National Press Club Address, Canberra

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The Hon Pat Conroy MP

Minister for Defence Industry

Minister for International Development and the Pacific

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media@defence.gov.au

(02) 6277 7840

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minister.conroy@dfat.gov.au

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28 November 2023

SUBJECTS: AUKUS agreement and acquisition of nuclear-powered submarines; defence budget, infrastructure, Australia-Tuvalu Falepili Union Treaty, government portfolios, export control legislation, nuclear power, submarines, bipartisan US support for AUKUS, Pacific Island workers.

SPEAKER: Today at the National Press Club Defence Industry Minister Pat Conroy. As Australia works towards delivering on the AUKUS partnership Minister Conroy is responsible for getting the nation ready to build nuclear submarines. Patrick Conroy is today’s National Press Club address.

ANDREW TILLET: Good afternoon, and welcome to the National Press Club for today’s Westpac address. My name is Andrew Tillett, and I’m the club’s Vice President and also Foreign Affairs and Defence correspondent for the Australian Financial Review.

Today’s address is being given by the Minister for International Development and the Pacific and the Minister for Defence Industry, Pat Conroy. Mr Conroy, who grew up on the Central Coast – which makes two of us – studied economics at Sydney University, has worked for the union movements as well as being a political staffer to Anthony Albanese and Deputy Chief of Staff to Greg Combet during the Rudd-Gillard years where he sort of dabbled a little bit in learning about Defence procurement issues. After the 2013 election, that’s when Mr Conroy entered Parliament, and he currently serves as the member for Shortland.

Amid growing strategic competition with China, Mr Albanese appointed Mr Conroy to the crucial role of helping bolster ties with the Pacific and to fix up Defence procurements and the perennial issue of projects running late and over budget. That happened after the 2022 election. A long-time leader of the Labor left, Mr Conroy at the party’s recent party congress – conference found himself at odds with many in his faction as he launched into a strong defence of the AUKUS nuclear-powered submarine pact.

He will today talk about how to deliver the nuts and bolts of AUKUS and the industrial transformation that will span beyond just Adelaide and Perth to cover much of Australia.

You can follow the conversation at PressClubAust or #npc on the social media platform X, formerly known at Twitter.

Everyone, please welcome Pat Conroy to the stage.

MINISTER FOR DEFENCE INDUSTRY PAT CONROY: Thank you very much, Andrew, for that kind introduction. I acknowledge the Ngunnawal people as the traditional custodians of the land we meet on and recognise any other people or families with connections to the lands of the ACT region. As Minister for Defence Industry I also pay my respects to Aboriginal and Torres Strait Islander men and women who have served our nation in the past and continue to do so today.

Can I acknowledge Deputy Prime Minister and Minister for Defence the Honourable Richard Marles MP, the Honourable Matt Keogh, Minister for Veterans’ Affairs and Defence Personnel, senior leaders of the Australian Defence Force and Department of Defence, members and directors of the National Press Club, members of the diplomatic corps, colleagues and friends.

I begin my remarks today by acknowledging the members of the Royal Australian Navy’s submarine service. Submariners keep watch over our maritime approaches, sacrificing time and family – with family and friends to deter action against Australian interests. Their work is essential to our national security, and I open my speech today by acknowledging and recognising their service.

As Minister for Defence Industry my number one priority is to make sure members of the Australian Defence Force have the capability they need to protect and defend our country. And I know this is front of mind for the Deputy Prime Minister as well. And no capability acquisition is bigger, more important or more complex than acquiring and constructing nuclear-powered submarines for the Royal Australian Navy.

How the Government is getting the job done on time and at pace is the subject of my address today. The Government is clear, as is the Defence Strategic Review, that there have been very significant changes to our strategic environment. When we look at our region we see intensifying great power, competition, accelerating military build-up, rising tensions and reduced warning time for conflict.

This is Australia’s most challenging strategic circumstances since the Second World War. And looking back to the lead-up to the Second World War provides important lessons about the need to invest in defence. In the decade before the outbreak of war in Europe in 1939 Australian defence spending averaged 0.8 per cent of GDP a year, less than half of its level today. It’s an extraordinary fact that on the brink of World War II Australia’s army comprised a permanent force of just 1,600 soldiers, supplemented by a voluntary citizen militia.

A month before Hitler invade Poland with Imperial Japan entering the third year of war with China the Menzies government rejected a proposal to increase this tiny force to seven and a half thousand permanent soldiers because it would cost too much. Such was the mistakes of appeasement in foreign policy and fiscal orthodoxies of the time.

Why do I reach back to the 1930s? It’s not to make some simplistic historical parallels – it’s because today, as in the 1930s, there are some who are turning are blind eye to our security challenges. Conflict is far from inevitable, but Australia’s 10-year warning time has evaporated, just as it did in the mid-1930s. The lessons from that era is that we cannot afford to be underinvested in defence. To shape a peaceful and stable region, Australia must play its part in deterring aggression and coercion. We must be able to deter conflict before it begins and certainly before it reaches our shores.

This means investing in military capabilities which discourage anyone from taking actions against our interests. And as the Foreign Minister has said, by having strong defence capabilities of our own and working with partners investing in their own capabilities, we change the calculus for potential aggressors.

For Australia, this is best achieved by arming the ADF to hold any potential opponents’ assets at risk at a greater distance from Australia’s shores. This requires a mix of intelligence collection, defensive and strike assets that generate deterrence, and if that fails an ability to impose an unacceptably high cost on any attacker.

Ladies and gentlemen, acquiring the most capable nuclear-powered conventionally armed submarines in the world is key to this strategy. Three mighty oceans – the Pacific, the Indian and the Southern – connect Australians to each other, our nation to the region and our economy to the world. Those charged with protecting the nation have long recognised the fearsome strength of submarines to protect our connection to the world and deter action against Australian interests.

In times of tension submarines conduct surveillance and collect intelligence. Against an enemy at war, they can strike without warning delivering a highly sophisticated and destructive payload. As the former submariner Commodore Peter Scott put it, submarines see without being seen, they hear without being heard, they know without being known until the day comes when we need them to strike.

