Q&A, Defence Horizon Breakfast

SUBJECTS: AUKUS; Western Australia; Henderson Defence Precinct; SRF-West; Australia-US relationship; Defence Industry; National Defence Strategy 2026; Integrated Investment Program 2026; Indo-Pacific

ANDREW GREENE, HOST: Well, Minister, we begin, I think, with some overnight news. Donald Trump has announced $6 billion for a new shipyard focused on Virginia Class submarines. Australia has been sending billions to the United States. Is this going to help us get our Virginia Class submarines? 

RICHARD MARLES, ACTING PRIME MINISTER: Look, I think the news overnight is good news, and you know I repeatedly said that actually I think when you look at what is occurring in terms of the US’s industrial base, we are seeing an uplift in the rate of construction, and the schedule is on queue, I guess, to achieving what we need to see it achieved by the early 2030s in order to create the space for us to be able to purchase the first of the Virginia Classes. The point I'd also make is it is not just about the construction of new submarines for the U.S. Navy. It's also about the sustainment. Really, the way to think about it is: we need to see more sea days for the USS Virginia Class fleet, equivalent, if you like, to an additional submarine in the water. And actually, what the West does, like what Stirling does, what in time Henderson will do, is really dramatically improve the number of sea days for the Navy, for the US Navy, which is why ultimately I am very confident that there will be the conditions met for us to acquire that Virginia Class.

GREENE: As you correctly identify, Henderson is clearly a key to this challenge. Can you tell the audience today when will construction begin?

MARLES: Shortly. We have taken a really big step in the last month or so in being able to announce the specific part of the Henderson strip where the Henderson Defence Precinct will be. And that's been a lot of work actually to get to that. I'm really grateful for the Western Australian government. I said in my introduction, Roger and his government, Paul Papalia, who is here today, have just been fantastic partners for the Commonwealth in respect of that. But I also want to acknowledge the industry players along the strip because this has been complicated, and we've been working very closely with them, and to get to a point now where we are able to actually draw the lines around what that precinct will be, does, enable us to get on with it. I think the way to answer your question is we've got a couple of key deadlines to meet. So in say 2031, early 2030s, we want to be in a position to have a facility which can lay down the construction of the Mogami-class vessel, which will be the fourth of the Mogami. So that is to say, the first three are built in Japan. We are very much wanting that fourth to be built here in WA.

GREENE: Because this is key: when Henderson begins, determines, when Mogami can also eventually be built. Can we guarantee that all eight will be built here in Western Australia?

MARLES: Well, that is very much our objective. We want to meet that 2031 deadline, about seeing a fourth built here, and the very moment that we announced the Surface Fleet Review, it was about establishing continuous able ship building here in WA for the first time. That's beginning right now with the construction of the Landing Craft Medium and Heavy for the Australian Army. But Mogami is going to be the heart of that, and so 2031 is a key deadline for that. But it's also a key milestone in terms of the submarine sustaining part of this. So having a contingency dock in place, which will allow the beginning of the current first deeper maintenance, if I could put it that way, of submarines at Henderson. That's a really important milestone in the context of what we're doing with AUKUS. So both in terms of submarine sustainment and AUKUS contingency dock, in terms of shipbuilding, the maintenance facility for the building of Mogami, both of those things being in place by then. We're at the end of 2026; that's not so far away, so construction will start soon. We are confident we meet those timelines. That's the most important thing for me to say this morning, and getting that agreement around a precise boundary of the precinct really was a critical breakthrough. Perhaps another point also to make is that the funding for everything I have just described is in place in the budget. The $12 billion that the Prime Minister announced here last year.

GREENE: But the figure will be much higher will eventually. Your colleague Pat Conroy in our magazine today has given a bit more detail about alternative financing. Who are you expecting to help fund this massive project?

