Press Conference, Gold Coast

SUBJECTS: Reinvestment into the ADF, Defence productivity.

MINISTER FOR DEFENCE INDUSTRY PAT CONROY: Thank you very much for that generous introduction and it's a real pleasure to be back in Queensland just before State of Origin starts.

Although as a proud [indistinct] I will note our historic women's victory. I still hope to get out of this room alive. But it's a genuine pleasure to be here, and last week I was sworn in as Defence Industry Minister for the second time, and I'm incredibly grateful to the Prime Minister for keeping me in that role. I asked to stay in that role because continuity is vital for what we're trying to do in defence, and I'll return to that later in my remarks.

So, I was sworn in again last week and this is the very first engagement I've undertaken since resuming that role. And that is intentional. I wanted to send a signal to industry, send a signal to the broader sort of defence ecosystem, that AIDN is incredibly important, that the membership of AIDN, the thousands, tens of thousands of defence SMEs that are vital to defending this nation and employing people, is a key priority of not just myself and Richard Marles, but the government as a whole. Such a real pleasure to be here for my first major engagement.

Continuity at a Ministerial level is incredibly important. We need longevity if we are to do these things. Everyone in this room shares a sense of frustration. There's a sense of pride about what we've achieved over not just the last three years, but across a couple of decades of real reinvestment in the ADF. But there's a sense of frustration about the untapped potential, what we can be doing more and how we can be moving faster. And to do that, we need continuity of leadership to drive cultural change. And again, I'll turn to that later, but I wanted to assure you that what happens here matters. It's feedback from organisations like AIDN and your membership that drives policy. And one example is the changed operating model around the Advanced Strategic Capabilities Accelerator ASCA, where feedback from industry players over its first 18 months led to a very significant reshaping of the organisation, putting it at the centre of the defence apparatus, under the Vice Chief of the Defence Force, closer to war fighters, pulling it out from the traditional bureaucracy so that it can move faster and adopt more of a model of rapid acquisition and modelled on what the Special Forces have done and quite frankly, putting in place General Hugh Meggitt to lead it. And that's led to a faster turnaround, more missions, more follow-through. That's because of feedback from forums like this, because closer engagement with industry is vital and it's essential if we're going to make it easy to do business with defence. But I do recognise change is not occurring as fast as we would like it.

Things are improving. And I know there is a sense of frustration about contract rollout and it would be not genuine to not acknowledge that during the DSR NDS process that there was disruption. There was disruption and some frustration. But the official data does demonstrate that the industry is growing. That's not to say that every part of the sector is growing as fast as wood. But data shows that, for example, direct employment in the Australian defence industry grew by 14.5 per cent compared to 2022. And the value of domestic contracts awarded per year is up by about 30 per cent. And in 21-22, the value of defence contracts to Australian industry was $24.9 billion. Last financial year was $32.4 billion. Now, importantly, this is not just based on ABN data. We have processes that look through the ABN to where the economic activity is actually occurring. This is not just a shell company and us counting that. This is genuine economic activity in Australia increasing. And we're committed to supporting industry and helping businesses grow and which in turn helps more Australians get jobs and perform financial security.

And that's why I'm very pleased to announce today that more than 50 businesses across Australia have been awarded grants totalling more than $16 million, including businesses here today, including IntelliDesign, MEMKO, Ron Allum Deepsea Services and Aldus Tronics. And another $16 million in grants have just been approved. So, this makes a total of $60 million in grants since we came to office three years ago. I'd also like to assure you that I've been engaging with industry and listening to your feedback on the grants programs, because I've heard from companies that try to innovate and invest quickly that the grants process is too slow. Part of this is because grant conditions prevent companies from spending money before grant agreements have been signed. So, I've asked Defence to investigate what options may be available for certain expenditure to be made before a grant is awarded at the company's own risk. We're not there yet. We've got to go through quite complex Commonwealth procurement guidelines, including a High Court decision that has reshaped how grants have to be operated. But I've heard the message from industry loud and clear that grants have to-- they're there to support you making investment decisions, not to hold you back from making investment decisions. And I think that's really, really important. 

And as the PM said during the election campaign, there is no magic number on defence spending. We will continue to increase defence spending and spending will increase by $57 billion over the next 10 years, including over $10 billion in the next four years alone. And if there's a case for more spending, you if there's specific projects that need to be added, the National Security Committee of Cabinet under the Prime Minister will of course lead that work. 

