Sarah Ferguson, 7.30

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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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11 October 2022

SUBJECT: Defence spending.

SARAH FERGUSON, HOST: Richard Marles, welcome to the program.


FERGUSON: What implications does this $6.5 billion defence blow-out have for the Federal Budget?

DEPUTY PRIME MINISTER: Well, we see defence as a growing area in the budget over the medium to long term. The point we're really making today is that, precisely because of that, we need to be making sure that we are managing the defence budget in a way which doesn't involve waste, where we've got quality spending, which delivers the highest capability to keep Australians safe. Now, over the last decade, we've had precisely the opposite of that – 28 projects running a combined 97 years over time.

FERGUSON: Let me come in there, you said your piece about the previous government's responsibility for this. Can we talk now about what it is that your government is going to do about it?


FERGUSON: I don't mean project by project, but you've got a big blowout without even talking about the very major spends coming down the line, what are you going to do about it?

DEPUTY PRIME MINISTER: Well, what we need to be doing is actively managing our procurement. Getting back to basics. So we've said today that we will establish the independent project office, we will seek monthly reports, we will have clear and objective criteria by which projects are placed on the Projects of Interest-  Projects of Concern List, which is the traditional means by which Defence has managed projects where there are issues. In other words, we're going to have an activist management of defence procurement from the government, from ministers. And that's in stark contrast to what we've had over the last decade, where, really, there has been negligence on the part of the former government and no management at all.

FERGUSON: So this we do know, that defence spending is going to go up from 2 per cent of GDP to 2.2 per cent of GDP, that's going to reach $80 billion by 2032. Sometimes these sums can be dizzying, but is the cost of nuclear submarines factored into those projections?

DEPUTY PRIME MINISTER: Well, the projection is that defence spending will go from about 2 per cent of GDP, where it is now, to 2.2 per cent over the course of the next decade. That does not include AUKUS and the nuclear submarine so –

FERGUSON: So what are your preliminary costings for the AUKUS project, for the nuclear submarine project?

DEPUTY PRIME MINISTER: Well, that's all information that we will release in the first part of next year, it forms part of –

FERGUSON: You do have – I'm sorry to interrupt you, forgive me – but you do have some idea about the costings for that. The Americans release costings on how much it cost to build an American nuclear submarine, which is more or less what we're going to be buying. Even if the project changes somewhat, you do have some idea. I think that there's knowledgeable estimates that put it at around $130 billion, is that kind of in the right ballpark?

DEPUTY PRIME MINISTER: Well, I'm not going to pre-empt what we will announce in the first part of next year. But obviously looking at what the cost of this will be is a key part of that. And it's balanced against what had been set aside for the Attack Class, which was the submarine program that had been provisioned for that was going to happen with the French.

FERGUSON: It’s a lot more expensive, isn't it?

DEPUTY PRIME MINISTER: Well, the anticipation is that it will be more expensive. But again, I'm not going to pre-empt the announcements that we make next year. But the point in your question to begin with is right, that when those projections have been made about increases to defence spending over the course of the next decade, that doesn't include this. And so, again, this just highlights the need for us to be managing our procurements in a way which delivers value for money, which does not involve waste, which is what we've seen in a profligate way over the last decade, and which focuses on outcomes, and that will be our intent.

FERGUSON: There's also as part of the plan for the future, a 20,000 person expansion of Defence personnel by 20 as well, where is all this money coming from? We've just spent a lot of time talking about pressures on the budget, where are these very large sums of money coming from?

DEPUTY PRIME MINISTER: Well, defence is going to be an increasing pressure on the budget over the over the medium to long term. Ultimately, defence spending is a function of strategic threat in a rational world, and we're rational people. It's precisely because of that, that we are highlighting how important it is that defence spending is undertaken in a way which is careful, which does not involve waste, which drives quality outcomes.

FERGUSON: Given what you're saying about the scale of the crisis, and you've talked about this quite a lot over recent months – a kind of World War Two scale crisis that we face, those are I think the words that you used – will defence spending have to be considered as a priority above and beyond things like education and the NDIS and health?

DEPUTY PRIME MINISTER: Well, I think NDIS, health, aged care, these are all areas that we've been talking about as being areas that provide pressure on the budget. I mean, the level of debt that we've inherited from the former government – as we see inflation go up, every dollar of debt that Peter Dutton has left us now costs more. So there are increasing pressures on the budget. But again, this just highlights why it's so important that we are managing this in a prudent way. And I don't think defence gets a leave pass from the normal budgetary processes, it's really important that we are applying scrutiny to the way in which we engage in defence spending – 

FERGUSON: I don’t think we’re talking about a leave pass from scrutiny. I think the question is, and it’s the question that your colleagues have been asking is, can we afford all of these things? So let me ask you this, are there any provisions that will be made for these hugely expensive programs in the upcoming budget?

DEPUTY PRIME MINISTER: Well, the kind of description that we've given about increases in defence spending really is over the medium to long term, it's not here in the next few years. So, this is not something that presents itself in the next few weeks. But it is going to be a pressure in the coming years, which is why we need to do business differently.

FERGUSON: Does that mean we won’t be seeing it in the forward estimates in this budget?

DEPUTY PRIME MINISTER: No, I don’t think you'll see a dramatic difference in in the coming budget, but these are pressures which are presenting themselves to us over the medium term and it's really why we need to be doing business in a very different way. We need to be actively managing defence procurement and we need to have stability in defence. I mean, part of why we saw the hopeless way in which the former government managed defence spending was that they had six, really seven, defence ministers over the course of nine years, and that kind of instability, set really exactly the wrong culture, when their focus was about making announcements, putting out press releases, a lot of hoopla and vaudeville, rather than actually doing delivery.

FERGUSON: I think we’ve had plenty of time on the previous government, let's stay with you in the future. Is there a plan to borrow more money from global markets to play - to pay rather - for a fleet of nuclear submarines? Is that in your thinking?

DEPUTY PRIME MINISTER: Well, what we're focused on is making sure we are delivering value for money capability for our Defence Force, to keep our nation safe, going into the medium and long term. How the budget is ultimately managed, fits in the context of the way in which budgets will be handed down across the board over the coming years. But the point that we're really making is this is going to be an increasing area of expenditure and it needs to be done in a prudent way.

FERGUSON: You kind of shook your head before at the scale of the crisis, but you've talked yourself about the situation that we're in, and that the Defence Review will be confronting exactly that, a very serious threat that faces Australia. You're not resiling from that view of the threat we face?

DEPUTY PRIME MINISTER: I’m not, there was a bit of a reaction to your reference to World War Two, I'm not describing this in those terms. But this is, I think, the most complex and challenging set of strategic circumstances that we’ve faced since the Second World War and it does present to us a very different strategic challenge, potentially, to what we've ever faced before and I think that does give rise to a different way of thinking about this. Obviously, the Defence Strategic Review has been tasked with the job of trying to conceive what kind of a Defence Force we're going to need to meet the future and to meet, you know, potentially very difficult circumstances in the future. Whichever way you look at it, as I said earlier, defence spending is a function of strategic threat in a rational world. We’re rational people and you know, there is no analyst out there which will describe our strategic circumstances as anything other than increasingly precarious.

FERGUSON: Richard Marles, thank you very much indeed for your time this evening. Thank you.




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