Our highly capable, conventionally powered submarines have provided potent undersea deterrence for decades. But technology is changing. Increases in wide area surveillance and detection capabilities means the effectiveness of conventionally powered submarines will be more challenged in the decades ahead. At some stage in the coming decades the requirement to snort air to run diesel engines to recharge the batteries will compromise the stealth and effectiveness of conventional submarines, potentially affecting their survivability in a high-threat environment.

Submarines are at their most vulnerable when near the surface. But nuclear-powered submarines can stay submerged from the minute they leave their base to the minute they return. That is one of the things that makes them such a remarkable capability. There is no technology in existence or planning that can supplant the role of nuclear submarines as a highly potent and enduring maritime capability. Its speed, range, endurance, and stealth, mobility and fire power are unsurpassed. They offer virtually unlimited range and stealth.

Nuclear-powered submarines enable us to hold an enemy’s assets at risk at the greatest distance possible from Australia’s shores and to put a substantial question mark in their minds. Due to their stealth and destructive capability, submarines, especially the most capable nuclear-powered ones, provide an asymmetric advantage. They allow a middle power like Australia to place doubt in nations with much larger militaries. Their mere existence imposes uncertainty into a potential opponent's plans.

Now, we have the third largest exclusive economic zone on the planet. We need to be able to deny adversaries in our northern approaches. We need to patrol and protect our sea trade routes far from home. And we have made a commitment to work with our partners to promote security and stability in the region. Nuclear-powered submarines are a vital capability that makes all of that possible.

Ultimately, their speed and endurance mean that a fewer number of nuclear-powered submarines can do the work of a larger number of diesel submarines. This is one of the key reasons why people arguing that diesel electric submarines are the right capability for Australia are misguided. Australia is the only nation in the world that requires diesel electric submarines to transit thousands of kilometres before they even reach their patrol area. Our diesel electric submarines need to use the greater part of their fuel capacity for these transits, limiting their time on station. By contrast, nuclear-powered submarines are not limited by fuel. They can get to where they need to go faster, meaning they can spend more time on station.

Furthermore – and this is a critical point – they can reposition to different areas without the need to return to a point to refuel, providing operational commanders with much greater flexibility in the types of missions they can conduct with nuclear-powered submarines. The key take away is that nuclear-powered submarines get to where they need to go faster, stay there longer and can reposition to conduct other taskings more flexibly than conventionally powered submarines.

And even in comparison with the Collins, which is at the highest end of scale for range, endurance and stealth for a conventional submarine, nuclear-powered submarines such as the Virginia-class can transit into an area much longer – or more than twice as quickly and remain in an area of operations for much longer.

To illustrate this point using a hypothetical example, a diesel-powered submarine might spend about half of its time on an operation in transit. By contrast, for the same operation a nuclear-powered submarine would spend 15 to 20 per cent of its time in transit. In this example, let’s say for a theoretical 70-day operation, a diesel electric submarine would spend 35 days in transit and 35 days on station. For Australia’s circumstances where transit distances are necessarily long, this type of advantage – sorry, meanwhile, a nuclear-powered submarine would spend just 15 days in transit and 55 days on station. For Australia’s circumstances where transit distances are necessarily long, this type of advantage is particularly significant.

This advantage is compounded by the fact that nuclear-powered submarines can generally patrol longer. This means that a nuclear-powered submarine can be seen as the equivalent of two diesel electric submarines in terms of patrol coverage – two diesel electric submarines.

In addition to the other significant capability advantageous, the bottom line is that nuclear propulsion is a significant force multiplier in itself.

Now, a critical aspect of this national endeavour is developing and implementing the acquisition strategy to build the new submarines. This will be the greatest industrial undertaking ever attempted in Australia both in scale and technical complexity. An undertaking that will generate around 20,000 highly skilled secure jobs, an undertaking that will drive the modernisation of Australian manufacturing, an undertaking that will train thousands of scientists and engineers.

So designing and implementing a realistic and viable acquisition strategy is critical. Our strategy is informed by lessons from previous procurements, especially the experience constructing, operating and sustaining the Collins-class submarines. This project delivered the best diesel electric submarine in the world. submarines that continue to provide a critical capability for the Royal Australian Navy, but it was not without challenges.

As someone who has spent much time across two governments working on submarine acquisition and sustainment strategy, the lessons from the Collins experience are imprinted on my brain. They will be the vital touchstones as we seek to reduce risk in the new project. For me, the critical lessons from the Collins build experience include the challenging of the unique design and being a parent navy; combining a new hull design with a completely new combat and weapons systems and insufficient consideration of through-life support requirements.

Australia’s future nuclear-powered submarines – the SSN-AUKUS – will be a state-of-the-art platform designed to leverage the best submarine technology from all three nations. It will be operated by both Australia and the United Kingdom. And unlike our experience with Collins where Australia was left operating a unique design with no existing parent industrial base to draw from, SSN-AUKUS will provide shared experience in operating the platform and a shared industrial base for maintenance and sustainment.

Sharing a design with the United Kingdom clearly avoids the first challenge the Collins faced. SSN-AUKUS will be a common platform operated by both the UK and Australia with two production lines – one based in Barrow-in-Furness in the UK And one based in Osborne in South Australia. In addition, we have further reduced risk by staging Australian production behind that of the UK. The UK will bear the first-of-class risks common in defence procurement, especially in naval construction.

The first submarine will roll off the UK production line in the late 2030s for the royal navy. Indeed, some of the long lead items for these submarines are already beginning construction. The first Australian submarine will be delivered in the early 2040s from Osborne at a three-yearly drum beat. And on current timing at least one if not two royal navy submarines will be in the water before our first. This arrangement will also spread the risk over two production lines and create efficiencies. Economies of scale will also be generated by producing parts for a fleet of submarines much greater than the production run of six Collins submarines.

