PODCAST: Driving Australia’s defence industry at home and abroad, The Hon Christopher Pyne MP, Minister for Defence Industry

With in excess of $200 billion to be spent on capability acquisition and sustainment over the coming decade, delivery of defence spending is critical to the national agenda and ensuring Australia’s strategic interests in the decades ahead.

Join Minister Pyne as he speaks with Defence Connect Podcast host Phillip Tarrant, as they cover key issues including the recent LAND 400 Phase 2 announcement, how the competition for SEA 5000 is shaping up, the opportunity to enhance Australia as a defence exporter and how Aussie businesses can crack the global supply chain.

Tune in for this and more.

Enjoy the podcast,

The Defence Connect team.

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FULL TRANSCRIPT:

Announcer:    Welcome to the Defence Connect podcast with your host Phil Tarrant.

Phil Tarrant: G'day everyone, it's Phil Tarrant here. I'm the host of the Defence Connect podcast. Thanks for joining us today. We've actually transported our studio down to Canberra and Parliament House today in the office of someone who has been integral in developing defence industry and shaping the way in which our capabilities are going to be moving ahead in the decades in front of us. The Honourable Christopher Pyne, MP, Minister of Defence Industry. How you going, Chris? Thanks for joining us.

Minister Pyne:         Phil, it's nice to be with you. Thanks for asking me to do it.

Phil Tarrant: I've got a bunch ideas here or thoughts around what we can chat about today. Very much just around the way you see the world with defence industry right now and how you see that shaping up into the future. Before we get there, something I'm sure that you'd be happy to talk about is just what happened in South Australia over the weekend. After was it 15 or 16 years of-

Minister Pyne:         16 years.

Phil Tarrant: 16 years of a Labour government, you've got a Liberal man there now, and I think his government was formed the other day or yesterday and lots of plans ahead. I guess the question is around, what does this mean for defence industry seeing that South Australia is the home for defence in many ways?

Minister Pyne:         Well, Steven Marshall, the new Premier is also the Minister for Defence Industry, so he clearly sees it as a very high priority, and that it has the potential to be quite transformative not only to our strategic, industrial base, but also to the South Australian economy in particular.

            South Australia is certainly the home of submarine building, maintenance and sustainment, and large platforms in shipbuilding. As everyone knows who follows Defence Connect, it has a large footprint for things like the defence science technology group, BAE Systems, of course, have a large presence there, and most of the significant primes like Saab and Lockheed Martin, Raytheon, Leidos, and so forth. It has a significant defence base.

            I don't know who necessarily made the most of it in the past, but the fact that we now have a Premier who's also the Minister for Defence Industry and very engaged on developing the skills base in South Australia and Australia, and supporting small and medium enterprises particularly in exports means it'll have quite a focus of his government.

            That said, I worked well with Jay Weatherill and Tom Koutsantonis and South Australia was never disadvantaged at any point, because they had a Labour government. Creating jobs, growing the economy is something that transcends politics. Obviously, we have different views about how to do it. The emphasis on tax versus not tax and regulation versus deregulation, but we always wanted to do the best we could for our state and for all the rest of Australia when it comes to defence industry.

Phil Tarrant: With the new minister in place depending who you talk to you obviously SEA1000 submarine programme coming on line and the Future Frigate programme, we need a lot of engineers, we need to bolster our workforce down there. I guess a double-barreled question, number one, are we ready for these big programmes in terms of workers, and what are we going to do to make sure we've got the right workers to deliver these programmes?

Minister Pyne:         There's no doubt, Phil, that the work place part of the jigsaw puzzle is the most challenging. We are keeping on schedule. We're making the decisions that need to be made. The infrastructure is underway at Osborne South and Osborne North. The money is available to be spent. The government's making the decisions to keep the programme on track. The hardest part is finding thousands and thousands of skilled Australians to do this job.

            We have a base, but we need to probably add about another 5000 people over the next four or five years who are engineers, scientists, mathematicians, but also really highly skilled tradespeople. 60% of all the jobs in shipbuilding and submarine building are tradespeople, and they're highly skilled in particular niche aspects of that.

