Interview with Patricia Karvelas, RN Breakfast, ABC Radio

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The Hon Richard Marles MP

Deputy Prime Minister

Minister for Defence

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02 6277 7800

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10 October 2022

PATRICIA KARVELAS: The federal government has been open about what it says is the poor state of the budget and the need for hard decisions around spending. A decision on whether to scrap or alter the controversial stage 3 tax cuts is off the agenda for now. But the government faces serious challenges in meeting its spending commitments. Some of these decisions just got a lot harder with revelations 28 major defence projects are $6.5 billion over budget and running behind schedule by a total of 97 years.

Richard Marles is the Defence Minister and the Deputy Prime Minister, and I spoke to him a short time ago. Deputy Prime Minister, welcome to the program.

DEPUTY PRIME MINISTER RICHARD MARLES: Great to be with you, Patricia. How are you?

KARVELAS: Good. These figures are extraordinary – 28 major projects delayed by a total of 97 years. I mean, this is obviously a cumulative figure. How has this happened, and does it reflect a lack of accountability in defence spending?

DEPUTY PRIME MINISTER: Well, what it reflects is that we’ve inherited a complete mess from the former government - a government that was very focused on announcements, very focused on hoopla and vaudeville, but when it came to the actual delivery of projects, they were one of the worst governments that we’ve seen in defence procurement history. And that starts with the fact that they had six defence ministers over a period of nine years. But it was all about the talking, it was never about the doing. And, as you say, what that’s resulted in is a combined 28 projects being 97 years over schedule, and this is a real challenge now for the incoming government to get this back on track.

KARVELAS: Well, how are you going to deal with the challenge? Because, from a capability perspective, where do these projects leave us in terms of our ability to defend ourselves in a region where tensions are rising?

DEPUTY PRIME MINISTER: Well, a very good question. We need to be focused on capability. We cannot afford capability gaps, and we’ve talked a lot about the bungling of the submarine program where we do look at capability gaps opening up. We’ve got the Hunter Class frigates which are four years behind schedule. And, again, there’s the prospect of capability gap.

What we’re going to do actively manage these projects. We’re going to get back to basics. We’re not going to be as focused on the announcement; we’re going to be much more concerned about the delivery, and that means we’re going to do things like have monthly reports on each of these projects, make sure there are objective criteria before projects are put on the project of interest and project of concern list, which is the mechanism by which defence has traditionally dealt with projects when they are running late. We will deal with all of these in a rational and sober way, rather than dealing with these in a political way, which is what we saw the former government do.

KARVELAS: Okay. So, what does that mean? What decisions are you taking around the 28 projects? Will all of them stay, or are you prepared to scrap some of them?

DEPUTY PRIME MINISTER: Well, the Defence Strategic Review is underway right now. It’s asking the question about the shape of our Defence Force that we need going into the future. What we’re really highlighting today is that over and above that at a granular level, we just need better management. We need much better hands-on management from government. And this is not the fault of the Department of Defence, it’s not the fault of defence industry. This is a failure of the former government to actively manage these projects.

KARVELAS: Okay, but you say – you say the government – your government – will work towards fostering a culture in Defence of raising attention to emerging problems and encouraging and enabling early response. So that’s about the culture in the Department, too, isn’t it? You can’t just sheet that entirely back to the former government, which is convenient. There must be a cultural issue going on?

DEPUTY PRIME MINISTER: Well, I think culture starts at the top, and when you had a culture under the former government of being very focused on making announcements, very focused on the politics of those announcements and making political decisions about whether particular projects which end up on the project of interest or concern list, that establishes the culture and the metric for the department.

What we’re making really clear is we’re less interested in those announcements, much less interested in the press releases, and we are completely interested in the delivery of these projects, making sure that they are delivered on time, on budget. And we will hold the department and defence industry to account against that standard.

KARVELAS: Have you made a decision on whether defence will drop the troubled French-made Taipan helicopters for the US-made Black Hawks? In August the US announced its State Department had approved the sale of 40 aircraft. Can you confirm if any move has been made on that?

DEPUTY PRIME MINISTER: This is under review, and we’ve spoken about this before. And that review is still underway. I mean, we’ve not hidden the fact that we are concerned about the Taipans. It is one of the 28 projects that we’ve described here. And we are looking at other options, which includes the Black Hawks that would potentially be provided out of the United States. But that review is still underway, and will resolve soon. I don’t want to pre-empt that decision. But we’re obviously looking at ways in which we can get the multi-role helicopter function done in a way which is effective and provides value for money.

KARVELAS: In the March budget Defence spending was predicted to hit 2.2 per cent of GDP by 2032. But you say that doesn’t include AUKUS or an increase in the size of the ADF. What kind of spending are we looking at over the next 10 years, and how much will delays and overspending from current projects affect that figure?