Now, regarding the second Collins lesson, while the SSN-AUKUS will be new, it’s envisaged that the combat system will be an evolved version of the current
AN/BYG-1 combat system, which is already in service in the Collins and Virginia-class submarines. This evolved version will be co-developed between Australia and the United States. It will incorporate evolutions of other existing systems that are tested, proven as successful, such as the vertical launch system and torpedo tubes. It's also envisaged to carry weapons deployed on US and Australian submarines such as the Mark 48 heavyweight torpedo. And sustainment needs are being considered from day one of the process, including what parts we will need, when we will need them and where they will need to be.

The Collins-class illustrates the difficulties that can emerge when insufficient attention is given to future maintenance and sustainment needs during the design and build process. For example, we are now having to cut the Collins boat in half to replace major equipment as part of the full cycle docking process. The SSN-AUKUS will not repeat mistakes like this.

Building submarines is hard, but sustaining them is just as tough, especially when it comes to parts that are only manufactured with submarines in mind. And unless the whole project is carefully mapped from beginning to end, there is a risk of loss of critical workforce with design construction skills, as we saw with the Collins. The trump card of SSN-AUKUS is that by operating a common class of submarines will not only increase demand, we’ll also create stable and continuous demand in both the acquisition and sustainment phases of the project.

This will provide businesses with the confidence to invest in capabilities needed to support this international endeavour. And by working closely with our international partners we can identify the best ways to share work to create a capable, efficient and integrated industrial base across the three nations.

Now, this is a critical point missed by those opposed to this acquisition: Mr Keating, who I greatly respect, has suggested that these submarines will be built in the United Kingdom. This is incorrect. Peter Dutton and Alexander Downer have suggested that we should buy them from some mythical showroom in the United States. This is completely wrong. The entire point of AUKUS Pillar 1 is to expand and grow the industrial base of all three nations so that Australia can join the US and UK in building nuclear-powered submarines.

This means the AUKUS partners move from having three shipyards capable of building nuclear-powered submarines to four of these shipyards. It will be a transformative uplift in Australia’s defence and industrial capabilities and a net increase to our AUKUS partners’ industrial capabilities at a time when we need it most. Yet it’s an uplift which Mr Dutton seeks to deny in a stance that would have adverse consequences for Australia’s national security.

One of the most egregiously unfair and unrealistic criticisms of AUKUS Pillar 1 is around cost. Unless you are arguing for unilateral disarmament, the most accurate approach is to compare the cost of nuclear-powered submarines to the cost of the conventionally powered Attack-class submarines. The Morrison government hid the cost of the Attack-class from the public, claiming for years it would be $50 billion. It was eventually revealed that the Attack-class had an acquisition cost of almost $90 billion, and sustainment costs of $145 billion out to 2080, a total of $235 billion.

And that figure did not include all the costs. The former Coalition’s costing of the Attack-class did not include the cost of the workforce or the required facilities and infrastructure, weapons and contingency across the whole program. It’s reasonable to assume that over the next 30 years the cost of these aspects alone would have exceeded $30 billion for the Attack-class. For example, applying a minimal 30 per cent contingency on elements such as sustainment would add over $40 billion by itself.

To be clear, unlike the Coalition, the Albanese government has been transparent with the public about the costs of this important national endeavour. We are embarking – what we are embarking on under AUKUS is unlike any other defence capability. We are building a new industry. And, as such, we are accounting for additional investments across infrastructure, jobs and skills. We are making a moderately larger investment for a significantly greater capability, and we are doing so with a more careful, prudent budget approach.

There is a choice for a responsible government. This is the choice for a responsible government – spend over $235 billion for a diesel electric submarine that will be increasingly at risk in our region or make a moderately larger investment to acquire a regionally superior submarine. A submarine that can stay on station at least twice as long. A submarine that can carry significant numbers of cruise missiles, torpedos and other ordinance. To truly acquire – to acquire a truly strategic capability, a capability that offers true deterrence.

Now, AUKUS attracts myths like hulls attract barnacles, so I’d like to scrape off a few more today. The first myth and the stickiest barnacle of all is that Australia loses sovereignty by acquiring this capability. The reverse is true. The capability decisions we make in the context of AUKUS will strengthen our sovereignty. Australia’s nuclear-powered submarines will be owned, operated, maintained and regulated by Australia and under Australian command. They will be a sovereign Australian capability commanded by Royal Australian Navy officers under the Australian Defence Force’s chain of command. Decisions on their deployment, missions and operations will be matters for the Australian government as with all of Australia’s sovereign defence capabilities.

The reactor unit will be delivered in a sealed module and will not have to be opened over the entire life of the submarine. This gives Australia greater sovereignty compared to other options. Mr Turnbull, for example, has advocated building the Barracuda submarine that uses low enriched uranium. This would require refuelling the nuclear reactor on each submarine every 10 years in another country. This would raise difficult issues around access to another nation’s facilities in time of conflict, or possibly in competition with their domestic priorities.

The reality is that almost all of Australia’s high-end capability is developed in cooperation with partners. Submarines are no exception. Our current submarines already include components sourced from overseas industrial basis. The generators, main motors and diesels in the Collins-class came from Europe, and during the life-of-type extension we will rely on many overseas manufactures to either replace or extend the service of many components.

The truth is that unless you make 100 per cent of your defence materiel, including all the inputs, you are reliant on other nations’ industrial basis to some extent. The question is how you manage this.

The second myth is that the cost of acquiring nuclear-powered submarines is exorbitant. Hundreds of billions is a large number, but this is a cost over more than three decades. Frankly, many other government programs will cost far more over that period. Based on the projections in Treasury’s latest intergenerational report, Federal Government health spending will be more than $8 trillion to 2055, more than 20 times the projected cost of the nuclear-powered submarines over the same time period.

The aged pension is projected to cost more than $4 trillion to 2055, more than 10 times the submarines. And the Federal Government is projected to spend many times more on aged care, education and the NDIS than on the AUKUS submarine over the next three decades.

Just as spending trillions on social programs over the next three decades will be important for the welfare of Australians, spending billions on nuclear-powered submarines will be important for the security of all Australians.

The third myth is that cost contingencies are bad things. Learning from the challenges of the past, we have built a very significant contingency into the program’s cost estimates to allow planning for real-world economic uncertainty, including inflation, the cost of labour and raw materials. It is entirely prudent to include an estimate of risk and uncertainty.

