Press Conference, 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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Karlis Salna - 0435 521 326

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29 February 2024

SUBJECTS: Defence Industry Development Strategy; ASIO; AUKUS

CHRIS DEEBLE: The Honourable Pat Conroy, Minister for Defence Industry and Minister for the Pacific, to my Defence colleagues, to Ian Croser, the founder and the chief technology officer for CEA, thank you all ladies and gentlemen for coming here today. It’s a great day for Defence and Defence industry. 

But, firstly, I’d like to acknowledge the traditional owners of the land on which we meet today – the Ngunnawal people – and pay my respects to their elders past, present and emerging. I’d also like to pay my respects to those First Nations people that have served and continue to serve in the defence of Australia. 

It is a great day for Australia and Defence industry, so I think it is most appropriate that we ask the Minister for Defence Industry to say a few words. So, Minister. 

MINISTER FOR DEFENCE INDUSTRY PAT CONROY: Thank you, Chris. And I also join in acknowledging the traditional owners of the land upon which we meet – the Ngunnawal people – and pay my respects to elders past, present and emerging and also pay my respects to any Aboriginal and Torres Strait Islander men and women who have served our nation in the past and continue to do so today. 

Today I’m joined by Vice Admiral David Johnston, Vice Chief of the Defence Force; Air Marshall Leon Phillips, head of the Guided Weapons and Explosive Ordinance Enterprise; Mr Chris Deeble, head of the Capability Acquisition and Sustainment Group; and Chief Defence Scientist Prof Tanya Monro. 

Ladies and gentlemen, it’s entirely appropriate that we’re here today at CEA Technologies for this launch and thank you to Mark and Ian for letting us impose on them. CEA is one of Defence’s most critical suppliers, and I particularly want to acknowledge all the workers who design and develop the cutting-edge technology on display today. 

CEA is a home-grown, world-leading radar technology company that has been supported by multiple Australian governments. It truly leads the world. We’re also surrounded by other Australian inventions and innovations that have saved lives like the Bushmaster protected mobility vehicle and the Nulka missile decoy system that is in service right now not only on Royal Australian Navy vessels but US naval vessels as well. 

Ten months ago, when we released the Defence Strategic Review, I said we need a sovereign defence industrial base in this country if we are to be independent and sovereign and have supply chain resilience. The Defence Industry Development Strategy that I’m releasing today is our blueprint for an industry that is focused on the most important priorities, supported by a defence enterprise that is a better customer, a better communicator and better at backing Aussie innovation. 

Crucially, this strategy I release today also represents a major shift in industry policy in Australia, articulating for the first time the defence industrial base the nation needs in the face of the strategic circumstances outlined in the Defence Strategic Review. 

It’s a plan to address the critical issues facing Defence Industry from upskilling and growing the workforce to uplifting security, to strengthening resilience in our supply chains, and it details the actions the government will take to grow the industrial base which employs more than 100,000 Australians and which is an essential partner to keeping Australians safe at home, secure in the world and employed in well-paid, high-skilled jobs.

And since coming to office, we’ve announced programs that will create around 25,000 jobs in the defence industry – 25,000. And under the Albanese government, Defence spending on Australian industry for capability acquisition and sustainment has risen to record levels. Defence data shows that in 2022-23 Defence spent $8 billion on Australian industry for capability acquisition, representing 57 per cent of Defence acquisition spending; 12 and a half billion on Australian industry for capability sustainment, representing 80 per cent of total sustainment spending. 

So that’s a total of $20.5 billion on Australian industry for capability acquisition and sustainment representing 69 per cent of total capability spending. And that is higher in dollar terms than in every year under the former Coalition government and higher in percentage terms than all but one year of the last government. 

The Defence Strategic Review made clear that we face a more challenging strategic environment. Our strategic warning time has fallen away, and we need to urgently transition to an integrated and focused force and to do that we need to prioritise the capabilities that are most relevant to the threats we face. 

And this strategy establishes seven focused defence industrial priorities. They are defined and detailed and they are designed to signal in advance the industrial capability needed by Defence to give Industry both the time to prepare and the confidence to invest to deliver what Defence needs. 

