Australia’s defence industry policy needs a reboot
17 Oct 2019| and

Agree or disagree with Hugh White’s prognosis of Australia’s strategic situation, options and potential responses, at least he has tabled the subject, and shaken more of the general public out of their comfort zone.

We’ll leave the equipment solutioneering to another place, but whatever the decisions on force structure, size and equipment, a few things are certain: the future is far less predictable than the recent past; we need our allies to remain our allies, but their paramountcy is less pronounced and their reliability less assured; and none of our conflicts over the past century-plus have been short.

Although there are positive signs in some elements of Australian defence policy, we need a major change of direction in our strategy for defence industry.

Any regional or grey-zone war, or a major sanctions issue, is likely to interfere with regional and hemispheric shipping, whether through the Malacca Strait or the South China Sea. That would obviously have severe, even if unintended, consequences on the Australian economy, but it would also have a serious impact on our armed forces if they continue to depend on offshore support. Ironically, the heavy, bulky, lower-tech items would be more affected than air-transportable electronic assemblies, but even the more specialised of those are rarely available on call. Munitions, whether guided or dumb, would be a particular issue, but so would a ship’s propeller shaft, a gearbox or an electric motor.

So the corollary is that Australia has to be mentally, organisationally and physically prepared for a range of scenarios in which it must be more self-reliant (even if only to pay the price of being in an alliance) and visibly able to deploy substantial forces when, where and for the extended period over which they could be required. For Australia to be more self-reliant, and for the defence force to be effective, we need a capable domestic defence industry.

But our defence industrial situation has three problems.

First, too much that could be done here is imported for no good reason other than convenience or vested interests. Quantity and consistency in industrial activity are the only ways to create and maintain a sustainable capability.

Second, the things that are done here in Australia are often at too low a level and doled out in penny-packets. The Commonwealth might buy the intellectual property, but to truly have usable IP here, the defence industry needs to use it—by manufacturing the item the first time and every following time—to develop the know-how and the know-why.

Lastly, great tracts of our defence industry are controlled from overseas, and some prefer to import finished products, perhaps salted with piece-parts from local sources.

The logical outcome of this situation is that Australia’s ability to use its military forces, as, when, where and for the period required, is dependent on others—not on Australians. In an uncertain world, this is an unnecessary risk.

Here’s the punchline: industry is not merely an input to capability—it is a capability. Not because it puts dollars back into the economy, or creates jobs, but because it generates, sustains and regenerates a deployed military force. A force with no industrial depth and excessive offshore dependence has little credibility, and if the US becomes less regionally credible, then so do our armed forces at a proportionally greater rate.

History has demonstrated that nations without an adequate arsenal constitute neither an adequately credible force to deter, nor an effective military force when fielded in the national interest. The fates of the Confederacy, Rhodesia and South Vietnam are apposite. As long ago as 1503, Niccolò Machiavelli warned, ‘One cannot always rely on someone else’s sword. One must be prepared to fight for one’s own cause. And to be ready for this, one must have the means.’ Most of the recognised theorists of war and strategy make similar points.

The issue of fuel dependency, and the recent suggestion that we can overcome a lack of onshore reserves by somehow tapping into a supply on the other side of the Pacific, shows how far from reality we have strayed.

What to do? History is a great teacher. Australia showed with the Collins, Anzac and Minehunter programs that it can successfully be done a better way. The furphy that it will cost more to produce here is just that; it’s not borne out by the facts. Warren King’s Senate testimony on shipbuilding in Australia in 2014 clearly showed that, as have other studies. Those programs combined industrial policy tools with competition to efficiently build ships we still use today, and which cost us less to maintain, mostly by ourselves.

Economies of scale only really exist for aircraft and their systems and for some forms of land equipment because they’re largely commoditised. There are few if any opportunities to benefit from offshore economies of production scale for naval platforms and equipment and some specialised vehicles, and, for good reason, Australia’s operational needs reflect its geography so these systems often need varying levels of adaptation. And we can’t presume there are embedded supply chains overseas to fall back on since, even if they exist, their owners are likely to want to use them for their own ends.

A defence industrial capability cannot be created overnight, and that capability needs to address our operational needs over the long term. The logic that says we only need to plan for a short war is fundamentally flawed. We might as well just put all our money on black.

Now is the time for policymakers to develop the defence industry strategy that will benefit Australia’s military capability as the strategic situation clouds. Now is the time to contract locally at scale and for capability, and to develop the defence industrial skills and expertise that we may need, because a big bag of spares from overseas just won’t cut it when the heat is really on.

To delay until tomorrow may be too late.