Some thought they had a gotcha moment when they realised that the AUKUS submarine program’s cost estimates included a 50 per cent contingency. The reality is that it would have been highly irresponsible not to include a contingency.

Fourth myth: that technology will erode the stealth capability of nuclear-powered submarines. It is true that undersea surveillance technology is advancing. In fact, Australian Defence Science and Technology Enterprise is a global leader in undersea and maritime capabilities. I’ve asked our best scientific minds whether technology is capable of tilting the balance between stealth and surveillance, and the answer is not yet and probably not ever. Even the most optimistic scientists find overwhelming barriers to monitoring even a modest marine space. And surveillance technology evolves in a race with countersurveillance technology.

And finally I’d like to set a few things straight the hull. We are not building the hull of SSN-AUKUS in the UK. The UK’s SSN-AUKUS submarine will be built in the UK. Australia’s SSN-AUKUS will be built in Osborne South Australia.

A critical step in the optimal pathway is the transfer of three Virginia-class submarines to Australia. This is necessary due to the dangerous gap the former Liberal-National government allowed to occur between the retirement dates of our Collins-class submarines, even after extension, and the new SSN-AUKUS. The staggering incompetence which created the capability gap, mismanagement saw
28 defence capability projects running 97 years late, and a diplomatic and foreign policy blunders in the Pacific, this all adds up to an Opposition which can’t be trusted on defence and national security.

The Albanese government is moving to close Peter Dutton’s capability gap. Our plan to deal with the submarine capability gap we inherited is the transfer of three Virginia-class submarines to Australia from the early 2030s. This will require an uplift in the US submarine industrial base. This is occurring and is underpinned by very strong US Congressional support for the optimal pathway. Whether it’s Prime Minister Albanese’s recent visit to the United States or Deputy Prime Minister Marles’s visits or mine, we’ve met with very strong commitment by Congressional leaders – Democrats and Republicans, senators and representatives – to get this done. And the US government is investing billions in expanding its submarine industrial base.

For example, in 2022 the American submarine build Electric Boat hired a total of 3,800 employees. By the end of August ’23 the shipyard had hired an additional 4,000 new workers and is aiming to exceed its hiring goal of 5,750 employees. The Electric Boat workforce in its two submarine shipyards has doubled over the last decade. There has also been a very significant increase in the number of suppliers with overall supply chain capacity increasing by 10 per cent. I witnessed this when I visited the Electric Boat submarine construction facility at Groton, Connecticut in June.

It’s true that during the Covid-19 pandemic the number of Virginia-class submarines being delivered reportedly dropped to 1.2 per year and availability declined to 60 per cent because of maintenance challenges. However, availability is now back to 67 per cent and SSN production has climbed much closer to 2 per year and continues to improve.

Delivering the industrial base and shipyard capable of building nuclear-powered submarines will be a transformational endeavour for Australia, and we’ve started by getting the international agreements in place. AUKUS partners signed the groundbreaking Exchange of Naval Nuclear Propulsion Information Agreement in November 2021, and we’re working openly and transparently with the International Atomic Energy Agency and in consultation with AUKUS partners to develop a safeguards and verification approach that will ensure Australia continues to meet our nuclear non-proliferation obligations and commitments.

Workforce is a complex challenge that’s got to be tackled from the perspective of the navy, industry and all levels of government. We’ve got to build the right workforce with our AUKUS partners and with state and territory governments, industries, unions, education and training institutions and the scientific and technical sectors.

It’s pretty obvious, but more than anything else, submarines need submariners. Members of the Royal Australian Navy are already training at the US Naval Nuclear Power School. The commanding officer and leadership team of the first Australia-flagged Virginia-class submarine will come from those officers and from those who follow in following years. The first three officers graduated from the US Naval Nuclear Power School in July after completing a six-month program of study. Another three graduated in October. Those officers will undertake additional training before serving aboard a US Virginia-class submarine. And in another milestone. The first cohort of sailors commenced studying at the Nuclear Power School in October.

Uplifting the skills of defence industry is also essential to the success of this endeavour. The best way to do this is to get people into the workplaces now. That’s why work is underway on embedding Australian industry in the UK and US nuclear-powered construction and sustainment programs. To kickstart the supply chains, we’re exploring opportunities for Australian industry to supply Australian-made materials and components to the UK and US programs. We are creating pathways for Australian industry to carry out maintenance activities on the US Virginia-class and UK Astute-class submarines during their rotational presence in Australia. We’re also actively training the workforce needed to deliver this critical endeavour.

Earlier this month the Deputy Prime Minister and the South Australian Premier released a South Australian defence industry workforce skills report. This report outlines the actions we are taking to grow the workforce for the submarine program. A foundational piece will be the dedicated skills and training academy in South Australia which will be built by 2027-28. This academy has commenced delivering pilot programs this year. And other initiatives to grow the workforce have also commenced. A UK masters program pilot initiative currently has nine industry personnel undertaking 12-month nuclear training programs in the UK, focused on the high-priority job functions such as nuclear engineering and science. And the accelerated training in defence manufacturing program in the US currently has 12 Australian industry trade and training personnel participating in a fast-track training program in critical manufacturing areas.

We’ve also begun the vital work of skilling up Australians through the early careers program in South Australia and Western Australia. Under this program ASC will employ more apprentices, graduates and undergraduates, and we are providing an additional 4,000 commonwealth-supported places to build the Australian STEM workforce needed to deliver the nuclear-powered submarine program. And the allocation of these places will be announced very soon.

From as early as 2027 UK and US nuclear-powered submarines will begin a rotational presence at HMAS Stirling in Western Australia. Submarine Rotational Force West will develop Australia’s ability to operate, maintain and safely steward our future SSNs by deploying our nav personnel on visiting UK and US submarines. This will enable them to gain at-sea experience with naval nuclear propulsion. Then from the early 2030s HMAS Stirling will house Australia’s first sovereign SSN capability - the Virginia-class submarines.

