority capability areas, is essential for our national security.

And if COVID wasn’t enough to highlight the importance of sovereign capability – the war taking place in Ukraine certainly should.

We need the know-how and know-why in our workforce to design, build and sustain what we need now and into the future.

We must build at home to defend our home.

There are incredible economic benefits of our determination to build our sovereign industrial capability.

There are 100,000 jobs and 15,000 businesses across Australia supported by our Defence investment.

Recently, as you may have seen on your TVs, at the cinemas or heard on the radio, our Government launched the “in our own backyard” campaign.

Its aim is to raise awareness of the thousands of local jobs around the country for skilled Australians in the growing defence industry.

We have embarked on this campaign to back our historic $270 billion investment in our sovereign defence capability.

We are working to encourage – and equip – the Australian workforce to ensure it has the right skills to build the capabilities, products and services our ADF needs to keep us safe.

Our investment is creating jobs in private businesses, defence industry, in capital cities and in country towns right across Australia.

We need young Australians – and, I might add, the not-so-young – to take up these jobs now.

And we need students to pursue the study pathways that will set them up for these well paid, exciting, generational jobs.

High end welders, engineers, experts in logistics, program managers, designers, cyber and surveillance, support services – we need all of them.

Right now there are about 4000 people employed across Australia in naval shipbuilding. By 2030 we are going to need about 15,000.

So the challenge facing us is enormous, and each of you in this room will play a vital role in ensuring we achieve our objective.

You have heard me talk at length over the past couple of years about our five pillars, Australian Industry Capability, the CDIC, Office of Defence Industry Support, and ASDEFCON.

Each of those reforms have reinforced our determination to have the right sovereign capabilities developed at home, so that we have the know-how and know-why to design, build and sustain what we need now and into the future.

When I came into the defence industry portfolio in 2019, I was determined to improve the lot of Australia’s defence industry.

To get more defence opportunities.

To get better interaction with CASG.

To remove barriers to entry.

To find and fund new programs to build our skilled workforce.

We have come a long way in three years and I have seen with my own eyes the cultural change in Defence when it comes to the importance of Australian capability in Defence procurement.

I am very proud of what my team and I have achieved – together with key partners, and now friends, like Tony Fraser and the Secretary of Defence, Greg Moriarty.

When I see the explicit focus on Australian Industry Capability in new programs – like the guided weapons enterprise and even with our future nuclear submarines aspiration – I know this is a lasting legacy. 

Before I finish, I want to take this opportunity to thank you for your great work.

I know COVID continues to cause severe disruption with much of what you do. 

You did so well to get through the border closures and supply chain issues we saw over the past two years.

And I was pleased to work closely with you during this difficult time – and hope to continue this partnership.

Omicron has posed a whole raft of new challenges, as has global uncertainty, so who knows what hurdles could be placed in front of you down the track.

What I do know for certain is maintaining the resilience you have shown up until now will ensure you get through it. 

The contribution of Australia’s defence industry companies will continue to be one of national significance in globally significant times.

And our Government will always remain committed to backing this industry and the thousands of SMEs within it.

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