MARLES: We do see this as being a real opportunity for alternative financing. Let me just walk back a little bit on that context. So across the Integrated Investment Program, the 10-year procurement schedule for Defence, which is worth about $425 billion, we are kind of shooting for around $15 billion of that to be done through alternative financing. It's worth noting that what President Trump announced overnight involved alternative financing as well in America. So countries around the world are pursuing this. It was articulated in in the Defence Strategic Review that we should be looking at this, not funding our Defence budget, but that gives you a kind of sense of scale -15 out of 425 - but to your question, the Defence Strategic Review articulated this as a real opportunity for Australia, given the funds under management that we have in our superannuation sector. I think we are fourth in the world right now. It's projected that by 2030 we will be seventh. With that kind of capital existing in Australia, this is obviously a lever that we should look to pull. And so that goes some way to answer your question of who we would think would be interested in an investment of this kind. And when we look across the sweep of that $425 billion, we definitely see Henderson as kind of front and centre as an opportunity for that alternative financing. Again, to talk about financing of Henderson more generally, we've committed $12 billion. I mean, we see over the course of the decade that the order of magnitude here for the cost of Henderson over that period is about $25 billion, but that's not the whole thing because it will take more than a decade to build. This is something that will be built out over a longer period of time than that. 

GREENE: [Indistinct] 60 billion? 

MARLES: I don't think it's that number, but it is more than $25 billion over the fullness of time. So that's the pathway that we're on. The $12 billion that we've already got in the budget gets us through all of those key milestones, which I've described. It gets us to 2031 and beyond. And so that work that we really need to do right now to get this thing going, that is funded, and we will look at opportunities for alternative financing to take the next step. And we expect that this is something that we will obviously be looking at in budgetary terms as well.

GREENE: Reminder, ladies and gentlemen, keep submitting your questions, which we will get to shortly. Looking immediately at Surf West, it begins next year. Are you happy with the level of protection and preparedness of HMAS Stirling

MARLES: I am. I think your question is specific around the security at the base.

GREENE: Well, and also, you know, some threats obviously in the UK recently, but even missile defence, all the things that are required for nuclear submarines.

MARLES: Yeah, look, I am, and I think the Stirling and Garden Island is, you know, having being down there lends itself to a facility of this kind. There's a certain isolation to it, I guess, in terms of being an island, having a causeway. There are challenges in that as well, in terms of getting material on and off the island. But from a security point of view, it's advantageous in terms of what that base will ultimately do. So I think, you know, we like it from that point of view. Our American partners really like it from that perspective as well. 

GREENE: Are there any concerns from our American partners? Are they completely satisfied?

MARLES: Yeah, I think they are really satisfied. In fact, I think they're excited actually about the opportunity that Stirling represents. I mean, they were very much excited about it when they looked at it for the first time and imagined the idea of Submarine Rotation Force West a few years down the track with some of the $8 billion that we've now committed to spending there over the decade and seeing that work actually happening. It's evolving. I mean, when you go down there, it's incredible what's happening. And again, it's on target. I mean, we've got American personnel there right now in preparation for the commencement of the Submarine Rotation Force West. In my mind, that was always the first major milestone that we needed to hit. That milestone is at the end of next year and we're going to get there.

GREENE: And with the influx of Americans, we're not expecting a repeat of history with a battle of Rockingham or like a battle of Brisbane?

MARLES: I don't think so. I think the people of Rockingham, the people of Perth, are looking forward to this. I mean, it's slightly different scale there, Andrew. I think at the peak of the Second World War, there was a million Americans in Australia. We're talking about 1000 personnel over the next few years coming to HMAS Stirling, and there are sort of questions that are often asked, not so much that one, but you know, housing and the like, and is there the social infrastructure there ready to receive this population? The answer to that is yes, and Defence Housing is actually building the housing for those people, but that number relative to the growth of the state is actually comparatively small.

GREENE: Turning to one of the questions that's come in, we hear a lot in the state about the importance, obviously, of the minerals sector and of China, but you've also identified our largest trading partner as our biggest potential adversary. How does this state come to terms with that perhaps contradiction? 