And for the first time, the government has been clear that it will intervene in the design and delivery of the integrated investment program to sustain these priorities. These priorities are designed to strengthen the partnership between Defence and industry to best equip and sustain the ADF for the future. 

We are also going to make the procurement framework easier, faster and more cost-effective for Industry to work with Defence. We won’t compromise on governance, but the strategies aimed at reducing the time it takes to receive project and contract approvals to deliver capability at speed. We will be reforming Defence contracting to simplify and reduce paperwork. Utilising the complex Defence contract template should be the last resort, not the first. And we’ll begin this work immediately with tangible outcomes by the end of the year. 

Defence will take on a more tailored approach to procurement based on the urgency and risk profile of the project. And Defence will establish more strategic partnerships with Industry that they’ll offer more certainty and create economies of scale. And long-term strategic partnerships have the potential to deliver better capabilities by supporting Industry on the journey from innovation and adaptation to evolution of capabilities. 

Now, ladies and gentlemen, ever since I started as Minister for Defence Industry business has spoken to me about the confusing Defence grant arrangements. So, we’ve streamlined them into a single Defence Industry Development Grant with four streams to help Australian businesses grow their capability and capacity. 

The four streams are focused on growth of industrial capability and capacity in our priority areas; export opportunities for Australian Defence Industry; upskilling and training of Defence Industry; and establishing and maintaining security accreditation in line with the Defence Industry Security Program. So, we’ve allocated almost $184 million over five years to this program.

The Australian industry capability program will continue, and Defence contracts will continue to require AIC plans because that’s essential to growing the Australian defence industry and the jobs that it supports. 

The Defence Industry Development Strategy will help grow our defence exports by creating greater opportunities for collaboration and trade with our trusted international partners. It will especially husband ensure sovereign, resilient and secure supply chains, and collaboration is essential to delivering initiatives like AUKUS. It allows us to produce game-changing technologies and deliver capability at pace and scale. 

And we’re also formalising an approach to defence exports based on government-to-government agreements. This approach means that brilliant Aussie products will be backed by the reputation of the Australian government. 

So, in conclusion, the Defence Industry Development Strategy is a vote of confidence in the Australian Defence Industry. It will make Australia safer and more secure. It will ensure Australian businesses and Australian workers reap the full benefits of the government’s prudent investment in the nation’s defence. The Albanese government is committed to a future made in Australia, and Defence Industry is an essential part of that future. The creation of well-paying, high-skilled jobs, helping defend our nation, helping put food on families’ tables, helping Australia create a stronger and more independent future. Thank you very much. 

I’ll invite questions on today’s announcement first, and then I’ll invite my Defence colleagues to move away. 

Kym. 

JOURNALIST: Minister, on page 11 of your report, one of the barriers to entry is limited publicly available information about Defence requirements. 

MINISTER CONROY: Yes. 

JOURNALIST: Now, that also bedevils the media. You’re running the most secretive regime – even more secretive than Peter Dutton. When are you going to relax things so that people can find out what’s going on? 

MINISTER CONROY: Well, I reject the premise of that question, Kym. What we do is follow the advice of security agencies about what is appropriate information to put into the public arena. So today‘s policy announcement sets out an unprecedented level of consultation with the Australian Defence Industry. That will include increasing the number and the detail of classified briefings so that Defence Industry, our trusted partners, can understand what Defence projects are coming down the line so they can make the investments in that. 

We’re also establishing in response to the parliamentary war powers inquiry a powerful parliamentary Defence committee based on the very successful joint intelligence committee so that parliamentarians – who are the representatives of the people – can understand what Defence is doing and hold us accountable. 

But I have to be frank with you – the level of information that was available in the public arena 20 years ago does not match what our strategic circumstances now require and we will always follow the advice of the security agencies but at the same time giving taxpayers confidence through things like the parliamentary committee structure and giving Defence Industry all the information they need so they can make those investments. 

JOURNALIST: Can I ask: for the purpose of this strategy, “sovereign” seems to be a contested word. How do you define “sovereign”? 