            We have a lot of work to do. It's quite achievable, but it's certainly not something we want to start doing in a couple of years. We've been from the very beginning of this national enterprise focusing on skills development.

            The Naval Shipbuilding College successful tenderer will be announced very soon. Work is underway to deliver the Naval Shipbuilding College that will produce about 1000 plus graduates a year when it's in full operation. That's, of course, spread across Australia using all the talents available to us in a hub-and-spoke approach, whether it's the Launceston Maritime College right through to Curtin University or University of New South Wales, RMIT, and of course, the TAFE Colleges in South Australia and Western Australia and elsewhere.

            We have a plan. This year, we'll release a strategic plan for skills and workforce development. Which will add to the suite of the structures that we're putting around what is the largest investment in the Australian economy by the Australian government in its history. That goes with the defence White Paper, the Integrated Investment Plan, the Defence Industry Policy Statement, the Naval Shipbuilding Plan, the Export Strategy, the Defence Industrial Capability Plan, and then will be the skills and workforce strategic plan, which I think will be very welcome across the industry. We recognise that it is a challenge, but we do have a plan about how to get there, and working with all the state governments that can contribute to this is going to be a really important part of what we do.

Phil Tarrant: From what I understand, you've just celebrated 25 years in parliament just the other weekend.

Minister Pyne:         I have. I have.

Phil Tarrant: Congratulations. It's a great tenure. I'm just quite interested on the back story for how you actually ended Minister of Defence Industry, how you fell into this portfolio, which you've had under your belt now for a couple years. You have a huge responsibility. That's $195 plus billion to spend over a decade.

Minister Pyne:         More now.

Phil Tarrant: More now. How'd you end up on the defence portfolio?

Minister Pyne:         Well, the truth is that this is the largest buildup of our military capability in our peacetime history. $200 billion over 10 years and growing every year as the next year of the forward estimates comes into the 10-year plan.

            Defence is a huge portfolio of its own, because we're engaged in operations and various important international responsibilities, and of course, looking after the Australian Defence Force and growing it. Malcolm Turnbull didn't want the enormous commitment that we're making to defence industry in Australia to be a second priority for the Department of Defence or for the ADF. We genuinely want to grow our Australian industry content.

            Therefore, we need a cabinet-level, senior government minister who's only job is focusing on that defence industry part of the national enterprise, and that has worked. For two years, we have been breaking records each year in the number of cabinet-level decisions, whether it's NSC, NSIC, cabinet itself to administer decisions. We've been breaking records on those decisions in both the two years that I've been the Minister for Defence Industry, because there is one person in the portfolio who's focused like a laser beam on that decision process. It has worked.

            Malcolm, I think, very presciently thought we should bring somebody into that job who would be energetic, enthusiastic, and passionate, as a South Australian, I love manufacturing. I believe very strongly in our advanced manufacturing base in technology, in the sophisticated jobs that are created through it, in using universities in the DSTG in research and collaborations between the research sector and scientific sector and industry.

            I see it as an enormous opportunity to grow our economy and also to provide the capability to the ADF that they need and require in an unsafe world. The synergies came together very well for me to do this job.

Phil Tarrant: As am MP, as a politician, you're obviously open to criticism that comes with the territory-

Minister Pyne:         Sure.

Phil Tarrant: ... and you mention a couple of-

Minister Pyne:         It's almost an hourly occurrence.

Phil Tarrant: It is. It is. You mentioned some great adjectives in terms of the requirements around what were needed in a Defence Industry Minister. I spent a lot of time in defence industry, and I'd say that by and large the industry would echo your sentiments around what's required to do it well, and that's energy, high tempo, connectivity, being intrinsically connected with what's happening with the industry right now, and how that translates into the needs of the government and the needs of our armed forces. I think the industry would give you a big tick on that regards.

            Obviously, open to criticism, and the decisions you make always going to have people that absolutely love them, and those that loathe them. One in particular only announced recently earlier this month, LAND 400 Phase 2 contentious. Obviously, the Army seemed very happy about the decision that's been made on the new Boxer CRV. Was that a tough call? Can you give us sort of any inside mail on how that played out?

