Aust + NZ Defence Directory 2021-22

AUSTRALIAN + NEW ZEALAND DEFENCE DIRECTORY 2021/22 INDUSTRY GROUPS, ASSOCIATIONS & GOVERNMENT DEPARTMENTS THE NATION BUILD

IS THE GOVERNMENT’S DEFENCE INDUSTRY POLICY WORKING? I s the government’s defence industry policy working? That depends on what you mean by ‘working’. Defence’s local spending is increasing, both in absolute and relative terms. Last year Defence’s local equipment acquisition spending hit a record $3.5 billion. That’s 38% of the total equipment spend, so 62% is still going overseas. 38% may sound low but it’s been on an upwards trajectory for several years. This year Defence is aiming for nearly $3.9 billion, or 42%. It’s an even more positive picture in sustainment spending with $5.2 billion, or 69% spent locally last year. On the other hand, those figures from Defence are a black box; it’s impossible to know where exactly those dollars are being spent, and what sovereign industry capability they are devel- oping. How is it divided up between primes, local companies, and universities? There’s no shortage of announcements about local grants and contracts, but what does it all add up to? You’ll forgive me if I don’t get too excited about an announcement regarding $10 million in lo- cal contracts for the $90 billion Attack-class submarine program. And the fact that one of the crown jewels of the shipbuilding program has revealed a further two-year delay indicates that regardless of who is to blame increasing defence spending isn’t getting the capability the ADF needs when it needs it. Aside from the problem of lack of data, another problem in assessing progress against the government’s industry policy is working out what it actually is. As with all sacred texts, people read it in different ways. As I was re-reading the editorials from last year’s Australian

Dr Marcus Hellyer Senior analyst defence economics & defence capability Australian Strategic Policy Institute

& New Zealand Defence Directory, I was struck by two comments that represent the ends of a policy spectrum. Brent Clark wrote, ‘if work can be done in Australia it must be done in Australia’, while Graeme Dunk argued that ‘as funding is finite it therefore follows that to get maximum “bang for our buck” we need to invest in those industry and military capabilities most aligned to the mitigation of strategic risk.’ It seems to me that when the Defence Industry Policy Statement was written in 2015 to support the White Paper, it was intended to pursue the second position. In its application over time, it has followed the first. This slippage can be seen in the Sovereign Industrial Capability Priorities themselves. When they were first released there was no doubt that they listed important capabilities, but already they covered a very large percentage of Australian defence industry capability. If everything is a priority, then nothing is. Moreover, much of the government’s spending is going on things that aren’t SICPs—nowhere in the land combat vehicles industry plan is the ability to build vehicles mentioned, yet the government is embarking on over $30 billion in local armoured vehicle assembly even though we know we can get the vehicles much more quickly by buying and building overseas. On top of that, another four SICPs have just been announced even though three years after the first ten were announced we still don’t have industry and implementation plans for two of them—including what is arguably the most significant of them, the continuous shipbuilding program. Defence industry policy is a conceptually challenging space. It’s among the most wicked problems I’ve encountered. Wicked problems are those which are difficult to solve, because of the wide range of stakeholders, changing requirements over time, and complex interdependen- cies. In fact, defining a wicked problem is just as difficult as solving it. And perhaps most fundamentally, not all stakeholders will share the same view of what counts as a valid solution. In short, you won’t make everybody happy. As Ralph Waldo Emerson wrote, ‘a foolish consistency is the hobgoblin of little minds.’ Seeking consistency and perfection in such a complex and contested space as defence industry policy is a fruitless quest. The details are never going to deliver everybody’s wish list. Personally, I’d like to see a clearer articulation of how the policy will develop a more robust Aussie ‘middle class’ of prime systems integrators rather than expecting it to evolve by itself. But I’m hesitant to suggest the government produce even more policy. The focus now needs to be on ensuring that the investment is not just delivering industry capability but more importantly ensuring it’s delivering the military capability we need in a time of increasing strategic uncertainty. If it’s not we need to adjust the plan, even if it means adjusting commitments made to industry. And for me, that means recon- sidering a naval shipbuilding plan that is not delivering a new warship for over another decade.

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