The Albanese government recognises the significance, importance and complexity associated with building SSN-AUKUS. We need to get our navy ready through training our sailors. We need the associated regulations in place for nuclear propulsion. We need to construct the necessary infrastructure at Henderson and Osborne, and one of the most critical elements will be the build strategy for
SSN-AUKUS. This build strategy and the build partners will play a crucial role not only the delivering our nuclear-powered submarines but also in uplifting and upskilling the Australian industrial base.

In line with our announcement around the optimal pathway in March this year, you can expect an announcement on the build strategy and build partner for
SSN-AUKUS early next year.

I’ve used this address to explain the importance of the nuclear-powered submarine acquisition and to provide an update on the Government’s work to deliver this capability. Let me conclude by returning to some fundamentals: the first responsibility of any national government is trekking Australia’s security and sovereignty. That’s why Labor governments established the Royal Australian Navy, led Australia during World War I, led Australia during World War II, forged the alliance with the United States, created the modern Department of Defence, built the Collins-class submarines and Anzac-class frigates and extended the alliance with the US through a range of force posture initiatives.

That’s why this Albanese Labor government has a strong approach to defence. Acquisition of nuclear-powered submarines is a critical element of our defence and national security policy. Squarely in the tradition of responsible, reforming Labor governments, we take defence seriously. This is a transformational endeavour for Australia’s defence and industry. Its scale, complexity and economic significance cannot be underestimated.

I hope my remarks today have demonstrated that the Albanese government is seized of the challenge and getting on with the job, working methodically and at pace to deliver this nation-building and nation-defending project. Thank you very much.

ANDREW TILLET: Sorry to keep you on your feet. We’ll get straight into questions. We’ve got a long list of questions and plenty of things to ask you, Minister. But can I ask my colleagues, please keep your questions to one, otherwise the Chief of Navy I’m sure will be very happy to throw a few of you into the brig.

MINISTER CONROY: Zing.

ANDREW TILLET: Our first question, Ben Packham.

BEN PACKHAM: Thanks, Minister, for your speech. Ben Packham from The Australian. Look, Labor said that the Coalition talked a big game on defence but didn’t deliver. But now those same criticisms are being directed at the Albanese government by defence industry, and including by people in this room. Firms say there have been no decisions, a lack of transparency and delayed strategic plans. Did the Government overestimate the department’s ability to deliver, or is this just – is this stuff just much harder than you thought it would be?

MINISTER CONROY: Thanks, Ben, for the question. And I – it will surprise you that I reject the fundamental assertion of that question. In 2022-23 according to the latest budget estimates, we will spend $31 billion on defence industry through capability and sustainment – $31 billion. That is $3.1 billion more than the last year of the Coalition government, an 11 per cent increase. We are spending more on capability and sustainment than any government in the past. And importantly, we’re making decisions and bringing things forward.

Just to give you an example from last week, I was at Henderson Maritime Precinct in WA where I announced the strategic shipbuilding partnership we formed with Austal, and a critical part of that is bringing forward key capabilities that the Australian Defence Force need. We are bringing forward the landing craft medium from 2028 with an aim of 2026 delivery. And even more significantly, we’re bringing forward the delivery of landing craft heavy – vessels of 3 to 5,000 tonnes from the mid-2030s, which is what the last government planned for, to 2028. That’s all in response to our strategic circumstances and based on recommendations of the DSR.

So we are bringing projects forward. We are spending more money. We’re driving change in the Department and we want to be a good partner with defence industry. But I have to phrase this question: there’s a difference between companies not winning contracts that they thought they should win and money not being spent in the defence industry.

ANDREW TILLET: Next question, Matthew Knott.

MATTHEW KNOTT: Thank you very much for your speech, Mr Conroy. You said that the Government is seized by the challenge of getting on with AUKUS. I was wondering if you could explain why the Government said it’s in no rush to announce the location of the east coast base given we’ve known the short list of three possible sites for a long time? When can we expect an announcement on that?

MINISTER CONROY: Thanks, Matthew. You’re referring to a process run by the former government. What we’re focused on is putting in place the infrastructure to deliver the submarines as soon as possible. And that’s why we’re spending $3 billion to invest over the next four years in building the submarine construction facility at Osborne in South Australia and to upgrade HMAS Stirling for the arrival of Submarine Rotational Force West in 2027. They are the critical priorities.

We have to demonstrate that we are sovereign ready, and that means having HMAS Stirling ready to receive visiting US and UK nuclear-powered submarines and having the submarine construction yard ready to start cutting steel on SSN-AUKUS. They are our critical infrastructure priorities, and that’s what we’re focused on at the moment.

ANDREW TILLET: Thank you. Next question, Anna Henderson.

ANNA HENDERSON: Thank you. Anna Henderson, SBS World News. Minister, the former Prime Minister now Opposition Leader of Tuvalu has written in the last
24 hours about the deal between Australia and that country describing it as shameful, ceding the sovereignty of that country and particularly criticised the lack of consultation with the people of that nation. So are you aware of any consultation that was allowed to occur within that country? And further to that, are you prepared to disclose the full agreement, or are there parts that will remain confidential? And where will the people who come to Australia as a result of the climate deal be allowed to settle? Will they be allowed to choose for themselves?

MINISTER CONROY: Thanks, Anna. It’s a good opportunity for me to talk about how significant the Tuvaluan treaty is, the Falepili treaty of friendship. This is truly transformational, and it’s the most significant announcement we’ve made in the Pacific since supporting PNG independence in the 1970s. It is that significant. And I’d make a couple of points and address your questions.

First, we’ve disclosed – the full treaty has been published on the DFAT website.

ANNA HENDERSON: There’s absolutely no confidential aspects of it?

MINISTER CONROY: That was published on the DFAT website as soon as the two Prime Ministers stood up. That and the leaders statement are the guidance of what’s been agreed to by the two countries.

And I’d really like to tackle this issue about sovereignty for a second. This agreement is about integrating Australia and Tuvalu. It’s about bringing the two countries together, both countries being stronger working together. And article 4, which people quote, obviously talks about Tuvalu talking to Australia and requiring agreement before other countries entry the security sector. The first article – sorry, the first clause in that article commits Australia to coming to Tuvalu’s assistance in the instance of a military attack, natural disaster or global health pandemic. That is the first time we’ve made that commitment to any country. First time.

