CEDA’s SA Defence Industry Overview Luncheon

ood afternoon, it’s a pleasure to be here in Adelaide for CEDA’s South Australia defence industry overview luncheon.

15th May 2018


 


 

CEDA’s SA Defence Industry Overview Luncheon

Tuesday 15 May 2018

 

Good afternoon, it’s a pleasure to be here in Adelaide for CEDA’s South Australia defence industry overview luncheon.

May I begin by acknowledging the great contribution CEDA makes to the economic and social policy debate in our country and here in our State.

Seeing CEDA achieve influence at a very high level in our national discourse and policy setting is a matter of some personal satisfaction to me. 

In 1960 my uncle John Macleod, then Chief Economist for CRA, joined Sir Douglas Copland and other distinguished Australians in founding CEDA.

I have also had the great pleasure in my role as Minister for Defence Industry of addressing several of CEDA’s events.

Today, I will talk to you about how far we have come in developing and implementing the Turnbull Government’s approach to defence industry and how it is affecting, and will affect, South Australia. 

The state is playing a very key role in creating a more capable and agile Australian Defence Force and that is creating tremendous, long term, benefits and opportunities.

And it is a delight to me that South Australia has a government, in Steven Marshall’s Government, that is relishing the State’s role in this enterprise and is prepared to clear as many obstacles as it can, as quickly as it can, to make things happen.

Now there are two things the Turnbull Government focuses on in defence industry policy and I can’t say this often enough. We are equally focused on our national security and our economic security. 

They are our twin pillars, if you like.

The Turnbull Government sees the defence and economic fortunes of Australia as inseparable.

National security and economic security, is, in the simplest terms I can put it, what our historic 200 billion dollar investment in defence capability and defence industry over the next decade is all about.

We are looking to develop a sovereign defence industry with the capability, posture, and resilience to meet Australia’s unique defence needs, to the greatest extent possible within our own borders, for the next century.

It is as ambitious a plan as it is unprecedented.

It amounts to the greatest peacetime renewal of defence capability this nation has ever undertaken.

It is the largest and most complex national project in our history. Its impact is transformative, and will be felt for a very long time.

The naval shipbuilding plan alone, at a cost of $90 billion over a decade, is tremendously ambitious. It involves the building of ships, submarines, surface combatants and minor naval vessels.

These naval vessels will be built on Australian soil, by Australians, using Australian resources to the greatest extent possible – that’s our commitment and it clearly engages both those pillars.

Much of this will unfold right here in South Australia.

It will deliver around 20,000 jobs for Australians.

It is already delivering renewed confidence.

South Australians are responding to the opportunities it brings. They are making their own investments in the future.

South Australians know that an investment program on this scale will do more than transform the capability of our Australian Defence Force across our air, land, sea and joint domains, as vital as that is.

It will also create highly paid jobs and secure their nation’s, and their State’s, future in shipbuilding and advanced manufacturing as the project reaches deep into the supply chain as well as on to their breakfast tables.

Just last week, Mr Anthony Brdar, Managing Director of MG Engineering based in Port Adelaide, said “There are huge opportunities in defence.  We’ve never had such a massive workload on the horizon.  It’s very exciting,” and expected to triple his workforce by 2022.

There is also increasing interest within the workforce with applications this year for SAAB Australia’s graduate recruitment round increasing by around 75%.

Every modern economy needs a sophisticated, high-end manufacturing sector.

It’s a long-standing fact that agriculture, mining and service industries have been central to the South Australian economy for 150 years, and have sustained our export base.

But we all want and should expect more of what advanced manufacturing can bring. We want the investment, the jobs, the skills development, the education and training and all the spinoffs that come with an innovative and productive manufacturing future.

The Government is serious about maximising the involvement of competitive Australian and South Australian companies in this endeavour. We want them involved in every aspect - from acquisition and construction, to sustainment and ultimately the operation of defence capability.

Which is why we are taking a carefully calibrated, strategic approach to building this great enhancement of our defence industry, our defence capability – and our economy. 

