Referral

1.1        On 8 February 2017 the Senate referred the following matter to the Senate Foreign Affairs, Defence and Trade References Committee for inquiry and report by 30 November 2017:

The impact of Defence training activities and facilities on rural and regional communities, with particular reference to:

1. economic, social and environmental impacts;
2. consultation and communication with local government and community organisations;
3. investments in new facilities, infrastructure and operations;
4. utilisation of local suppliers and service providers to achieve value for money;
5. encouraging awareness of tendering opportunities for rural and regional businesses; and
6. any other related matters.[1]

Conduct of the inquiry

1.2        Details of the inquiry were placed on the committee's website at: https://www.aph.gov.au/senate_fadt. The committee also contacted a number of relevant individuals and organisations to notify them of the inquiry and invite submissions by 28 April 2017. Submissions received are listed at Appendix 1.

Interim report

1.3        The committee tabled an interim report on 14 August 2017 which focussed on the evidence it received at a public hearing in Port Augusta on 8 June 2017.

1.4        On 12 July and 14 July 2017 the committee held public hearings in Rockhampton and Townsville, Queensland, respectively. A list of witnesses who gave evidence is available at Appendix 2.[2] The committee has decided to table an interim report which focuses the evidence received in Rockhampton and Townsville.

1.5        Submissions and the Hansard transcript of evidence may be accessed through the committee website.

Acknowledgement

1.6        The committee thanks the organisations and individuals who participated in the public hearings in Rockhampton and Townsville as well as those that made written submissions.

Background

2016 Defence White Paper

1.7        The committee's first interim report covers the policy framework. Briefly, the 2016 Defence White Paper (White Paper) indicates that a number of Australian Defence Force (ADF) training areas in northern Australia will receive upgrades by 2020, including Shoalwater Bay along with a range of ADF bases including Lavarack Barracks in Townsville.[3] As noted in that report, the White Paper sets out the government's increase in Defence funding by $29.9 billion over the period to 2025-26 and enabling investment of $195 billion in Defence capabilities over 10 years.[4]

1.8        The proposed investment projects outlined in the White Paper in the Townsville and Rockhampton regions are as follows:

• Upgrades at Lavarack Barracks to support new and upgraded land combat and amphibious warfare capabilities, representing an investment over the next decade of about $50 million. (An additional $550 million planned from 2025/26 out to 2035/36).
• Updating facilities at RAAF Base Townsville over the next 10 years with an additional $100 million investment to support the introduction of the F‑35A Joint Strike Fighter aircraft. (An additional $500 million planned from 2025/26 to 2035/36).
• Redeveloping the Townsville Field Training Area with an investment of about $20 million in the decade to 2025-26. (Further investment of about $110 million between 2025-26 and 2035-36).
• Upgrading Shoalwater Bay Training Area to support the range of new land combat and amphibious warfare capabilities over the decade to 2025/26, representing an investment of up to $150 million. (An additional investment of around $40 million is planned for the decade between 2025/26 and 2035/36).[5]

1.9        Following the release of the White Paper, the then Assistant Minister for Defence, the Hon Michael McCormack MP, and the Minister for Regional Development, Senator the Hon Fiona Nash, welcomed the increased spending and noted that much of this investment will be spent in rural and regional Australia where most defence facilities are based.[6] They advised:

"This $195 billion investment means more high paying, highly skilled jobs for rural and regional Australia. It's a huge vote of confidence in rural and regional Australia – and rural and regional Australia has the skills and professionalism to deliver.

"This means construction and development in rural and regional areas and jobs in building and construction, information technology and logistics."

"Regional businesses will also have the chance to capitalise on this investment by tendering for the supply of goods and services to Defence."

Assistant Minister for Defence Michael McCormack said investment through the White Paper in Defence industry capability, estate and infrastructure will create jobs and drive investment right across regional Australia.

...