DEPUTY PRIME MINISTER: Well, what delays in the projects do is create capability gap, so that it makes our Defence Force less capable. But there is the potential for financial implications as you look to try and work out resolutions to those capability gaps. You’re right in observing that the budget in May, whilst looking at Defence spending increasing in the way you’ve described, did not include AUKUS and did not include a projected increase in the size of the Defence Force.

I don’t have a specific answer to what that will look like in 10 years’ time as a percentage of GDP. But we know that Defence spending is increasing. We know it represents one of the medium to long-term pressures on the budget. And what that in turn requires is that the quality of that spending needs to be excellent. And that’s not what has been the case over in the last 10 years. And that’s a lot of what we’re trying to talk about today.

KARVELAS: So, is the need for more Defence spending another argument for revising the stage 3 tax cuts?

DEPUTY PRIME MINISTER: Well, I know there’s been a lot of discussion about the tax cuts over the last week. Our position on tax is well known and our position has not changed in respect of tax since the election.

KARVELAS: But there was a discussion. There was a discussion, and now it seems to be shut down for the October budget. Why have you delayed a decision to make changes to the stage 3 tax cuts?

DEPUTY PRIME MINISTER: Well, actually, the only thing we’ve been saying about that is that our position in relation to tax hasn’t changed. And we’ve been consistently –

KARVELAS: No, that’s not what you’ve been saying. No, sorry, with respect, I’ve listened so carefully to this, and I think our listeners expect us to be very honest. The government has wanted a debate on it, and now we are told that decision has been delayed at least until May or perhaps we’ll see. Why not now? Why have you decided to shut down the debate for this budget?

DEPUTY PRIME MINISTER: Well, Patricia, we’ve consistently said that our position on tax has not changed. I don’t think we could have been clearer than that. We’ve been making the point that the budget is under pressure, and it’s certainly under pressure looking into the medium and long term. It’s under pressure in lots of ways. I mean, with rising inflation, every dollar of debt that has been left to us by the former government is now costing more. But it’s under pressure in relation to particular areas of spend – in health, in the NDIS, but in defence as well. Defence is one of those rising costs, and the focus of what we are trying to say today is that the waste that we’ve seen in defence over the last 10 years must come to a stop and we must be making sure that our focus on defence is in respect of quality spending. And that’s what it will be going forward.

KARVELAS: Richard Dennis of the Australian Institute said leaders should not blindly stick to promises that are unpopular, unnecessary and unfunded. What do you say to that?

DEPUTY PRIME MINISTER: Well, Richard Dennis can make those comments –

KARVELAS: But on the substance. Do you have to stick to any promise fully, blindly, as he describes it? Or is there room?

DEPUTY PRIME MINISTER: Look, if this is another way of trying to ask the question in relation to tax, let me be clear: our position hasn’t changed. We are obviously looking at how to manage the budget in a sustainable way and in a way which is fair going forward, and which deals with the pressures that is being placed on the budget. And, as I say, defence is one of those and the starting point is to make sure that the quality of our spend on defence is as excellent as it can be. And that requires change given what we have seen over the last 10 years.

KARVELAS: The Chief Executive of the Grattan Institute, Danielle Wood, said it would be sad if we lost the moment for a substantial discussion about tax changes and hoped a broader debate was still possible before the next budget in May. Is that broader debate possible before May?

DEPUTY PRIME MINISTER: Well, again, I’ve made our –

KARVELAS: You’ve told me your position, but I’m asking about a broader discussion about May. My question is different.

DEPUTY PRIME MINISTER: Well, we’re focused on dealing with budgets that are sustainable and are fair and take into account the real challenges and pressures that are being placed upon the budget. As I say, defence is one of those, and that’s why we are talking about the need for a much better way of going about defence spending in the future.

KARVELAS: We keep hearing about NDIS and health and defence growth. Today these new figures you’ve put out for your own department about the overspends, blowouts - timelines blowing out - is defence the worst offender of all of those areas?

DEPUTY PRIME MINISTER: Well, I think defence has been a pretty significant offender over the last 10 years, and we certainly mean to change that going forward. I mean, in a rational world defence spending is a function of strategic threat, and we face a very precarious strategic environment. That’s why we talk about the fact that defence will be a pressure on the budget going forward for good reason; because there is a very precarious strategic environment that we face. But that’s all the more reason why it’s very important that the money that we do spend on defence is done so in a prudent and quality way. That has not been the way in which we would describe things over the last 10 years, and that is going to change. And the starting point is we’re not about to have defence ministers turn over every 18 months, which is what we saw under the former government.


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