Minister Pyne:         Well, the good thing about that decision was that it was a very clear recommendation from the Army about what the capability was that they wanted, and that the Boxer fulfilled that capability. The AMV, which was the offering from BAE didn't fulfil the capability that the Army required. The AMV came a very clear second, and so it was a relatively easy decision. If we'd chosen the AMV, we would have been knowingly choosing a vehicle that had not won the tender, so that would have been an impossible decision to make.

            The truth is Rheinmetall, whether they were building in the Northern Territory, Lord Howe Island, Queensland, or wherever, they were going to win that tender once that recommendation was very clear from the defence force, and state considerations had nothing whatsoever to do with it. It was a decision based on capability, and that's exactly as it should be. If Rheinmetall had chosen Victoria to be its construction base, it would be based in Victoria.

            The problem with tenders is that somebody wins and somebody loses, and the people who don't win usually aren't very happy with the decision. But companies move on, BAE has moved on. They're a contender for the $35 billion Future Frigates project, and there will be the usual process of briefings and post-tender discussions with BAE about their offering, they will take lessons from that I guess, to the next time it may try and tender for the AMV for a combat reconnaissance vehicle for another country.

            But we're very happy with the choice of Rheinmetall. We think it will be a great success. The Army's very pleased with it too, and that's really the main thing. It will protect our soldiers. It will give us the lethality that we need, and the Australian industry content has gone from 5%, which was the initial offering to 55% in the acquisition phase. That's $280 million versus about $2.8 billion of Australian industry content. For the entire project, which is $15.7 billion, it's about a $10.2 billion Australian industry content, which is about 70%.

            From a defence industry point of view, it's a transformative project for the companies, and it'll be involved in that enormous project.

Phil Tarrant: You mentioned the SEA 5000 Future Frigates Programme. Three contenders there, so there's going to be two that aren't successful rather than one, but-

Minister Pyne:         There'll be two unhappy people and one happy person.

Phil Tarrant: Yes, this is true, but obviously, the capability component was a lead consideration on LAND 400 Phase 2, and rightfully. Is that still going to be the same way within the SEA 5000 Programme? Is capability going to be central to the frigate that gets chosen?

Minister Pyne:         Capability is always the number one priority. I often say that we will not keep the Australian Defence Force and the Department of Defence are on the same page of the government when it comes to growing our defence industry if capability becomes a second consideration to the capability of the defence force. Thus far, the defence force is perfectly delighted with the government's priorities. They are getting the capability that they need, and we're growing the Australian defence industry.

            But the moment that we choose an inferior platform, product, service, whatever it might be, because it's Australian, over a technology or capability that was better, that's an overseas supplier, defence will start to scratch their head and think, "This isn't the direction we need to be going in."

            Now, we're not doing that. We're getting to have our cake and eat it too, if you like. We're getting the capability that we need, but we're growing the Australian industry content. The buzz in the industry is, in many respects, explained by the fact that for years, people from the Department of Defence used to jump into the nearest stairwell to avoid people from the Australian industry, because they didn't have a mandate from a government to grow Australian industry.

            Now industry tells me, they're being chased down the corridor by people from Russell Hill saying we need to talk, because we need to find out what capability you have. If you haven't got what we need, we need to work out if we can build you up, so that you can provide it.

            That's, of course, what's in the Defence Industry Policy Statement. That statement is about providing the funds and the support to get Australian industry to the point where they can provide the capability as well as anybody in the world, if they don't already have it.

Phil Tarrant: That's quite a major culture shift that you've just explained there. When you reflect on the two years since the delivery of the Defence White Paper, it's where we are today and where we are moving forward. A dedicated Defence Industry Minister, I would imagine has a lot to play in terms of that scenario you talk about whereas Army, Navy, Air Force capability people within government chasing down SMEs to make sure that our guys and girls have the right kit, which is great. It's good for industry, and I think it's good for Australia.

            When you look at the agenda, the defence industry agenda, under you at the helm of that moving forward for the next two, five years, what are we going to see just delivering what we said within the White Paper, or is it going to be tweaked and changed over that time?