"Regional Australia will be a major beneficiary of this investment which will translate into the creation of thousands of local jobs to assist in base redevelopment and upgrades as well as wider economic benefits for local communities."[7]

1.10      The Federal Member for Capricornia, Ms Michelle Landry MP, said the investment would create jobs and deliver substantial benefits to the region:

"I think what's going to be really good about this is that it's the introduction of new armed intelligence and surveillance and reconnaissance manned aircraft in early 2020, so they are really looking for the future and I think this is going to be fabulous for central Queensland," she said.[8]

1.11      During the federal election campaign in June 2016 the Minister for Defence, Senator the Hon Marise Payne, indicated that the government would work with Defence to ensure local businesses are able to participate in the substantial upgrades. The Minister also stated that:

The Turnbull Government is committed to resetting the relationship between defence and industry to ensure more of our Defence dollar can be spent in local businesses.[9]

Increased Singapore Armed Forces training in Australia

1.12      On 29 June 2015 the Australian and Singapore governments signed a Joint Declaration on the Australia-Singapore Comprehensive Strategic Partnership. On 6 May 2016 the two governments announced a substantial new package of bilateral cooperation initiatives to enhance strategic, trade, economic, defence and people to people links. Among a range of defence initiatives, the Partnership agreed to the following:

Australia and Singapore will jointly develop military training areas and facilities in Australia, enhancing Singapore's training.  Singapore will have enhanced and expanded military training access in Australia over a period of 25 years.

Australia and Singapore will sign a Memorandum of Understanding to enhance military personnel exchanges and begin civilian personnel exchanges.[10]

1.13      On the day of the announcement of the Partnership, the Prime Minister, the Hon Malcolm Turnbull MP, spoke about the benefits that will flow to North Queensland:

It will approximately double the Singapore armed forces existing access to training facilities in Australia, and will give a much needed boost to local economies in North Queensland over the next 25 years. We will jointly develop military training facilities in Northern Queensland, which will be fully funded by Singapore. Singapore will invest up to $2.25 billion in the expansion of two of our most important military training facilities the Shoalwater Bay training area and the Townsville Training Area. This is going to create thousands of jobs in construction, in tourism, and investment.[11]

1.14      The Prime Minister, on visiting the Lavarack Barracks on 26 July 2016, advised:

Can I say also the importance of the big investment from Singapore in these facilities here is going to be...a massive investment in infrastructure, military infrastructure in North Queensland and is going to play an important part in ensuring strong growth in jobs, supporting the local businesses here and in the future.[12]

1.15      On 13 October 2016 the Minister for Defence, Senator the Hon Marise Payne and the Singapore Minister for Defence Dr Ng Eng Hen signed a Memorandum of Understanding Concerning Military Training and Training Area Development in Australia (MOU). The MOU delivers:

...a framework to implement increased SAF [Singapore Armed Forces] unilateral training in Australia. It sets the conditions for upgrading the Shoalwater Bay Training Area and Townsville Field Training Area to deliver enhanced training outcomes for both the Singapore Armed Forces and the Australian Defence Force. Under the initiative, up to 14,000 SAF personnel will conduct unilateral training in Australia for up to 18 weeks per year – significantly increasing current personnel numbers.

The enhanced training access will be in effect for 25 years, with provisions made for Singapore's training presence to increase from 2017. It is expected that SAF personnel numbers and the military equipment brought to Australia will progressively increase as the new infrastructure and facilities are built. As this presence increases, opportunities for local businesses to provide support and services will expand. Up to AUD 2.25 billion will be invested in the Townsville and Rockhampton regions from 2016 to 2026.[13]

1.16      Following the signing of the MOU, the Minister for Defence met with key community stakeholders in Townsville to inform them how the implementation will impact on the community and region:

As part of the memorandum, priority will be given to local businesses around Townsville Field Training Area and Shoalwater Bay Training Area, in support of both the phases of development and the ongoing training activities, boosting regional jobs and growth.

Defence anticipates that there will be local opportunities in the construction, logistics support, retail and tourism sectors.

About $2 billion will be invested in the training areas to support the increased training activity over the next decade.

Defence will begin engaging with community groups next month and will appoint a dedicated community liaison officer in Queensland to ensure business and the community receive timely updates on the implementation.