So this is an agreement where both countries are embracing obligations because it’s in the interests of both countries to work closer together. And this is part of the Albanese government’s broader agenda of rebuilding our Pacific arrangements.

We’re working through the details of the mobility with dignity aspects of the agreement. But I make the point that we envisage similar arrangements to what occur under the Pacific engagement visa where there are no restrictions on where people choose to live.

On Tuvaluan processes, that’s best directed to the Tuvaluan government, particularly Prime Minister Natano, but I would make the point that they formed an eminent expert panel – or a panel of eminent people to develop this proposal that they put to the Australian government. And that’s another really important point: we are responding to a gracious request from the people and government of Tuvalu. We’re responding to what they’ve asked for, and that’s what’s embodied in the treaty – a treaty that brings both countries together.

ANDREW TILLET: Next question from Andrew Greene.

ANDREW GREENE: Minister, Andrew Greene from the ABC. We heard you again today talk about the most challenging strategic environment since World War II and the challenges faced under the AUKUS endeavour. Do you think it’s time now to have a look at the ministerial arrangements to address those urgent needs of meeting defence? Is it a problem that most of the ministers in your Government are either double-hatted or triple-hatted or, in the case of the Defence Minister, often overseas or fulfilling Acting Prime Minister duties?

MINISTER CONROY: I think we’ve got a very strong team. So thank you for that question, Andrew. And it gives me an opportunity to talk about how good the team is. No, just joking – I won’t take the time up. But I will make the point that this is, I think, one of the strongest Defence teams in the history of the nation. And if I reflect upon one fact, we’ve got – I’m a bit conscious that he’s sitting in front of me, so I’ve got to be careful, because I’m going to praise him – but I can’t think of a time where we’ve had a Defence Minister this senior in a government. Just think about it. I’d have to go back – I’m happy for an historian to correct me – but I’d probably have to go back to John Curtin when he was both Prime Minister and Minister for Defence Cooperation during World War II. One of the great achievements of this Government under Prime Minister Albanese is to have a deputy prime minister who is Minister for Defence and a foreign minister who is Leader in the Senate.

So if you think about that tandem, I defy anyone to say a government has had a team with that great a senior representation, and that gives defence more influence around the table. That gives defence much more say in the priorities of the Government. And Minister Keogh and myself and Assistant Minister Thistlethwaite, we work really strongly with the Deputy Prime Minister. Unlike a lot of defence industry ministers, for example, I am a full member of the National Security Committee of cabinet. So I think we’ve got strong representation and I think you’ve seen that flow through with decisions around the optimal pathway for the nuclear-powered submarines and the Defence Strategic Review and securing the commitment, for example, of increasing defence spending to 2.3 per cent of GDP over the decade. That is the greatest level of defence funding as a percentage of GDP in nearly 50 years.

ANDREW GREENE: And what about the de facto Prime Minister in Penny Wong who wins all the ERC arguments it seems?

MINISTER CONROY: That’s a second question, Mr Tillet! Well, I reject the premise of that question as well. And I refer to my earlier comments, Mr Greene: we’ve got a great team. We’ve got a very senior Foreign Minister and Defence Minister and they’re working really well together, as are the junior ministers.

ANDREW TILLET: Lance Barnard was the last Deputy PM who was Defence Minister.

MINISTER CONROY: Thank you for the correction.

ANDREW TILLET: But to go to Andrew’s point, though, I mean, the defence budget, one of the criticisms of the Government is that you aren’t increasing defence spending in the forward estimates period, but that increase to 2.3 per cent comes in at the back end of this decade. What do you say to that given the rhetoric around the strategic uncertainty of these times?

MINISTER CONROY: Well, I’d say, respectfully, Mr Tillet, that’s factually wrong. The defence budget goes up every year over the forward estimates. And as importantly, if you compare those years to what the last government projected in their last budget, which is March 2022, in every year of Labor’s budget they are higher than what the Opposition committed to when they were in government. So every year the defence budget goes up, and we’ll reach 2.3 per cent of GDP at the end of the decade, so over the 10 years, moving from just slightly over 2 per cent now.

So I know people are frustrated, but the defence budget is increasing. Money is flowing to defence industry to deliver capable projects, critical capabilities. And we are bringing forward projects such as the landing craft, LAND 400, the infantry fighting vehicles, long-range strike is all being brought forward to deal with the deteriorating strategic circumstances.

ANDREW TILLET: Are you tying your hands, though, by not increasing the integrated investment program, which is one of the criticisms that, you know, we had the Secretary of Defence make comments yesterday about how there will have to be cuts and reprioritisation to that.

MINISTER CONROY: Well, again, the integrated investment program covers both capability and sustainment expenditure. This year, as I said – well, ’22-23 we allocated a bit over $31 billion to that. Every year in our budget papers the amount we spend on capability acquisition and sustainment increases. Every year it increases in dollar terms. And that’s incredibly important. And we are making decisions.

But we’re also reprioritising, and this is one of our criticisms of the last government. Under Peter Dutton the last government added $42 billion of extra defence spending commitments to the defence budget but didn’t add an extra cent. They didn’t add an extra cent. They didn’t cut other programs. They treated it like a magic pudding instead of making the hard decisions. So we’ve increased the defence budget, but, importantly, we’re making hard decisions. For example, reducing the number of infantry fighting vehicles we’re buying, as important as they are, but bringing it forward. Spending that money on landing craft to actually transport the infantry fighting vehicles, and spending more money and earlier money on long-range strike to support the Australian Army, and also bringing money forward to establish missile manufacturing in this country by 2025. So government is about priorities and making hard decisions, and we’re not shying away from that.

ANDREW TILLET: Thank you. Next question, Tess Ikonomou.

TESS IKONOMOU: Thank you very much for your time today. There are concerns in the sector about new export control legislation and the impact that will have. Are you confident the Government will have the budget to support the defence industry, and how much would you be willing to spend?

