10 October 2022
SUBJECTS: Projects of Concern meetings, power prices
KIERAN GILBERT: And as we reported earlier today, the Defence Minister has outlined a number of significant blowouts of cost and time in his portfolio. Some of the largest and most significant projects are running up to four years behind schedule and are billions over budget. Let's bring in the Defence Industry Minister, Pat Conroy, who joins me live in the studio. Thanks for your time. Let's start with some of the response that you've announced today. Things like Ministerial summits or declaring these projects of concern. Why is that important as a stepping stone to get things back on track?
PAT CONROY: Well, there's really three parts of the equation to getting these projects delivered. There's the Defence Department and the ADF, there's defence industry and there's government and ministerial oversight providing energy. So the summits are really important because we will have problems with procurement. This is a very complex area and you're going to need ministerial oversight and energy to bring the parties together to resolve the issues. And that's why a commitment to regular ministerial summits is so important. And to give you an idea of how the last government dropped the ball, they had six ministerial summits over the first nine months, nine years of their government, so that's one every year and a half. When we were last in power, we were averaging one every six months. So that brings everyone together, provides a bit of heat for the Minister to put everyone in a room and say, let's sort this out. So that's really important, as is the independent project office within the Department of Defence to shine a focus on these issues, as are the monthly projects of concern meetings, briefings for myself and the Deputy Prime Minister. This is all about getting ministerial energy and oversight.
PAT CONROY: So to ensure that you're on top of it, more transparency in that sense. Is that right for the minister and the government?
KIERAN GILBERT: Transparency and more importantly, providing more leadership, because that's what was lacking under the last government. As we've said, they averaged a Defence Minister every 18 months. As I've said publicly, goldfish lasted longer than coalition defence ministers and that meant that they weren't providing the leadership to the department, to the defence industry, saying, “These are my expectations. What are the hurdles? How do we come together to solve them?”
PAT CONROY: Doesn't the department have to take a bit of accountability as well for the blowouts here?
KIERAN GILBERT: Well, some of the blowouts - let me give you a couple of examples.
PAT CONROY: You're talking about a cultural change in the department. That's one of the six measures that does seem to suggest that they've dropped the ball.
KIERAN GILBERT: Well, it starts at the top and the leadership of the Defence Minister and the Defence Industry Minister. And as I said, when you're rolling through them every 18 months means the leadership doesn't start from the top. You don't get the culture set from the top, saying, "I'm focused on this issue, this is a priority for me. Department will work with me to solve them". So that's really important. But some of the problems have arisen directly from decisions from the last government. Two examples the offshore patrol vessel, really important capability for the navy. The last government intervened and instructed Luerssens as the successful tenderer to negotiate with the company that lost the tender to include them as a subcontractor. That's led to a delay of up to twelve months on that really important capability. Or the Hunter Class Frigate where the last government lied, said they're buying a capability that's off the shelf that was in service with the British Navy when they're still finishing the design right now and that's where to a four year delay in the project.
KIERAN GILBERT: So these delays are directly explained that though you're saying it wasn't an-
PAT CONROY: No-
KIERAN GILBERT: off-the-shelf product, it had to be designed-
PAT CONROY: it existed purely on drawing board when the last government made a decision. And we're still only finalising the design now for what's called the Type 26 Frigate, which is what the UK Government is building right now.
KIERAN GILBERT: Do we have to also rein in expectations on the local bills? Well, because it seems to me over a number of decades defence policy and strategic priorities have been second to industry policy and jobs. And having jobs in parts of the country, Adelaide and elsewhere.
PAT CONROY: It's not getting the balance right. Having a local industry is critical, not just for sustaining these platforms but are giving you a key critical advantage. So we need to be rational about it. There are some areas where we should maximise local industry content because it's good jobs, but secondly because that gives us a sovereign capability that we need to maintain in this country. But we have to be frank about that. But that frigates, example of Hunter Class Frigates, the delays weren't because we're building them in Australia, the delays are because the design wasn't ready when the last government decided to buy them. And that's where immature decision making by a government where defence ministers turn over so quickly means they can't get their feet under the desk and understand the issues. And Peter Dutton was a classic example of that.