MINISTER CONROY: Well, that’s a great question. For me, “sovereign” is an Australian Defence Industry. So, in here we have a definition that defines what industrial capability is. Industrial capability consists of having an Australian-based workforce, having intellectual property access, having capital in this country - so having facilities in this country and having a host of other arrangements. So that’s industrial capability. 

What makes it sovereign is the fact that it’s based in Australia. We’ve been very clear that in a very narrow range of capabilities to be part of the sovereign industrial base you’ll need to be Australian-owned as well. And there’s no greater example of that than CEA radars, where not only is that a company that is essential to our sovereignty, it’s so essential that the Australian government is acquiring it. 

But let’s be very clear about this: I reject any assertion that the six and a half thousand workers who work in BAE Australia aren’t part of the sovereign industrial base or the hundreds of Australian workers working at Thales Bendigo making these brilliant Bushmasters aren’t part of our sovereign industrial base. 

So, I acknowledge that people have different definitions. The definition in this is the Australian government’s definition, and it’s the one we’ll operate by. 

JOURNALIST: You would say that this – people would say this is domestic capability as opposed to sovereign capability. It might be kind of not such a big deal in the case of Bushmasters, but missiles, probably. So, with – how do they fit into the – 

MINISTER CONROY: Well, as I said to you, sovereignty is Australian capability. So, sovereignty is the ability to have an Australian workforce, have access to the intellectual property and have the facilities on Australian soil. That gives us the sovereignty we need in all but very limited circumstances. And there’s a narrow range of cases where sovereignty in certain technologies means Australian ownership is a factor as well. 

JOURNALIST: But would they be missile capability also? Is that something you’re pursuing? 

MINISTER CONROY: Well, I’m not going to get into the details of where our sovereignty is required. We’ll do that on a case-by-case basis. But CEA radars is an example of where we’ve done that. 

JOURNALIST: Minister, can you clarify, like, what you want the defence industry base or what you expect the Defence Industry base to actually grow to under this strategy? There’s a hundred thousand people now. What will be it in five, 10 years? Is it outlined in this blueprint? And where does nuclear fit into the seven priorities? Does it come under naval shipbuilding? 

MINISTER CONROY: To your second question, Rosie, yes. It’s part of the continuous naval shipbuilding Sovereign Defence Industrial priority. We’re not going to set arbitrary targets about what size we want. We’ve got over 100,000 workers already supported by the Defence Industry. Announcements we’ve made in the last 18 months will support another 25,000 jobs in the Defence Industry. And, as I said, we’re spending almost 70 per cent of Defence’s acquisition and sustainment budget on Australian defence. The level of employment will be driven by how much we spend and, critically, the most important functions are articulated in the annexes to this, which is the sovereign defence industrial priorities that need to be supported. 

But as this policy also articulates, every single acquisition contract we do will have an Australian industry capability plan as part of it. They will be contractually enforceable. So even if we’re buying a widget off the shelf, you will have an AIC plan associated with it once it gets to a certain scale. 

JOURNALIST: Can I ask in terms of accountability, you mentioned that the plan [indistinct]. There’s a lot of glossies, and when it comes to Defence we have [indistinct] a lot of dot points. How do we ensure that we actually hit that given that in previous [indistinct] Defence department we have [indistinct] projects behind schedule, projects that aren’t delivered, projects that are over budget? How do we ensure that this [indistinct]? 

MINISTER CONROY: Well, a couple of things. I make the point that the recent ANAO report on some major projects that they release every year already noted significant improvement in the processes. The Deputy Prime Minister and myself made announcements in October 2022 about significant reforms to Defence procurement – six individual reforms. If I could give you one example of that, having ministerial focus through projects of concern summits. In the 18 months I’ve been the Defence Industry Minister I’ve had five projects of concern ministerial summits. The last government in over nine years only had five. So, I’ve had five in 18 months. They’ve had five. 