The policy bank is firmly in place. We have the Defence White Paper, the Defence Industry Policy Statement, the Integrated Investment Program, and the Naval Shipbuilding Plan in place.

Last month I released Australia’s first ever Defence Industrial Capability Plan, which outlined the government’s long-term vision and objectives.

This plan is a comprehensive roadmap that outlines the opportunities on offer to industry and explains the system.

The plan captures the many initiatives we have announced and implemented since I came into this job in 2016.

I’m referring to initiatives such as the Centre for Defence Industry Capability, the Defence Innovation Hub and the Next Generation Technologies Fund.

These initiatives are about helping industry.

About lowering barriers to doing business.

About innovating and working with Defence as a partner.

South Australian businesses have already been enthusiastic users of these new industry support initiatives.

There was evidence of that this very morning. The Centre for Defence Industry Capability delivered the final Introduction to the Defence Market seminar here in Adelaide. There was a great turnout.

Across these 17 seminars nationally we have had close to 1,000 participants hear about the considerable opportunities for Small and Medium Enterprises to join in on, and thrive, within our burgeoning defence industry.

The Defence Innovation Hub is another gem, providing valuable opportunities for businesses and research organisations of all sizes to put forward their most innovative ideas. To help them collaborate in developing their technology from concept to implementation.

Four such defence innovation contracts have been awarded so far to South Australian companies, injecting 7.2 million dollars into the South Australian economy.

In fact, South Australia received the largest portion of funding out of any State demonstrating that its defence industry extends beyond shipbuilding with many small and medium enterprises contributing to the advancement of our defence capability.

There is Myriota – a fantastic example of a leading South Australian start-up, a spinoff of the University of South Australia, gaining new Defence business and creating an opportunity to build innovative products – and that is thanks to another initiative, the Next Generation Technologies Fund.

Myriota was selected to develop a soldier-worn ‘Fight Recorder’, a piece of technology used to measure soldier movement and assist in scenarios such as personnel recovery.

Myriota is going from strength to strength with Boeing and their venture fund HorizonX Ventures investing in the company – I’m delighted to note that this is HorizonX Ventures’ first investment overseas.

South Australia’s defence industry is full of such innovative businesses with world-class capabilities. There will be many more opportunities for the ones that exist now, and for those yet to be created.

I want the Defence Innovation Hub to be as innovative as the products and capabilities it supports, so I’m working with them to ensure they speed up their processes and keep signing contracts with industry as we look to developing the next generation technologies our Defence Force requires.

The Turnbull Government, working in lock-step with the Marshall Government, is determined to see these innovators get the support they need.

Furthermore, we want our defence industry to grow internationally.

This makes good economic sense. We are an export State – in an export nation.

Through exports we can improve the sustainability of our defence industry sector and sustain it across domestic peaks and troughs in demand.

And vitally, we can improve the quality and reduce costs for the Australian Defence Force.

To provide the roadmap for growing our Defence exports, the Government launched Australia’s first ever Defence Export Strategy in January.

The strategy brings together all of the levers available to provide end-to-end support for Defence exports, from building readiness to identifying and realising export opportunities.

Last month I opened the Australian Defence Export Office, the focal point for Australia’s defence exports, and announced former Defence Minister, David Johnston, as Australia’s first Defence Exports Advocate.

Both the Office and David are already reaching out to industry to map out export success. If you are a defence exporter and haven’t already linked up with either, I encourage you to seek them out.

In my role as Minister for Defence Industry, I have also travelled across the world promoting Australia’s defence industry and supporting its exports.

Last month at the Defence Services Asia exhibition in Kuala Lumpur with Team Defence Australia, I was proud to promote an array of Australian Defence capabilities to the Malaysian Prime Minister and Defence Minister, and to a large and excited media contingent.

There were companies from around Australia with their services and products on display including successful South Australian companies such as Codan and Prism Defence. 

I’m not certain what or who was the biggest drawcard for the large paparazzi blitz – the Malaysian Prime Minister or our Thales Bushmaster.

Next month, I’ll travel to Eurosatory in Paris with our very capable companies in the land sector. I plan to support a number of export announcements and further our already strong relationship with the French.