MARLES: I'm not sure it's contradiction. It's just it's the reality. I think you're right to highlight that this state, I think, feels this as much as anyone in the country, but this is a path that the nation needs to navigate. I mean, the fact of the matter is that we want to have the best relationship that we can have with China. We want to have the most productive relationship we can have with China. China is our largest trading partner, and we want that to be as cooperative as possible. China is a significant security anxiety, and those two things live together, and so we have to balance that, and it is challenging. And we talk in terms of stabilising the relationship with China, which we believe we have. We have a mantra, which I think kind of picks up the sentiment of this, which is that we work with China where we can, we disagree where we must. That's the path that we have tried to walk. That kind of mantra, I think, has helped as a bit of a guiding light of how you do this balance. We're not alone, obviously. I mean, the experience that we have in that respect of having China as a large training partner, but there being a security anxiety would be a situation shared by many nations. Japan, for example, they're in a similar situation, India and the like. So you know, we have partners and friends around - America itself, actually – so, we have partners and friends around the country, around the world, I should say, with whom we can talk and compare notes, and ultimately, what we want is a peaceful and stable world and Indo-Pacific. Maybe in addition to that, one of the things we have sought to do and have done actually since coming to government, which we don't talk a lot about, is to build the defence dialogue between Australia and China. Back in 2022, at the Shangri-La Dialogue, I was the first minister in our government to hold a ministerial level meeting with my Chinese counterpart, and the specific ask that we had in that meeting was to recommence a defence dialogue, which we've had for a long time with China, but during that period of three years or so, obviously didn't occur, and we have started to build that back. Our Chief of Defence Force went to China last year, in the middle of last year, and so that doesn't resolve issues, but it does build understanding, and it does kind of give a sense for both of us as what we're trying to do, and that understanding and the guardrails which come with that are really important. So you know, we use words like stabilization, we express that answer, as I just have, but behind that is a lot of work which we are putting in here, and we think the results of that are there to be seen.

GREENE: Acting, PM another question that's come in concerns Austal and the maneuvering that is going on at the moment about the ownership of that that company, does Australia have a view on the overall ownership of Austal, both here and in the US? And have you spoken to your counterparts in the US about it?

MARLES: We are watching with interest, is perhaps the way to put that. Austal, we have identified as our strategic shipbuilder here in Western Australia, and so in a sense we have a deep interest. I don't mean financial interest, but interest in Austal such that it can do the work of being our strategic shipbuilder, and obviously its ownership arrangements have the potential to be relevant to that. We don't want to be prescriptive about this, but we obviously do want to make sure that Austal is in a position to undertake its work as the strategic shipbuilder, and for what it's worth, Austal is keen to ensure that as well. We are comfortable with what has been spoken about in relation to Austal. To be clear, I mean Austal is an incredible company, having grown out of Fremantle. You know, it is one of the major builders of the US’s service fleet, I’ve been to its facility in Mobile, Alabama. It is vastly bigger than anything that is here, but it's really important to understand that the ships being built in Mobile are being designed in Fremantle. You know, it is genuinely an amazing company. And it does, as the name suggests, carry something in Australia, a Team Australia brand in our most important partner in the United States. But what is being contemplated or spoken about is that the US arm, if you like, of Austal. We keep a keen watch on this. Obviously, we speak to Austal. Obviously, we speak with our international partners, but we're comfortable with where this discussion is at.

GREENE: Speaking of exports, you're keen as a government to expand export markets. In fact, I saw we've started exporting to Hong Kong with F-35 parts recently. On that, are we identifying new markets, and how is that going?

MARLES: Well, we’re just identifying new markets. There are kind of regions that we would historically export to, and they haven't changed. What I think has changed is that the global demand or the demand within those regions for equipment definitely has changed over the last few years, particularly since the war in Ukraine, or obviously now wars in the Middle East. The industrial base across NATO and Japan, Korea, ourselves is stretched, and that is, I mean, that's a challenge as a defence minister seeking to procure what we need. It's an opportunity, though, from a defence industry point of view, in that there is very much a hungry market to receive product that we can make in this country. And I think having Land Forces here this week, it is absolutely incredible to see the extent of Australian defence industry innovation on display there. There are very much an international flavor to Land Forces, but in fact I think there's almost 1000 exhibitors, just over 200 are from overseas. So most of what you're seeing there is actually Australian innovation, and there is enormous opportunity now for us in new technologies like drones, for example, to be building here, designing here, innovating here, but exporting into those markets. So we actually think this is a time which presents real opportunities for Australian defence industry.