Implementation is always a challenge with these reports. And one of the things we’re critical of the last government is they had 14 industrial priorities, but they didn’t even define six of them. What you see in these documents is detailed definitions of all seven of ours, including detailed planning on which parts of that industrial priority we need in which time frame. And you’ll also see at the back of this a summary of implementation actions that you can judge us by as well. 

We are accountable. We are making improvements to Defence procurement. That is flowing through, and I’m very confident that we can continue to work with the fine people of Defence to improve our procurement performance. 

JOURNALIST: Can I just ask a question of the Chief Scientist, if that’s okay? 

MINISTER CONROY: Is it regarding this announcement or is it something else? 

JOURNALIST: It’s regarding AUKUS, so [indistinct] Defence Industry. 

MINISTER CONROY: Well, what is – are there any other questions on defence industry? 

JOURNALIST: Yes. 

MINISTER CONROY: On this, on today’s announcement. I’ll give other people a go first. 

JOURNALIST: Just going back to Rosie’s question, you know, [indistinct] 69 per cent of last year’s Defence [indistinct]. How much would you like to see that rise by? 

MINISTER CONROY: Well, again, I think governments get in danger when they set arbitrary targets. But what I can say to you is we’re increasing the Defence budget significantly - $41 billion over the next 10 years. And every year the amount we spend on acquisitions and sustainment will go up. And every year the amount that we spend on Australian Defence Industry will go up. But I won’t set arbitrary targets. 

JOURNALIST: Minister, there’s a big focus on [indistinct]. What sort of [indistinct] tension between the [indistinct] technology safeguard [indistinct] risking ceding sovereignty over [indistinct] capability. How does your government-to-government agreements help resolve that tension? 

MINISTER CONROY: Well, the government-to-government agreements is really about supporting the credibility of Australian Defence Industry by backing them with the Australian government. In some areas, there’ll still be commercial arrangements where an Australian company will sell to an overseas country. But in other cases, it makes sense to sell through the Australian government. The US have a very well-developed foreign military sales office that does that. And we envisage an arrangement, obviously not of that structure, that level of depth given the size of the US Defence Industry, but a similar where if another government is looking at purchasing Australian products they end up contracting with the Australian government to provide those products rather than with the company. That means that our exports are backed by the Australian government. 

On the first part of your question, we acknowledge that changes to the defence export – the defence technology controls will pose some challenges. But it’s essential to be part of the AUKUS ecosystems. It’s essential to getting access to the best technology in the United States. And it also increases our opportunities to export our goods to just – to not just the United States but the United Kingdom as well. 

JOURNALIST: You and I have seen dozens of policy releases over the years. 

MINISTER CONROY: Yeah. 

JOURNALIST: The problem always seems to have been with implementation. So, what can you say to Australian Industry to give some assurance that all of this will actually be put in place? 

MINISTER CONROY: Yeah, well, I think you’re absolutely right to characterise Defence Industry policies of the past as being challenged by implementation, of falling down there. One thing we’re doing is being honest with the Australian Defence Industry and the Australian public. So, for us, we’ve cut the number of industrial priorities from 14 to seven because one of the messages I’ve heard from Defence Industry is if everything is a priority nothing is a priority. People want clear guidance on where we’ll intervene - Defence Industry wants clear guidance on what are the essential things we need to do in Australia and what we’ll do to support that. 

So, another new part of this policy announcement is for the first time a government has said we will intervene and shape the integrated investment program to sustain these seven industrial priorities. No other government in the history of this nation has been very overt – has been overt and made that commitment. The last government – and I don’t want to be too political – the last government had a grant scheme to support the priorities. That grant scheme on average supported – provided support of one and a half million dollars a year to each of these priorities. We’ve got a narrower list that’s more detailed in the definitions, and we’ve articulated how we’ll support them. So that’s how I ask Defence Industry to judge us. 

JOURNALIST: Can I ask about the role of the industry portfolio in the development of this. I understand there was previously a [indistinct] insight into Industry run by Defence. That’s been pulled back into the Defence Force. So, given there’s so much [indistinct] in everything – there’s industry and a small amount of Defence Industry – how do those things plug together? And if you could also, sorry, address quantum AI – those AUKUS technologies – that are mainly seen supported by Industry but are clearly [indistinct]? 