MINISTER CONROY: I’m confident about the defence budget. I think you’ve seen a stout defence of the defence budget in my Q&A section. This Government takes national security incredibly seriously. There is no higher obligation than defending Australia, our interests and our people. And that’s what’s reflected in our priorities.

On the export control legislation, this is something that’s incredibly exciting. This is a huge opportunity for Australian industry. As part of this process we are opening up industrial opportunities to export to the UK and United States and also to transfer technology from those countries. The United States has only contemplated once before opening up their export controls like they are contemplating now, and that was with Canada. So this is a huge opportunity for Australian industry, and it’s a symbolic and concrete manifestation of the AUKUS partnership, which is about expanding the industrial base of all three countries.

ANDREW TILLET: Thank you. Our next question is to our National Press Club new board member, Andrew Probyn.

ANDREW PROBYN: Thanks, Andrew. Andrew Probyn, Nine News. Minister, if we were to have a young Pat Conroy in his 20s up here on stage and I asked you, you know, “Do you support Australia having a fleet of nuclear-powered subs,” the answer would be something like, “Don’t be so ridiculous,” I imagine. Given that, do you believe that bipartisan support for nuclear-powered submarines is de facto acceptance of nuclear power, and do you believe that Australia will have to develop a domestic nuclear industry, including electricity generation, if anything, to sustain your AUKUS subs?

MINISTER CONROY: The answer is no. And on the earlier part of your question, if you met a young Pat Conroy in his 20s, I think you might get a slightly different answer than what you projected. I remember a conversation I had with the then Chief Defence Scientist in 2009 when I was 30 - so not quite in my 20s, but closer than I am now. And we were talking about the then Rudd government's acquisition of submarines and he made the point to me that what we ask our submarines to do is on the edges of the laws of physics. We are asking a conventionally powered submarine to do something that every other nation in the world who ask those submarines to do that uses nuclear-powered submarines.

So this is the right decision that delivers the right capability for Australia. And I’m proudly in that tradition of the Labor Party that is proud of our role in defending this nation. My great hero is John Curtin, a man who I think did more than anyone else to defend this country. Two of the books that were on my bookshelf when I was a nerdy 18-year-old were the biographies of Andrew Fisher and John Curtin – one who founded navy, the other who protected Australia during World War II.

So I made the case at national conference – somewhat controversially – that being strong on defence is a progressive thing because who fights wars? Workers fight wars –

ANDREW PROBYN: But, Minister, back on sustainment –

MINISTER CONROY: Yeah, I’ll come to that.

ANDREW PROBYN: Nuclear subs, sustaining them.

MINISTER CONROY: Yeah, so the strength of this agreement is that the reactor module comes to us sealed. It comes sealed designed to be never opened over the life of the submarine. You don’t have to refuel it. You don’t have to insert new fuel rods or do anything like that for the life of the submarine. That is why the Labor Party supported the AUKUS arrangements when we were briefed. Other arrangements that use low enriched uranium require refuelling, and that gives you two choices: either establish a domestic nuclear power industry or have another country do that refuelling for you with the impact on availability.

On nuclear energy, the difference is you can’t have solar-powered submarines. The operational environment for submarines dictates nuclear power is the best source. We live in a country with the greatest solar radiation per square kilometre of anywhere in the world. We’ve got great wind resources. The cheapest form of new electricity is renewable energy backed up by pumped hydro, transmission investment and batteries. That is the cheapest form of power. What Mr Dutton is advocating for is a massive increase in electricity prices through his fools errand around nuclear power.

ANDREW TILLET: Thank you. Next question from Kym Bergman.

KYM BERGMAN: Minister, thank you for your speech. I thought the budget might come up, so I’ve taken a few notes. On May 29th, the Australian Strategic Policy Institute released their analysis of the budget that said core funding for defence has actually been reduced at a time when unprecedented demands are being placed upon it. Between 2023-24 and 2025-26 defence funding drops from $154 billion to $152.5 billion. Now, the next day Defence officials confirmed that during Senate estimates hearings. Now, you’re on the hook to transfer $4.7 billion to the US submarine industrial base in the next couple of years. Where is that $4.7 billion going to come from?

MINISTER CONROY: What we’ve committed to is allocating a number of billions of dollars to support the uplift that’s occurring already in the US industrial base. That is something that’s in our interests. The US industrial base is expanding as it increases its Virginia-class manufacturing – submarine manufacturing of both Virginia-class and their new SSBNs. That’s in our interests because we need to obviously have the transfer of those three Virginia-class submarines to Australia in the 2030s to deal with the capability gap left by Mr Dutton.

That's fully accounted for in the budget process. It's there. And it is a critical pathway. I will make the point that over the same time we’re investing $6 billion over the forward estimates in investing in Australia’s industrial uplift. And over the life of the program $30 billion in uplifting, upskilling the Australian workforce, investing in companies, investing in infrastructure.

On the first part of your question, I reject the formulation of core defence funding. ASPI were picking and choosing between what parts they counted and what parts they didn’t count. I urge you to look at the Defence papers. Every year the defence funding goes up. Table 1.4B is one close to my heart because that shows the line items for capability, acquisition and capability sustainment. Every year the amount of funding going to each of those items increases. Every year.

ANDREW TILLET: Thank you. Next question from Laura Tingle.

LAURA TINGLE: Minister, you mentioned your devotion to John Curtin, who, of course, was very focused on the defence of Australia. And in your speech you made repeated references to the greater capacity of nuclear submarines to move to be on station much faster than diesel submarines. Can I just go back to the basic strategic question: what role will nuclear submarines be playing in a strategic sense? How many would you see them being on station at any point of time, and given the massive expansion of the Chinese submarine fleet, how effective is that?

MINISTER CONROY: Yep, thanks, Laura, for the question. And you’re right to draw attention to the very significant arms race that’s occurring in our region right now. The arms race is the greatest it’s been since 1945, and that’s why I reject assertions by some people – not in your question – that Australia is somehow fuelling that arms race. We are responding to it in a responsible and mature manner, like Australian governments should.

