Shipbuilding Industry Motions

I rise to address Senator Carr’s motion. I commend Senator Farrell for his enthusiasm and commitment to the mining sector in South Australia, but I must say that I deplore that such a serious issue as the South Australian economy or the important issue of shipbuilding, which is an incredibly important part of our national security, should come down to such a cheap exchange of political barbs. I would like to go to some of the issues of substance, but this is at the end of the day a political debate, so I shall start off by rebutting, just like a school debate—which is the level, unfortunately, that such debates often reach in this place—some of the errors and misconceptions that were put forward by Senator Farrell, and then I will talk about some of the more concrete issues that this place, on both sides of the chamber, should be addressing in the interests of our national security and in the interests of the working men and women of South Australia.

Senator Farrell made a number of comments about this government and what it has done to the auto sector. I have stood in this place before, as have other members on this side, and talked about the fact that the demise of Ford, Toyota and Holden has occurred over a number of years—and, in fact, most of those years were under the ALP’s government. Mike Devereux, as the GM of Holden, specifically made the comment that GMH was now talking about sovereign risk in relation to Australia because of the back-flipping of the Gillard government over policies. When it came to the fact that they closed their doors, he made the very clear statement that no decision of the Australian government—no amount of cash—would have changed MH’s position, because they were in fact closing down factories around the world as part of their consolidation. The Productivity Commission has underpinned that. Steve Bricks has also underpinned that in terms of the volume of cars that have to be produced to make a plant economical. So can we put aside the cheap political barbs and trying to draw from that analogies on this issue of shipbuilding?

This is where I want to finish the political points, just to contrast and compare the actual record of action—not the record of words and promises but the record of action—between the coalition and the ALP. Senator Farrell made great mention about the air warfare destroyer project: the SEA 4000, phase 3. That project was planned, approved and funded by the Howard government, by the coalition government. We have heard a lot of talk about Armadale patrol boats: SEA 1444. Again, that was the coalition government. There was the joint project 2048, phase 4A and the LHD. Again, that was the coalition government. So if you want to know which is the side of politics that actually commits to a program—does not just talk about it; does not just have aspirational white papers which it then fails to fund—if you look at the shipbuilding projects around Australia that are occurring today, they are because of decisions of the Howard government, which was seven to eight years ago. I particularly make that point to illustrate the time frame that is required for a venture the size of building a ship between the decision and the commitment of funds and when you have people on a dockyard cutting, welding steel and integrating systems. It does not happen overnight. The things that happen overnight are the defence acquisitions that come from offshore.

While we finish this little political segment, which we seem to have to have in this place, let us contrast the ALP’s record. The white paper of 2009 had big dreams: 12 submarines to be built in South Australia and all kinds of equipment promised. Within less than six months, the ALP had started cutting the defence budget to the point where it is now at its lowest level since 1938. Not only did they have to defer those major acquisition projects but they also cut funding out of the running system of the Defence Force. Defence admitted in estimates recently that that has amounted to some $16 billion worth of expenditure which has been deferred, which means contracts they had for building renovations, training, equipment upgrades or maintenance has all had to be deferred. Who suffers from that when those things are deferred? The defence industry does. They are the people who were expecting to be doing the work, and the work has been deferred.

We see on one hand a lack of decision. The SEA 1000 was promised in the 2009 white paper, yet no decision was made for six years. It is interesting that, when you do look at the decisions that were made—and there were some decisions made—those decisions did not necessarily bring advantage to the very people that this motion is about. Let us look at the JP2048 Phase 3 in terms of the amphibious water craft replacement. In September 2011 the then government made a decision on this project. If you go back through the Capability Development Group and the Defence Materiel Organisation’s papers it is clear that this was put forward as a project that had every opportunity to be a project that was manufactured and supported in Australia. We are not talking rocket science here. These are the smaller landing craft that will operate to and from the landing helicopter docks, the LHDs, the Canberra class vessels. These are not complex or expensive ships, but they would have provided work—and they could have been providing work right now and over the next two or three years if the then government had decided to do that.

What did the ALP do? They decided that they would send the job to Spain. In relation to those 12 ships—one of the few things that the ALP actually made a decision on and committed money to—did the ALP support Australian dock workers and manufacturing workers? No, they did not. They sent the work to Spain. I am bringing these things forward, in this small part of the to-ing and fro-ing of politics, to highlight the hypocrisy of the ALP in what they are accusing this government of when, on the few occasions they made decisions, they actually sent work in this very field offshore. I challenge members opposite to consider how much of the ‘valley of death’ would have been avoided if the ALP government had taken a decision to build the landing craft in Australia as opposed to sending them off to Spain. I concur that this is a serious issue, but it is rank hypocrisy for the ALP to say that the problem we face today is a product of the coalition over the last few months.

The broader issues that we should be debating in this place, to make sure that we put in place a framework that will be good for our national security and that will be good for our defence industry, is actually understanding capability development for Defence and how the government, the department and industry should be collaborating to make sure that we have a sustainable and viable capability. I use the word ‘capability’ advisedly. Defence has a process where they talk about FIC: fundamental inputs to capability. If we want to have an air combat capability, that is more than just the aircraft. You need to have a training system for the people, you need to have a training system for the maintenance folk, you need to have a support system for spare parts, you need to have airfields. You need the whole lot—people, organisations, support, training, equipment and doctrine are all required. One of the missing pieces in that construct is defence industry. Governments of both persuasions over the years have not directed or engaged with Defence to have them consider, as a formal part of their FIC process, defence industry.