KIERAN GILBERT: Now, having covered this area for a long time, there have been blowouts almost on an annual basis in defence spending. Is it an inevitable byproduct of such a massive, and you put it yourself, complex area of government policy?
PAT CONROY: It's certainly challenging, but I think the key thing is to be frank with the Australian taxpayer about what projects we're getting. Some projects are going to be called what's off the shelf. We're buying C-17's out of the buying production line in America. We know what the cost is, we know what the schedule is, we're one of an order of 50 or 100, that's fine and that suits that capability. But when we need something that's cutting edge, that's something that can't just bought off the shelf, we need to be frank with people about the schedule challenges and the cost challenges-
KIERAN GILBERT: Do you also have to, in terms of I know there's a review underway with Stephen Smith and Angus Houston, but you also have to say that some things aren't applicable to our strategic needs. Like, for example, the armoured vehicles for the army, meant to be the most expensive acquisition in army history, should they be scrapped?
PAT CONROY: Well, I won't be commenting on cabinet processes and that's where Land 400 is up to, so it wouldn't be appropriate for me to comment on that. The Defence Strategic Review is a really important piece of re-evaluating our entire defence posture going forward. The last government in 2020 said that we'd lost the ten year warning horizon for any future conflict. And they're right, we've lost that. But they did nothing to actually speed up acquisition and fix these problems projects. So the DSR is a really important piece of advice to government and we'll work through that.
PAT CONROY: This is one of the rising expenditure areas. I know the government's got its first budget in two weeks. The stage three tax cuts have been a big focus. It'd be risky to, and I'm asking this as a political practitioner as opposed to Defence Industry Minister, but it'd be risky to be breaking a promise on income tax cuts, wouldn't it, so soon after an election win?
PAT CONROY: Well, the Government's position with the stage three tax cuts, hasn't changed. Hasn't changed. There's a lot of media speculation. Our position hasn't changed.
KIERAN GILBERT: It won't change-
PAT CONROY: It hasn't changed. It's what we took to the last election and this speculation. I understand why people are getting excited because the budget is coming up, but our position on the stage three tax cuts has not changed, as the Prime Minister indicated yesterday.
KIERAN GILBERT: Do you think he should rule out any change? As an advisor, close friend of the Prime Minister's.
PAT CONROY: Our position has not changed. And that's where it's up to.
KIERAN GILBERT: The power prices issue, just to get your reaction to this. Finally, it's a story that we've seen emerge over the last hour or so, but the Alinta Chief Executive, Jeff Dimery, warning about power prices going up a minimum 35 per cent next year. He says it's horrendous. He's right about that, isn't it? Well, if that's true if it's true.
PAT CONROY: If it's true. And I haven't seen his predictions, I haven't seen what modelling he's basing it on. What I can say is that the conflict in Ukraine, the reduced reliability of our existing power stations that are ageing, is impacting on the cost of electricity. And the best way of solving that is to get more renewables into the grid, which is the cheapest form of new energy, backed up by pumped hydro and batteries, and really speed up this move towards clean energy. It's cleaner, it's better for the environment and it's better for our wallet and that's what our government's plan will deliver.
KIERAN GILBERT: But in terms of rewiring the nation, which is part of that, it's $20 billion expenditure. So you'd think that at least in the short term, at least in the short term, in terms of beefing up that infrastructure, it puts upward pressure, doesn't it?
PAT CONROY: Well, it's a $20 billion investment and if you get those connections in, that allow more renewable energy into the grid and that will lower power prices, and that's what the modelling has shown. We've got at the moment, solar farms that can't actually feed into the grid because the grid's not fits the purpose. So getting the rewiring of the grid done will allow more renewable energy in and that will mean that power prices will be cheaper than they otherwise would be.
KIERAN GILBERT: Defence Industry Minister Pat Conroy, I appreciate your time.
PAT CONROY: My pleasure.