MINISTER CONROY: Well, on the second question, one of the seven industrial priorities is autonomous systems. So, things like AI are incredibly relevant to that. 

On your first question, I work very closely with Ed Husic. Our departments work closely – and I might invite Chris Deeble – or would it be more appropriate Tanya, no, Chris – to talk about the interactions with the Department of Industry. But we work closely together. They were consulted on the formulation of this policy. One of the announcements that we made in this is the formation of a Defence Industry council. Ed Husic will be on the council with me. So, you’re absolutely right that the Department of Industry and the Department of Defence will work closely together. 

Chris, was there anything else you want to add? You don’t have to. 

CHRIS DEEBLE: I’ll just add one thing: I think within the DIDS there is a whole-of-government perspective on how we can best harness that. You know, Defence Industry doesn’t sit – you know, it sits within Australian industry writ large, and we have to make sure that we dovetail opportunities. So, taking account of things like the NRF fund, you know, those aspects, will be important to us as we work with industry through that and we’ll work at that whole-of-government level. 

MINISTER CONROY: Thanks, Chris. Any other questions on this announcement? 

JOURNALIST: Yeah, just [indistinct] the centre that was started in 2015 [indistinct] on behalf of Defence. Why has that function not been considered to be [indistinct]? 

MINISTER CONROY: Well, we’ve – one of the feedbacks we’ve had from our consultation with industry – and there was well over 100 organisations consulted on this – was that there was too many grants, they were too confusing and they duplicated themselves. So that’s why we’ve made a decision to simplify it into one Defence Industry grant with four different streams underneath it backed by more money. So, that’s why we’ve allocated almost $184 million to these grants. 

And to give you an example of why we want to simplify it, instead of a company having to make multiple grant applications for different parts of it, they can make one grant application that goes to supporting an industrial priority, that goes to upskilling their workforce, that goes to helping uplift their security. So, it’s about simplifying it and making it more accessible for the Defence Industry. And that’s one of the strongest feedbacks we got from the Industry. 

JOURNALIST: Minister, can I ask about Mike Burgess’s comments last night? 

MINISTER CONROY: Okay. Okay, one more and we’ll make this the last question on that. 

JOURNALIST: The Chief Scientist. In terms of the AUKUS taskforce from last year, I’m just wondering if we could get an update from the Defence Minister’s announcement, you’re working with your partners and how that kind of builds into some of the priority areas here? 

TANYA MONRO: Certainly. One of the exciting elements of the Defence Minister’s announcement just before Christmas last year was that all three AUKUS nations are together, starting a regular drumbeat of trilateral innovation challenges. The first one of those will come out in the next month to two months, and what is a profound shift that supports the intent of the Defence Industry Development Strategy is that we will together issue a single shared challenge to our industries. Each nation will have oversight of what our AUKUS nations have to offer in that area, and that will allow us to very quickly accelerate the best of breed from each of our nations for solutions. So, the very first of these challenges will be in the area of electronic warfare which, as you know, is critical for many of our Defence platforms. 

JOURNALIST: So triple oversight then? 

TANYA MONRO: Correct. 

JOURNALIST: Each country oversights the other? 

TANYA MONRO: Yes. What we’re working towards is bringing together the best elements of each of our nations’ industrial basis and R&D basis. In Australia it will be led through ASCA – the Advanced Strategic Capability Accelerator – in the US the Defense Innovation Unit, and in the UK DASA – the Defence Accelerator. 

MINISTER CONROY: Thanks, Tanya. We’ll make this the last question on the announcement then we’ll go to other topics of the day. 

JOURNALIST: [Indistinct] supply chains [indistinct]. [Indistinct] underperforming [indistinct]. What reforms will be made to the program to ensure that it’s getting more [indistinct]? 

MINISTER CONROY: So, a critical reform in this is that the global supply chain had an artificial arbitrary cut-off for the size of the Australian company that could participate in it. So, once you got over a certain number of employees, an Australian company wasn’t eligible to be part of the GSC, which meant an overseas prime couldn’t partner with a medium-size Australian company like CEA and have that as part of their global supply chain initiative. 

