Chapter 3Committee view
3.1This chapter outlines the Committee’s view and recommendation.
3.2The purpose of this interim report has been to provide an overview of the key themes raised in submissions to inform the Committee’s future work.
3.3Recent events, such as the COVID-19 pandemic and the Russian Federation’s illegal invasion of Ukraine, have exposed the vulnerability and volatility of poorly secured global supply chains. It has never been more important for Australia to critically assess the resilience of its supply chains and consider which areas of sovereign capability are critical to its national security and require strengthening.
3.4Changes in Australia’s strategic circumstances also necessitate the adoption of a new approach to capability acquisition. Whereas it was previously the case that peace and prosperity in our region was underpinned by the unipolar leadership of the United States, as a nation we now face the prospect of major power competition in the Indo-Pacific with the potential to threaten our interests and increase the risk of conflict.
3.5The Committee recognises the vital role that Australia’s defence industry plays in assisting the Australian Defence Force to meet its current and future sovereign capability priorities. The Committee is of the view that the existing capabilities of Australia’s defence industry has been poorly leveraged and there is scope to enhance its value in contributing to the strengthening of Australia’s national security.
3.6The Committee accepts that with Australia’s new strategic circumstances, timely and strategically relevant acquisition of capability is of the upmost importance. There is an important role for Australian defence industry in achieving this objective, but it can only be done with a greater degree of clarity on what Defence expects of our defence industry, providing participants with the certainty they need to invest and innovate.
3.7The Committee notes submitters’ concerns arising from a lack of clear articulation from government on what is meant by the term ‘sovereign capability’ and the strategic rationale for pursuing it. The Committee is of the view that there is more work to be done by the Australian Government, in consultation with industry, to clearly define and articulate what it means by the term ‘sovereign capability’ and how the Australian defence industry fits in as a fundamental input to this capability. Australia’s priority capabilities and their associated procurement and acquisition programs, to which Australian defence industry can respond, must also be well articulated and underpinned by a clear strategic rationale.
3.8The Committee considers that the Sovereign Industrial Capability Priorities (SICPs), in their current form, are significantly flawed. It is clear from submissions that benefit would be found in consolidating and narrowing the SICPs to allow Australian defence industry to better target resourcing to meet Australia’s defence needs. Such consolidation and narrowing would also provide industry with the clarity and confidence it needs to invest in research and development, innovation, and commercialisation to support the attainment of Australia’s priority capabilities.
3.9Furthermore, the Committee wishes to acknowledge the important role of adjacent industries in contributing to the sustainability and viability of Australia’s defence industrial capability. There are opportunities to leverage dual-use capabilities to accelerate defence acquisition processes toward the attainment of Australia’s strategic capability priorities by nurturing and incentivising collaboration across defence and adjacent industries—including academic and scientific institutions—to encourage innovation, research and development, and commercialisation in Australia.
3.10The Committee also recognises the importance of developing and maintaining a skilled defence industry workforce capable of achieving Australia’s sovereign capability ambitions. The Committee considers that the creation of a dedicated plan to develop Australia’s defence and adjacent industry workforce capacity needs to be examined.
3.11Some submitters flagged gaps in the data available to assess the number and value of Defence contracts awarded to Australian versus foreign companies, as well as the need for a clear picture of the size and scope of Australia’s sovereign defence industrial base. A comprehensive national strategy on sovereign capability necessitates a robust assessment of Australia’s supply chain strengths and vulnerabilities, identifying what Australia can design, build and sustain locally and what can be sourced from trusted international partners. The Committee acknowledges that strengthening Australia’s sovereign capability does not require abandoning foreign military sales all together, noting that neither would it be desirable. What is important is that Australia maintains resilient supply chains that are underpinned by a sufficient development of a sovereign defence industrial base in combination with strategic sourcing from allies in way that ensures supply in times of instability or crisis.
3.12The Committee notes that submitters identified a number of barriers and challenges that defence and adjacent industry face in engaging with the Department of Defence’s procurement process. The Committee acknowledges that Defence has work to do to improve its communication and collaboration with industry, as well as finding areas where the process can be streamlined. For example, the issues with procurement timelines mentioned by submitters warrants consideration on whether greater use of different sourcing options would assist in reducing timelines, such as sole sourcing.
3.13The Committee recommends further examination of, and reporting back to Senate on, the following matters as a part of the Committee’s continued work:
how sovereign capability should be defined in Australia and which priority areas Australia ought to maintain and develop in order to strengthen its sovereign industrial defence base;
deficiencies in Australia’s defence procurement processes and how they can be alleviated;
how Australian defence industry’s existing sovereign capacity could be better measured and monitored;
how innovation pipelines can be improved and supported; and
any other related matters.
Senator Raff Ciccone
Chair
Labor Senator for Victoria