Singapore's training presence will begin to increase from 2017. As this presence increases, the demand for support services and opportunities for local businesses will expand.

Defence will provide an Initial Business Case on the upgrades to Government in 2017 and construction will commence from 2019.[14]

1.17      On 3 November 2016, the Minister for Defence and the Federal Member for Capricornia visited Rockhampton to meet with local government and business leaders to discuss the opportunities stemming from the Singapore Military Training Agreement and advised that the MOU:

...gives priority to local businesses around Shoalwater Bay Training Area, in support of both phases of development and the ongoing training activities, boosting regional jobs and growth.

...

Ms Landry said the Singapore agreement presented a unique opportunity for local business.[15]

1.18      Under the Australia-Singapore Military Training Initiative (ASMTI) there will be increased Singapore Armed personal numbers and longer training periods with Defence expecting there will be a need for goods and services to support construction of the following infrastructure and facilities:

Training facilities;

Logistics facilities;

Camp facilities;

Information communication technology infrastructure;

Roads; and

Utilities.[16]

1.19      Defence also expects the Singapore Armed Forces will have need of other ongoing services, including:

Maintenance;

Health;

Hospitality and catering;

Accommodation;

Transportation;

Tourism; and

Recreation.[17]

Focus of the inquiry

1.20      As outlined above, the release of the White Paper and the signing of the MOU; followed by statements from the Prime Minister and ministers including the Minister for Defence, the Minister for Regional Development and the Assistant Minister for Defence, have generated expectations that regional Australia would be able to benefit, directly and indirectly, through the participation of local businesses, particularly SMEs, in building defence capability.

1.21      A key focus for the committee therefore is investigating whether regions, local communities and businesses have sufficient awareness of and effective access to information about the plans to upgrade training facilities so that they can be in a position to offer goods and services. In addition to looking at channels of communication, the committee spoke with businesses currently working with Defence to hear what has assisted them and those who may wish to do business in order to understand what assistance may be required. The committee is also interested in the communication of Defence with stakeholders in the local communities who will be affected by the upgrades, particularly in relation to land acquisition, as well as communication channels regarding existing training activities.

Defence presence, expenditure and new investment in the region

1.22      The Queensland Government acknowledged the positive contribution of Defence in the region:

The Federal Government's Defence portfolio maintains a strong and valued presence in Queensland through a number of long standing Defence facilities and assets. The impact of Defence training activities, facilities and assets on rural and regional communities within Queensland is largely positive, and [the Queensland Government] particularly acknowledge[s] the support that Defence personnel provide in rural and regional communities during times of crisis, including the recent Severe Tropical Cyclone Debbie.[18]

Rockhampton - Shoalwater Bay Training Area

1.23      The Shoalwater Bay Training Area (SBTA) is a category 1 training area which supports joint and combined manoeuvre for force elements at or above battle group with the potential ability to support live fire training from land, air and sea.[19] The SBTA, encompassing 290,000 hectares of land near the coast and 165,000 hectares of maritime area, sits within the Livingstone Shire and is under the broader Fitzroy region. The closest regional centre is Rockhampton. Based on the land size, the SBTA currently occupies over one-quarter of the total land area of the Livingstone Shire.[20]

1.24      The 2014-15 and 2015-16 Defence expenditure on the SBTA totalled $3,748,000 and $6,235,000, respectively. A breakdown of this expenditure is set out in the following table:[21]

Fin.Year	Military Employee Expenses $'000	Civilian Employee Expenses $'000	Facilities Capital $'000	Facilities Operating $'000	Grants $'000	Major Capital Equip't $'000	Supplier Expenses $'000	Total $'000
2014-15	1,300	146	784	707	0	5	805	3,748
2015-16	1,315	146	821	1,002	0	0	2,951	6,235

Townsville

1.25      Townsville is a major base for defence facilities and hosts four major Defence establishments.

1.26      Lavarack Barracks is a major Australian Army base located in Townsville. The barracks is a large working, training and accommodation facility, home to about 4,500 soldiers and 280 civilian employees. It covers approximately 750 hectares.[22]