France and Australia are close friends and allies already, but that relationship is set to be taken to the next level – and the catalyst for that is our Future Submarine.

Australia was fortunate to be visited by French President Macron only a couple of weeks ago – our relationship more recently bolstered by the Turnbull Government’s decision to partner with Naval Group to build our 12 Future Submarines over the next decade right here in South Australia.

It was announced during the visit critical design work on the Future Submarines will move to South Australia from 2022, fuelling more local jobs and investment.

Currently, initial design work is taking place in Adelaide and Cherbourg in France.

Up to 270 Australian jobs will be created in the detailed design and production planning activities. And where better than in South Australia, where we have a proud history of naval shipbuilding.

From the Whyalla shipyards supporting the war effort in World War II to the Collins Class submarine build at Osborne, South Australians have made a significant contribution to naval shipbuilding and thus directly supported the Australian Defence Force’s capabilities

But it must be said, much of that achievement has since been squandered through indecision and poor, if not invisible, public policy.

The challenge for businesses involved in defence industry in the past has been to weather the ebbs and flows of demand.

But now, with the establishment of the Naval Shipbuilding Plan, people are ready to invest again in defence industry, with confidence that over time, they’ll be secure and rewarded for their efforts.

We all know that peaks and troughs in domestic demand in shipbuilding happen. But a dramatic boom-bust cycle, such as we saw with Labor’s Valley of Death was quite another matter.

It was, to put it bluntly, an abdication of responsibility. The Labor Government somehow forgot to commit to a single naval vessel from an Australian shipyard over six long, neglectful years.

Well that’s over. We’ve come a long way, on the back of good policy from this Government.

We need never again see skilled workers thrown into such dire uncertainty.

Furthermore, the Turnbull Government is determined to see those workers who put their hands up become busy and productive again.

And on top of that we are encouraging, and looking forward to a new generation of highly trained and skilled people coming on stream.

We are implementing a far-reaching training agenda, under a consortium engaging some of the best and brightest institutions around the country, to train a new skilled workforce to build up our workforce capacity.

This is designed to unfold to support our continuous build program delivers 54 new naval vessels and thousands of jobs to industry. 

It’s a pretty good contrast with those wasted years and I’m proud of it.

Our forward-looking strategies will set up a naval shipbuilding industry for future generations of Australians, particularly here in South Australia, that is designed to last and to ride out whatever comes its way.

Just to recap on what is in store for South Australia.

There’s a 50 billion dollar rolling acquisition program for 12 Future Submarines to be built at the Osborne Naval Shipyard.

Design has commenced and construction will start within five years.

We have a continuous build of major surface combatants, also at the Osborne Naval Shipyard, with construction of nine Future Frigates commencing in 2020.

And then there is a continuous build program for minor naval vessels, with the first two of 12 Offshore Patrol Vessels being built at the Osborne Naval Shipyard commencing this year and the remainder at Henderson in Western Australia.

Australian industry involvement for the Offshore Patrol Vessels is estimated at 60 per cent.

By the middle of this year, we will announce the successful bidder for the 35 billion dollar Future Frigate Program.

This is a Program which will directly create an estimated 2000 Australian jobs, and there will be high percentage of local content.

On the Air Warfare Destroyer Program we achieved 50 per cent Australian content and were pretty happy about that.

So we’ve provided that figure to the Future Frigate participants with the guidance that the Australian content on the Future Frigate Program is expected to be even higher. 

This shipbuilding enterprise is vast in scale.

It is the largest recapitalisation of the Royal Australian Navy in peacetime and South Australia is right at the centre of it. 

Things are getting done. The process and the program are starting to accelerate.

Infrastructure is one of the key enablers of this naval shipbuilding enterprise and we are making the decisions now to ensure our shipbuilding projects are on track.

Our infrastructure program contains more good news for South Australia.

The Commonwealth has purchased the common user facility and surrounding land at Osborne to ensure we have the infrastructure needed to support this shipbuilding program.

There will more than $500 million invested on surface ship infrastructure at Osborne, with Lendlease selected as the managing contractor for the upgrade to Osborne South Shipyard. 