Minister Pyne:         Well, the Integrated Investment Plan is a living document. It's not designed to be static and to be not responding to the needs of the Australian Defence Force. Some projects will be brought forward, other projects will move back. Some projects will be ready to go, some projects will need more time. I don't make any apology about that. If people in the media say that means the Integrated Investment Plan isn't working, in fact, it's the opposite. It means it is working.

            There is absolutely no diminution in spending in the goal to get to 2% of GDP. In fact, we'll get to 2% of GDP a year earlier than we promised, but the projects themselves will move around, and that's as it should be.

            For example, we have a newer focus on our anti-ballistic missile defence, and so we're ensuring that the contract that was won by Raytheon to provide the anti-ballistic defence missile shield for deployed forces, we're ensuring is on track, it's begun.

            We'll have to consider with the Future Frigates what their capabilities are beyond anti-submarine warfare. Not that we want to change the tender or the plan. They will be anti-submarine warfare vessels primarily, but we do need to think about what capabilities they have in terms of anti-ballistic missile defence. That's as it should be.

Phil Tarrant: You said an interesting position is the interface between government and defence industry, and it is a genuine partnership, and you speak about this at length. Now you've implemented a number of different things, including the CDIC and a mechanism for supporting innovation within defence under some of the funds.

            From your view though, every relationship has its challenges and has areas where it can approve. What do you think DoD and CASG can do better to engage industry, but also as a hard marker, what can industry do to make sure that they can really deliver the capabilities required?

Minister Pyne:         I think the most critical thing in the relationship between Capability Acquisition and Sustainment Group and defence industry is a truthful relationship. The worst thing that could happen for defence industry is for claims to be made about what they can deliver, and then for them not to be able to deliver it. Because then the people in defence, and I am sure there are still people in defence, who would prefer to be a safe and good customer of overseas equipment manufacturers, will be able to say, "We told you so." Then we'll start losing that debate within defence.

            Right now, there's an enormous enthusiasm about what the government's trying to do in defence. But there are 18,000 public servants in the Department of Defence and about 50,000 uniformed people. I'm sure there are people within that who are still sceptical about the government's agenda. I try and convince them every day that it's achievable and working.

            The best way to make sure that the ambitions that Malcolm Turnbull and I have for defence industry are realised is for CASG and defence industry to make promises that they can deliver and then deliver them, and then we'll keep winning.

Phil Tarrant: One of the big objectives of your government is defence exports. We obviously have the Defence Export Strategy recently unveiled and just by reading a couple of numbers that you've used, I think the 12th biggest economy, we're the 12th biggest defence spender, we're the 5th biggest defence importer, and we're trying to reach a top 10 exporter. We're sitting around 19th or 20th at the moment, depending on who you listen to.

Minister Pyne:         We've just moved into 19th.

Phil Tarrant: We've just moved into 19th. What needs to happen for us to actually be a true powerhouse in defence exporting?

Minister Pyne:         Well, the first thing that has to happen is that government has to have an agenda around it, which we've never had before, which we now have. The Defence Export Strategy needs to have money behind it. We now have put money behind it, $80 million over the next four years.

            We've ramped up our approach to expos and trade shows and conferences. We have a grants programme to support small and medium enterprises to get themselves to those kinds of trade shows.

            We're now allowing the uniformed branch of the defence to actually sell our capabilities in terms of equipment, platforms, and services in a way that they've never been encouraged to do.

            We've empowered the Defence Attachés to make defence exports a part of their daily routine rather than an interest if they have it, quite apart from their strategic roles in the 70 missions in which they're represented around the world, more than 70 attachés.

            We've ramped up the Global Supply Chain Programme. Put more money into that to ensure that the primes, and the companies just below primes, become part of the Global Supply Chain Programme.

            We've brought together in the CDIC and in defence generally, all of those different parts that had an interest in exports apart from the export permit office, but all the others that have been involved in Team Defence Australia, we brought them together into one unit, so that they're all working together.

            Today, in fact, we released the Australian Military Sales Catalogue. Last year, it was 14 pages. This year, it's 94 pages. Every state and territory's now working as part of that. We've expanded it's remit dramatically. The companies have responded really well. And there were 20 companies that didn't make it into the catalogue that wanted to be in it, but we didn't feel that they were ready to be put in the catalogue. Next year, it'll be bigger again.