1.27      Royal Australian Air Force (RAAF) Base Townsville is an important forward operating base located north-west of Townsville. It is home to:

• No 383 Squadron - Contingency Response
• No 452 Squadron Townsville Flight - air traffic control
• No 27 (City of Townsville) Squadron - Airbase Operations
• No 38 Squadron (38SQN)
• Combat Survival Training School - evasion and escape training
• Army's No 5 Aviation Regiment - Black Hawk and Chinook helicopters
• 1 Expeditionary Health Squadron Detachment Townsville
• No 2 Security Squadron detachment Townsville[23]

1.28      The 2014-15 and 2015-16 Defence expenditure on Lavarack Barracks, RAAF Base Townsville, Ross Island Barracks and Mount Stuart Training Area was $643,100,000 and $598,888,000 respectively. A breakdown of this expenditure is set out in the following table:[24]

Fin.Year	Military Employee Expenses $'000	Civilian Employee Expenses $'000	Facilities Capital $'000	Facilities Operating $'000	Grants $'000	Major Capital Equip't $'000	Supplier Expenses $'000	Total $'000
2014-15	453,859	19,353	78,518	36,009	0	94	55,267	643,100
2015-16	492,062	17,840	51,111	11,202	-	56	26,616	598,888

1.29      Townsville Field Training Area (TFTA) [incorporating the Star Ai Weapons Range] is a category 2 training area which supports the conduct of single service collective training and has the potential for joint or combined training.[25] The TFTA covers over 200,000 hectares of land and includes a number of weapons ranges and is generally used for aircraft and personnel training activities.[26]

1.30      The 2014-15 and 2015-16 Defence expenditure on Townsville Field, Cowley and Tully Training Areas totalled $6,336,000 and $11,205,000 respectively. A breakdown of this expenditure is set out in the following table:[27]

Fin.Year	Military Employee Expenses $'000	Civilian Employee Expenses $'000	Facilities Capital $'000	Facilities Operating $'000	Grants $'000	Major Capital Equip't $'000	Supplier Expenses $'000	Total $'000
2014-15	4,049	206	466	82	0	295	1,239	6,336
2015-16	4,339	223	2,616	2,027	50	28	1,921	11,205

1.31      Port of Townsville's Berth 10[28] – upgraded in 2013 in collaboration with Defence, the approximately $85 million facility was co-funded by Defence. The berth was purpose-built to host the Royal Australian Navy's two newest and largest landing helicopter dock vessels, HMAS Canberra and HMAS Adelaide, and includes fuelling and tank-staging areas, a terminal building and is supported by a quarantine wash-down facility. Defence has priority berthing arrangements in place to utilise the Berth 10 facility.[29]

1.32      Defence provided detail on the level of expenditure in Townsville in the financial year 2015-16:

...it was around $609 million in the region, in Townsville and the Townsville field training area. We think around $11 million or $12 million of that was directly associated with the training area and the bulk was obviously associated with Lavarack Barracks.[30]

1.33      Defence was asked on notice to provide a more detailed breakdown of these figures which had not been received at the time of tabling this report.

Singaporean expenditure

1.34      Visiting Singaporean Armed Forces (SAF) have a long term presence at Shoalwater Bay in QLD and also RAAF Base Pearce in WA and the Army Aviation Centre in Oakey QLD. Defence reported that 'Singapore currently spends in excess of $20 million annually through Australian commercial enterprises in the central Queensland region, particularly the Rockhampton area'.[31]

1.35      The SBTA currently hosts SAF for up to 45 days between August and December to conduct the unilateral Exercise Wallaby.[32] Ms Mary Carroll, Chief Executive Officer, Capricorn Enterprise,[33] advised the committee that '[i]t's...been broadly considered that the Singapore Armed Forces inject about $35 million annually into our local economy.'[34]

1.36      By extrapolating the current level of expenditure by the proposed extension of the ADF and SAF training activities, the KPMG report Socio-Economic Impact of the Australia-Singapore Military Training Initiative – A report for the Department of Defence, June 2017, estimated the level of additional average annual expenditure in the regions as a result of the proposed ASMTI:[35]