The Treasurer's productivity agenda is also incredibly important to the defence sector. Speed to contract is critical. So, it's not just about productivity of the actors in this room, it's about productivity in the Department of Defence. Waiting months for approvals and bureaucratic processes is lost productivity to industry and defence has to do better. Now importantly, what I want to inform you today is it is not the Commonwealth procurement rules that is holding the Department of Defence back. The CPRs do have enough flexibility. So, if you hear a DoD official say to you if only the evil Department of Finance could change the Commonwealth procurement rules, I could do more faster, that is not the case. We need to drive more risk-taking and a greater commercial culture within the Department of Defence so that they can use the flexibility that is right there to support your businesses more effectively. And Chris Deeble and I are certainly on that case. 

We need defence industry to move up the value chain, doing more complex work and getting more out of every dollar. And we're funding the uplift of our sovereign supply chain in areas like GWEO and where a contract does go to a prime, even dare I say an overseas owned prime, we are really focused on growing the Australian sovereign supply chain underneath that. And the best example I can point to is the contract with Kongsberg for the strike missile factory where fully 15 per cent of that contract is allocated to growing the Australian supply chain underneath that process.

So, even when prime's been contracted, I want the Australian supply chain to really win work and grow their sovereignty and their capability underneath that. Streamlining accountabilities within Defence is also important to ensure that we're in the best position to deliver the IIP. And I'm dedicated to empowering delivery managers to give them more autonomy to manage their projects and finding streams with importantly greater capability discipline on the capability managers. We cannot have capability managers changing requirements willy nilly, stuffing around industry, slowing down processes and adding cost and delay. 

Some of my focus areas in the near term include some very big decisions that are coming up in the second half of this year, including the general purpose frigates on the Sea 3000, where a critical part of the decision making matrix will be the industrial opportunities and the domestic supply chain that will be committed to by the two competing tenders. The second regiment of long-range flyers under Land 8113 will be decided and the next steps for the MQ-28 Ghost Bat to be made in Queensland will be decided upon after the capability demonstration activities that will soon shortly commence at Wurrung. We also will be spending more of the $10 billion that we've allocated to drones and autonomous systems. And we've allocated $4.3 billion to autonomous uncrewed aerial systems and $690 million for uncrewed tactical systems for army. Importantly, we expect that work to go out beyond primes and there are many companies in this room already that are in live tenders or seeking to tender for parts of that over $10 billion we're adding to autonomous systems. We're establishing the Australian Defence Strategic Sales Office which will have five initial priorities where we will actually use defence to partner with companies to sell Australian products and Australian-made items overseas. No longer will we leave defence industry on its own. We will have a fully strategic approach where we use the reputation and the credibility of the Australian Defence Force and the entire defence apparatus partner. That was how we won the Boxer export deal and we've got five priorities to roll that out. Over the next year you can expect to see further procurement reform, including a big push on upskilling and professionalising Defence staff so that we can get better and faster decisions, better industry engagement, more frequent and meaningful classified briefings. I had a great conversation with an AIDN roundtable that Carl put on in Brisbane last year and one of the really important feedbacks is we haven't delivered effectively on those classified briefings. That is the quid pro quo for taking more information in house. Because of international security settings, we need to be able to relay to trusted industry partners what our investment plans are so that you can make investments, invest in your workforce, invest in your capital equipment. 

And I'd like to see more long term exchanges between the ADF industry that are seen as a way of enhancing a military career and increasing professionalisation. I know Jenkins Engineering, for example. I've had some great conversations with them. They've got placements of key specialist navy personnel in their own operations, but that's the exception rather than the rule and we need to change that. And obviously we're ramping up work on the 2026 Defence Industry Development Strategy which will be released in conjunction with the updated National Defence Strategy and the 2026 Integrated Investment Program. 

So, thank you for having me. I'm looking forward to a bit more informal chat, but hopefully you can tell that I'm incredibly excited by the opportunity to spend another three years delivering in partnership with you. And I want to finish by thanking you for what you do. Every day you get up and make Australia safer. Every day you get up and contribute to the local and national economy. Every day you contribute to an Australian Defence Force that we're asking to do more and more. So, I want to thank you on behalf of the Commonwealth for what you do every day. Thank you for having me.