What roles submarines have, I’ve outlined them in my speech. They’re things like collecting intelligence in peacetime, and obviously providing strike capabilities in wartime. On how many you can expect to be on station at any given time, that’s a question that would disclose information that we have to be very careful about. I know people get very frustrated when defence ministers and defence officials talk about that, but, quite frankly, the minute we start revealing how long submarines can stay on station you start giving information to people about capabilities.

But I would make the point that where we need these submarines to operate, the hypothetical example I gave to illustrate the point is useful. An Australian submarine spends half its time – sorry, the hypothetical example of a diesel electric submarine that spends half its time transiting to and from its patrol area versus a nuclear-powered submarine that would spend 15 to 20 per cent of its time. That’s why a nuclear-powered submarine has the potential to be the equivalent of two diesel electric submarines.

In terms of where they operate, again, we have to be careful about that. But I’m confident that we’re acquiring the most capable nuclear-powered conventionally armed submarines in the world and they are fundamental to the defence of Australia. And that doesn’t just mean defending the Continental Shelf. You don’t just defend Australia by stationing pickets around Karratha or off Darwin. You need the ability to hold an adversary at bay and to threaten a potential opponent’s assets as far away from Australia as possible.

ANDREW TILLET: Next question, Daniel Hurst.

DANIEL HURST: Daniel Hurst from Guardian Australia. Minister, you spoke a lot about managing risk in the speech, and you also spoke about Australia maintaining its sovereignty. Isn’t there an inherent tension between the notion that Australia will decide what to do with these submarines and its reliance on the US to be able to sell these Virginia-class submarines to Australia in the 2030s? The reason I ask this is the Congressional Budget Office and the Congressional Research Service in Washington have both pointed to the idea that the uncertainty about what Australia would do in a conflict, in a potential conflict, might be used as an argument by the US against proceeding with those sales. So what is your plan B if the US actually ends up not selling those Virginia-class submarines to Australia in the 2030s?

MINISTER CONROY: Thanks for that question, Daniel. I’m very confident that we’ll continue to get strong support from the US government and the US political system for the optimal pathway. As I said in my speech, in all the conversations I've had with senators and representatives, both Republican and Democrat, there has been overwhelming support for this because it’s something that assists the alliance, it’s something that increases the industrial base of all three countries. And I’m confident that the US system will continue to support it.

On your early question about sovereignty, I made a few remarks, but I’d refer you to the Deputy Prime Minister’s statement in Parliament earlier this year, which outlined exactly how our sovereignty is being maintained and guaranteed. And I’m very confident that that will remain the case.

HURST: So there’s no plan B on the Virginia-class?

MINISTER CONROY: I’m very confident that the US system will remain supportive of it. As I said, they are massively uplifting their industrial base. Availability of their nuclear attack submarines, the SSNs, has increased back to 67 per cent. They’ve got a goal of 80 per cent. They’ve more than doubled the workforce in the Electric Boat yards. Huntington Ingalls down in Virginia is making similar investments. We’re seeing their production rate move back towards 2. I am very confident that the US system will continue to support it.

ANDREW TILLET: Thank you. Just time for a couple more questions. Obviously conscious you’ve got question time today. But David Crowe.

DAVID CROWE: Thanks, Andrew. Thanks, Minister Conroy, for your speech. I have a follow-up to Daniel on the situation in the US. The media obviously covered Anthony Albanese’s trip to Washington DC, and while we were there Congress didn’t even have a leader because the Republicans could not agree on the Speaker. What would you say to somebody who says we cannot be confident of American support for AUKUS because a future Donald Trump president may change their view of the agreement or there may be a Trumpist president at some point in the future given this has to last for three decades? Do you think AUKUS can survive Donald Trump as president or a Donald’s Trump-like president?

MINISTER CONROY: I’m very confident that the AUKUS arrangements can survive any changes of administration in the United States because it has strong bipartisan support over the long term. And this is really important: the AUKUS arrangements are, I’m confident, will succeed because it’s in the best interests of all three parties. And the US representatives made it very clear to me that they’re supporting this not out of charity but because they support it because it’s in the interests of the United States. So I’m very confident about the normal democratic processes that whatever future administrations there are in the hypothetical future. And I have to be very careful; I’m not commenting on the US political system, the people of America will make that choice. But there is strong bipartisan support for AUKUS across both parties of government.

ANDREW TILLET: Thank you. And the last question from Ben Westcott.

BEN WESTCOTT: Thank you very much for your speech, Minister. Changing tack just slightly on the Tuvalu agreement, you made it very clear – you and the Prime Minister made it very clear when that was signed that that was a deal that had been reached because we had had outreach from the government of Tuvalu. Have any other Pacific nations reached out to us expressing interest in similar agreements?

MINISTER CONROY: I’m not in the habit of disclosing confident discussions we may or may not have with other governments. But what I can say is that obviously there’s a broad agenda throughout the Pacific of how we work closely together. And there may be some countries that see an advantage in similar arrangements. For others there won’t be because of their particular circumstances. But this really is a ground breaking agreement that hopefully demonstrates Australia’s commitment to the Pacific. We are truly a member of the Pacific family, and this brings us closer together. But it’s just one part of our broader Pacific policies that are all about repairing the damage and being the partner of choice for the Pacific.

For example, we have around 40,000 Pacific islanders working in our economy right now filling labour shortages in Australia, sending home huge amounts of remittances to sustain their families and their villages. It is literally lifting people out of poverty. For example, around one-third to half of all Pacific islanders live on $1,000 a year. The average Pacific worker sends back $15,000 a year, and we increase investing in their skills at the same time, so when they return home they can make an even greater contribution to their economy. We’ve got the Pacific engagement visa, we’ve got sports cooperation, we’ve got more work on climate, more security cooperation. We are doing – to borrow a sort of phrase from our American cousins – a full-court press to really engage the Pacific, because that’s what a responsible government committed to strong international policy does.

ANDREW TILLET: Thank you. We didn’t even get to ask about frigates, so you’ll have to come back next year. But thank you very much for your time today, Minister Pat Conroy. Please accept our gift of membership to the club.

MINISTER CONROY: Thank you.

ENDS

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