We see that manifested by the fact that the so-called industry division within Defence has sat in a number of places, but it does not sit with the Capability Development Group. The Capability Development Group, CDG, are the ones who bring to government, at first pass, not only the strategic requirement for the equipment and what kind of capabilities or characteristics it should have but also advice around the procurement approach—how they should acquire that. Their thinking does not include at this stage, from a long-term perspective, what the industrial, design engineering, design support and manufacturing capabilities are that we as a sovereign nation need to maintain onshore.

Let us not get into the simplistic argument, as often occurs here, where people fold their arms and say, ‘We’ll never again build jet aircraft in this country. Why are you talking about building things onshore?’ There are countless examples where we see the requirement to have competence, particularly in the area of design assurance, design engineering, fabrication, repair, design and enacting repairs in Australia. If we do not have those things we run the risk of more things like the collapse of the amphibious fleet. For those who are not familiar with that, it was because Navy got rid of their engineering capability. It was given to DMO, who outsourced to industry, and there was nobody keeping watch on the quality of what was being delivered or on the ships. That has cost Australia dearly in terms of our ability to respond to natural disasters, our ability to support other ships afloat, and it has cost through the whole Rizzo process. It is still costing Defence money as we try to rebuild that engineering capability.

So it is important that we map a path forward to maintain in this area of shipbuilding, in the area of aerospace and in the area of electronic warfare the high-end engineering competencies, the high-end manufacturing competencies and the large infrastructure requirements. It is important that Defence map a path forward so that those things remain viable. That does not mean that we do everything. That does not mean that we try to have orphan systems in Australia and not link into global supply chains. But it does mean that, at first pass, the Capability Development Group should have as one of their considerations a fundamental input into that capability, which means the ability to perform that function on behalf of government over the next two to three decades and that they should have an understanding of what skills, competencies and capacities our industry is required to have. If we were doing that, then each time Defence came to government to put before them, at first pass, a strategic need for the piece of equipment, they would also be bringing to government, wrapped up in that proposal, the strategic plan for sustaining those elements of defence industry capability and capacity that we believed were essential to maintaining our sovereignty as a nation.

That goes directly to this issue of shipbuilding and maintaining the shipbuilding industry. If governments of both persuasions in the past had done that, we would not be where we are today. The inaction of the last six years is inexcusable; but it does not stand alone, because the system has had this flaw in it for many years. We do have an opportunity to fix this and move forward. There are ways that we can start to remediate the issues. The SEA 1000 future submarine is a classic case. The Liberal party is committed to South Australia as the place to build those submarines. But are we going to build 12 submarines—as per the 2009 white paper—with either a new or an unproven design that is a complete step up from the current Collins class? That is the current thinking of block replacement for fleets that the public and the media talk about and that Defence put forward to government.

There is a far smarter way. There is a more intelligent way to look at this capability from a long-term perspective. If we are to build critical skills in engineering, marine architecture, design, systems integration, propulsion and manufacturing, then we will take the service life extension program for the Collins class and we will gradually ramp that up to the point where we have mature and well-functioning systems for each of the major systems—whether they be the hotel services, the ship management services, the combat system, the external sensors or things like getting the hull centre of gravity or the propulsion system right. By doing that through the service-life extension program, we reinvigorate the design, the manufacturer, the welders—all of the things that we need to be able to step up that next notch to the SEA 1000. What you would then see is a continuous and seamless workforce and the building of capacity and competence so that we reduce the risk, and therefore the cost, of future projects.

At the moment, shipbuilding is done on a stop-start basis where we have high risk that increases cost. We see people ramping up to try to make production schedules to keep in line with this concept of a time-limited project. If we had a program, the peak numbers would not be as high; but, then again, you would not have the troughs—the valleys of death—either. You would have lower risk and lower cost, and you would iteratively develop your capabilities. If we are talking submarines, then we are talking about a better boat at each iteration of that submarine. We would transition from the extended Collins into the SEA 1000 boat, and many of the systems, and the skill sets of those who are supporting it, would roll across. The benefit is that not only have we reduced the risk and therefore the cost, but also we will have a design with more integrity. This means that the mean time between failures for critical systems such as the propulsion, combat and other systems will be increased.

The flow-on effect is that the availability of boats in the water will be significantly enhanced. The 2009 white paper said 12 boats because this figure was probably based on the current metrics that say if you want one boat in the water you probably need to have two or three to be around world’s best practice. So, to have four, five or six boats in the water, they thought you would need 12. But, if you have a design that is more reliable, then your mean time between failures is greater and you understand the systems better, so your full cycle docking times are less. If your upgrade paths are more recurrent and iterative then you will probably find that you never need to build 12 boats in order to have six continuously available in the water. That alone brings efficiencies and savings to the taxpayer as well as operational capability to our Defence Force.

I concur with the intent of Senator Carr’s motion to draw attention to the fact that shipbuilding is important. But I highlight the fact that there are long-term considerations that we need to get right as opposed to this short-term, party-political argument that ignores the bigger issues that will set us up to have a sustainable industry that avoids the valley of death. They are the arguments we should be having. They are the things we should be working on more collaboratively to put in place for the benefit of Australia. Regarding Senator Carr’s perspective and his position that the government should be deciding right now I highlight yet again that the decisions on the projects that are occurring right now—the air warfare destroyer and the LHD—were taken more than eight years ago. If we had wanted a project to be running next year or the year after—people actually cutting metal, welding or integrating systems—those decisions would have to have been made well before the current government.

There is a way forward. I believe it is the iterative upgrade path with things like the Collins class submarine moving into the SEA 1000. But I would encourage senators in this place to avoid the overt and shallow party-political bickering on an issue that is so important to our national security and to the men and women and the economy of South Australia. This motion is clearly political in nature, which is why this government is not going to support it. But it raises important issues, and I would implore senators from both sides in this place to lift their sights above the grubby party-political bickering on these important issues and to look at the long-term interest of our nation.