This project will create up to 600 jobs.

In March, we announced that KBR had won a 7 million dollar, Future Submarine Construction Yard concept design contract. This will support 100 South Australian jobs.

Leveraging our defence investment to create more and more jobs right across Australia is a key priority for the government.

We estimate that by the mid-2020s the structural workforce—people such as boilermakers, structural workers and steelworkers—will need to grow by more than 1000. 

The outfitting workforce—electricians, joiners and carpenters—will need to grow by more than 1400.

Many of them will need specialised training.

This is why last month the government announced the new Naval Shipbuilding College.

The College will be headquartered here in Adelaide at Osborne Naval Shipyard, and will be established progressively as the demands for a skilled workforce within the naval shipbuilding industry evolve. 

The College will be national in scope, working with existing educational institutions across Australia to ensure a large and capable pipeline of skilled shipbuilding and sustainment workers, so shipbuilders can meet their workforce needs as they arise.

Beyond that, for the next generation, we are developing a Defence Industry Skilling and STEM Strategy to create more defence industry capability. This will not be an easy task.

The Turnbull Government has also agreed to a targeted retention strategy to create up to 200 positions within ASC Submarines for current shipbuilders working on the Air Warfare Destroyer program. 

As the Destroyer program winds down, up to 100 workers will support the Future Submarine Program Office and fill vacant positions in the Collins Class sustainment workforce.

As many as 100 scholarships will be offered to workers to support opportunities to upskill for roles in operations management, computer-aided design, and engineering and supply chain fields. 

As I said, South Australia is central to our naval shipbuilding enterprise.

It is also set to benefit from our broader investment program.

RAAF Base Edinburgh is receiving over 600 million dollars in infrastructure and airfield upgrades, to enable that base to play a key role in Australia’s future maritime surveillance and response capability.

Earlier this year we announced the successful tenderer for our new fleet of 211 Combat Reconnaissance vehicles, a 5.2 billion dollar project which will create up to 1450 jobs – that’s right across Australia.

Over the 30-year life of those vehicles, Australian industry will secure two thirds, or 10.2 billion dollars, of the total investment in acquiring and maintaining the fleet.

South Australia is expected to generate around 160 million dollars of Australian industry involvement during the acquisition phase of that project.

On a broader front, I recently launched Australia’s first ever Defence Industrial Capability Plan.

This milestone document outlines the government’s long-term vision and plan for growing our defence industry.

It outlines how Defence will partner with industry and utilise all our innovation initiatives.

The Plan provides a stronger definition of Australian defence industry.

It also introduces a Sovereign Industrial Capability Assessment Framework and an initial ten Sovereign Industrial Capability Priorities that will be managed right across Defence planning. 

A 17 million dollar per year grant program will be introduced in 2018 to support our Small to Medium Enterprises who provide critical capability to Defence.

The plan outlines opportunities for Australian industry – particularly our SMEs—and provides more information for industry than they’ve ever had.

While the plan sets a clear direction for our defence industry, this is only the beginning.

There will be Implementation Plans for each Sovereign Industrial Capability Priority and Australian Industrial Strategies for each Integrated Investment Program Capability Stream from mid-2019.

I encourage you as South Australians, and Australians, to read the plan and to take advantage of the opportunities that the Government is providing.

And remember you will be doing it to support the nation on two fronts.

Conclusion

So as I said, The Turnbull Government is focussed on the twin imperatives of national security and economic security.

That is why we are so firmly fixed on the policies and decisions that will maximise Australian industry involvement in this enormous, 200 billion dollar capability renewal program.  

We are delivering huge opportunities for South Australian businesses and workers from all walks of life, and make no mistake; we are supporting all Australians by doing so.

I am delighted that so many South Australian businesses are taking up the opportunities we are creating.

And I am delighted to be working with a State Government that wants to get things done as soon as humanly possible.

South Australians are determined, resilient and very capable people.

Thanks to the commitments of the Turnbull Government, the best days for defence industry are definitely ahead of us for this great state and for our nation

I look forward to seeing them unfold.

Thank you and I wish you all great success in 2018.

APDR at a glance