One of the – at the heart of this document is growing Australian defence industry companies to the medium size. We’ve got a thin level of primes. We’ve got a lot of defence SMEs. I want to grow those SMEs into medium-size companies, and I want them to still be eligible for the global supply chain initiative as a way of getting them into projects around the world. So that’s one example of how the reforms of the global supply chain will help Aussie industry. 

Another is our shift to a co-development, co-production, co-sustainment model. That’s part of our partnership with the United States. That was referred to in last year’s AUSMIN communique, and Prime Minister Albanese and President Biden talked about it from our missile manufacturing ambitions in the state visit. 

And so, when we join programs, I want to get Australian companies into the supply chain from day one. We’ve just joined the development program for the precision strike missile increments 3 and 4. I want Australian companies in from day one, not just us getting access to the technology and the end product but being part of the production process. 

JOURNALIST: Some businesses would say the money for that program would be better spent [indistinct] rather than [indistinct] to a prime [indistinct]. 

MINISTER CONROY: It’s one part of everything that we’re doing. And it’s an important part because except – well, for most Defence Industry the best way of exporting is being part of a finished product. We only export a few finished products to the rest of the world. So being part of a product that might be assembled or manufactured in another country is the best way of betting Aussie exports. And that’s why the global supply chain initiative is so important. 

There’s been so many success stories through it. You just have to go down to Marand Engineering in Melbourne to see producing one part for the thousands of joint strike fighters is better than trying to export one joint strike fighter. And that’s the essence of the GSC. 

I might excuse my Defence colleagues before I answer any other questions. Thank you very much for joining us. 

JOURNALIST: If I can ask you, Minister, for your reaction to Mike Burgess’s revelation last night that a foreign interference operation successfully recruited a former politician? For your general reaction, and also, should that politician out themselves so Australians can determine what harm that might have had to the parliament? 

MINISTER CONROY: I am not in a position to comment on the second part of that question. I just think it’s not appropriate for me to voice an opinion on that. 

On the first part, we work incredibly closely with the Director-General. He’s doing a great job and he’s right through his annual security threat update to talk about the challenges we face. And he’s absolutely right to say that foreign interference is becoming a much greater challenge and much greater threat than it was in the past. And that’s why obviously, we’ve supported the passage of laws under the previous government, and that’s why we work really closely with the intelligence agencies. Foreign interference is something we need to guard against every day as we spend more and more money on very advanced defence technology. It’s a prime area for foreign interference, and that’s why we’re working very closely. That’s why the passage of that legislation through parliament is critical as well. 

JOURNALIST: Were you shocked by what Mike Burgess said last night? 

MINISTER CONROY: I probably – I don’t want to comment any further. I think the Director-General said enough on that topic and he’s got our absolute confidence in how he’s handling that. 

SPEAKER: Last question, too, guys. [Indistinct]. 

JOURNALIST: I just want to ask, based on that, are you concerned about the impact it might have on our allies, such as our AUKUS [indistinct]? 

MINISTER CONROY: Well, no, I think every country around the world, particularly countries in the west, face issues around foreign interference. They’ve all put in place systems that deal with it and you see those threats occurring daily and you see occasional reporting of that. So, no, I’m not. 

We’ll make this the last question, Kym, just because you – 

JOURNALIST: I think you might regret it. 

MINISTER CONROY: Okay, well, give it a go. 

JOURNALIST: My question is about the US industrial base. In January the US Secretary of Navy Carlos Del Toro criticised US shipbuilders for excessive greed, buybacks boosting their stock price. So why is Australia going to transfer 4.6 billion to the same US industrial base? 

MINISTER CONROY: What I can say to you is that we’re incredibly committed to getting the most advanced capability – most advanced submarine capability in the world. And part of that is uplifting the US industrial base. At the same time, we’re investing $30 billion in uplifting our own industrial base. That will create 20,000 Australian jobs. So that’s the answer to the question. Thank you very much, everyone.

ENDS

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