GREENE: Returning to where we began with the Henderson Defence Precinct. When will we know how many dry docks that facility will have, and what are the Americans telling us they need for their sustainment, their operations?

MARLES: Again, good question. So, of course, it's plural. It's more than one, and we are really working through at least two, and conceiving of a laid out area which provides optionality going into the future, and when we say that, this is imagined over a long over decades. When we are thinking about the future of Henderson, we are literally looking into the 2050s in terms of the kind of needs that might be required. I guess from that point of view, this is really something I guess I've learned along the AUKUS journey. It's to think about how you eat an elephant, you do it one bite at a time. It's kind of important not to try and do the whole thing at once, to take every step as you encounter it, and to not try and make decisions ahead of time. The world changes by the time you get to make a decision, and so it's important that you're kind of making it with the most information available. But also, you can just literally get indigestion if you try and do it all at once. And so, as we are thinking about Henderson now, while we are living in a place of optionality for the future, and by that I mean 2040s and 50s, we're not seeking to make those decisions now. 

GREENE: Is there room for more? 

MARLES: Well, I mean there is optionality going into the 2040s and 50s, is what I would describe, and what we are thinking about in the here and now is building what we understand to be our needs now, and that is more than one. So we are thinking two, with optionality on that.

GREENE: Just quickly on the question of transparency, this comes up quite a lot. We've seen the ANAO major project reports disappear, a new Defence committee with secret provisions. Are people right to be concerned about increased Defence spending and less scrutiny?

MARLES: I think there's more scrutiny, is the truth. I mean, we do have the ANAO. We have the Defence committee. The Defence committee is more scrutiny, not less. 

GREENE: It’s not public in all of its work.   

MARLES: Well, not all of its work, but allowing the parliament, if you like, behind the veil of executive government in respect of Defence is a huge step forward in respect of transparency and people need to understand that. This is a big thing that we are doing, and so in every respect, the Defence committee is a step forward in relation to transparency. A lot of what it will do will be in the public domain, but there is just a whole lot that occurs in the Defence world, which needs to exist in a classified realm. You know, we're talking about our most guarded national security secrets. Every country does that. What we're doing with the Defence committee, though, is allowing those on it, members of parliament, to come behind the veil and scrutinize what they're doing, and that I think actually is a really significant step forward in terms of transparency. So, I mean, from our perspective, we are definitely spending more on Defence. We think that it is critical that we maintain the social license to which to keep doing that, and transparency is fundamental to that.

GREENE: If we've just got a little bit more time to discuss the next steps in Henderson, we've got the Bechtel Report as well. When can we see that?

MARLES: Having got to the point now of being able to identify the specific spot on Henderson, where the entire strip where the Henderson Defence Precinct will be, we are now in the process of much more granular planning, to a much higher level. This is, you know, as I'm learning this as I'm going along, a process which involves, I mean, you could kind of do more. You could probably plan it through until 2050. So planning is a continuous process, but you've got to get it to a threshold level which allows you to begin the construction. And as I said earlier, you know we need to have physical things in place by 2031. So that construction needs to start shortly. That planning is the priority right now. It is literally done with a degree of urgency, and we hope to be in a position of moving dirt around there in the opportunity to the future.

GREENE: Minister, you've been very generous with your time. Also, note that as acting prime minister, you seem quite comfortable in C1 driving around Perth. Could we see you in that car permanently in the near future?

MARLES: Andrew, Anthony Albanese - look, I answered this question in an interview in the last couple of weeks and as in my last answer - I feel so grateful, and I genuinely mean this. It's going to sound twee, but it's genuinely how I feel to be Anthony's deputy. I think at this point in my life, to have the partnership that I have with him, I thank my lucky stars every day, and we are from the Labor ranks. You know, Anthony, he comes with an incredible experience that the unity and purpose of our government, which is as unified as any point in time since I've been in Parliament, is based upon Anthony's fundamental decency. I genuinely think that the interests of Labor and specifically this government lie in Anthony doing his job for as long as he can. 

GREENE: Richard Marles, I note that you kind of answered that question. We'll leave the end of the day. Minister for Defence, Acting Prime Minister Richard Marles, ladies and gentlemen, please thank him for his time.

ENDS