	Fitzroy	Townsville
Additional average annual training expenditure ($ million)	31.4	31.2
Additional permanent staff annual expenditure ($ million)	5	5

Exercises

1.37      Exercise Talisman Sabre is a biennial combined Australian and United States training activity which has been conducted since 2005. It is designed to train the participating military forces in planning and conducting Combined Task Force operations to improve the combat readiness and interoperability between the respective forces.[36] Exercise Talisman Sabre is conducted at Shoalwater Bay, QLD, Bradshaw, NT, Mount Bundey, NT and numerous other sites in QLD and NT.[37]

1.38      Commodore Allison Norris, Director General, Simulation and Training, and Exercise Director, Talisman Sabre 2017, Department of Defence, advised the committee that just over $5 million will be directly injected into the local area for Talisman Sabre 2017; and when national suppliers are added, which will include subcontractors in the local area, the amount contracted increases to just over $10.3 million. She further noted that this amount was just under half of the entire budget for Talisman Sabre in 2017.[38] A breakdown of the approximate $5 million expenditure was also provided by Commodore Norris:

Local businesses are approximately $1.1 million. If you then go to local branches, which would be Rockhampton branches of chains, there is $155,000. Regional comes to $66,000. Fuel provision for the local area is just over $2.9 million. I currently have an indication from US contracts of about $700,000, but I expect that will increase because we are still creating contracts at the moment. Payments to local landowners for leases are approximately $111,000.[39]

Proposed expansion of the SBTA and TFTA

1.39      In late November 2016 landowners in areas adjacent to the SBTA and TFTA were advised by the Department of Defence of the proposed expansion of the training areas in order to:

...enable the Singapore Armed Forces and Australian Defence Force to conduct complex training concurrently. It will also provide state of the art training facilities which will enhance the capability of the Australian Defence Force.[40]

1.40      Although Defence had indicated in the letters of advice to landowners that the expansion of the SBTA and TFTA was to accommodate the increased levels of training under the Australia-Singapore Comprehensive Strategic Partnership, the Defence website clarifies the reason for the expansion:

For the Australian Defence Force to safely and sustainably conduct battle preparedness Defence will have to expand its training areas. This remains true irrespective of Singaporean use of Australian facilities.

The development of an amphibious capability has placed greater demands on Australia’s existing amphibious training facilities, which is not sustainable in the long-term. The restructure and mechanisation of Army’s Brigades, and the incoming fleet of armored fighting vehicles have increased the required training area to enable Army to undertake sufficient levels of high-intensity combat readiness, safely and sustainably.[41]

1.41      On 23 February 2017 the Minister for Defence announced the finalisation of the master planning activity for the upgrades to the SBTA and TFTA. This process identified the training needs and options on how Defence could best achieve the upgrades, with the least amount of land.[42] The Minister advised that as a result of the master planning process Defence was able to significantly reduce the scope of the training area expansion that would be needed to meet the ADF's training requirements, and confirmed advice of 7 February 2017 that Defence would only purchase land from willing sellers.[43]

1.42      Mr Steven Grzeskowiak, Deputy Secretary, Estate and Infrastructure Group, Department of Defence, advised the committee about the factors driving the proposed expansion to the SBTA and TFTA:

Our need for training areas that can accommodate the training that we need to do in the future was signalled in the white paper last year. Obviously, many of our training areas are established for a long time. Over a period of the last 10 years, we've started to look at expansion.

...

As you are aware, we're still working on what the training areas will look like. The minister made very strong statements that there would be no acquisition of land that people did not want to sell, so conversations are ongoing on the moment about what that means. We don't know what the answer's going to be at this point in time. There are a range of reasons why the training areas need to be modernised. Some of those go to the Australian Defence Force capability that's coming online in the future requiring larger areas and some of it goes to the comprehensive strategic partnership with the Singaporeans, which is part of a broader government-to-government agreement. One of the factors in that agreement is that the Singaporeans are ramping up their training here, and there is an investment to the order of $2 billion over time to create the facilities that you need to be able to do that.[44]

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