            I believe that we will increase our exports quite quickly. We now have a defence industry minister who is focused on exports, who travels to the countries where we have prospects. Last year, I was in Riyadh and Warsaw and Paris and London, and after Malaysia, this month in Singapore. I'm going back to those places again and again, whether it's Abu Dhabi or Washington or Ottawa to chase prospective export opportunities. We've never done that before. We couldn't do worse than we've done before, and I think we'll move quite quickly along the road.

            The 10-year goal, the top 10 exporters is a 10-year goal, not supposed to happen next month. We've already moved into 19th position, but that is based on the Stockholm Peace Research Institute, and I think that's a pretty flawed model actually, a pretty flawed measure. Part of the defence export strategy is to come up with our own measure, and then to apply it.

            Because for example, the Stockholm Peace Research Institute probably doesn't include Marand's vertical tails for the Joint Strike Fighter Programme, because they're not a stand-alone platform. They're a part of a much larger platform, and yet that's a billion dollars worth of exports on Marand's books. What it does include, I'm not exactly certain, but that's the only measure at the moment. I'm quite sure that we're going to keep moving along the road.

Phil Tarrant: What is the secret for Aussie businesses large and small to crack the global supply chain? Have we got the capabilities, or do we need to improve them in order for us to be better exporters, or we're just not selling ourselves well enough?

Minister Pyne:         We've never had a government that supported our Aussie exporters. We have the capabilities in lots of areas. Marathon Targets, the remote weapon systems, the Bushmaster vehicles, Hawkei, the Nulka, the phased array radar, of course, we've been able to do it. We could do more.

            We have to always keep improving our capabilities, because it's a competitive market, but we also have to sell our own product. Sell our own book when we're travelling overseas. That's not something we've ever done before. We have a lot of work to do. It's very exciting. Australian businesses are very excited.

            I was the first minister in the defence portfolio to go to the G'Day USA Defence Conference, which was remarkable. I was advised at the time that it wasn't really important for me to go. I said, "But isn't it in Washington with all the people who might want to buy our products and services? Isn't the United States still spending 50% of the world's military expenditure is from the United States budget." I'm going again this year, but we've never had that consistent approach.

            We've always taken the view that if it's Australian it might be good, but it might not be as well. Whereas what we now need to do is say, "It's Australian. It's the best in the world, and we're going to sell it overseas, and we have the backing of the government to do so." That's a big difference.

Phil Tarrant: We've had a very quick snapshot-

Minister Pyne:         Quick? It's been 25 minutes.

Phil Tarrant: It has, yeah.

Minister Pyne:         Haven't you got a day job?

Phil Tarrant: 25 minutes, well, a very quick snapshot of what is a very wide portfolio that you do manage here. Obviously, a lot of the key programmes coming along, but also these longer term development programmes, funds, CDIC, et cetera.

            Final question, for those businesses out there, and obviously we're attracting a lot of new people into defence industry, whether it's for domestic opportunities or for export opportunities. For those organisations, which come into defence, and a lot of them listen to and read Defence Connect, they see the opportunity, but they often get fatigued by the often sometimes length of time it takes to actually get some action, get some contracts signed. We need to keep encouraging these businesses into defence and defence industry. I think it's absolutely critical. What would you say to them if they're wavering or second-guessing or questioning their decision to move in defence?

Minister Pyne:         Well, we have tried to change that, for example, with the Defence Innovation Hub grants. Normally a government would have waited 12 months and announced all the grants at once and got a big bang in the media for a big announcement about defence innovation grants. We're doing it every month. So the business who are unsuccessful can get on and try and find backers for their ideas elsewhere, and businesses that are successful can get on with it. We've changed that culture immediately. That was an early decision.

            Look, these projects are big though. They are big. The scale of the decisions that we're making are very rarely in the millions. They're usually in the 10s of millions, 100s of millions and billions. Decisions won't be made quickly.

            What we've managed to do in the last two years is make them on schedule as promised. And the combat reconnaissance vehicle decision is five months early. Nobody's actually mentioned that, but it's actually five months early. When was the last time a big defence project worth $15.7 billion was almost half a year early? Doesn't happen.

            We are changing the culture. I would say to people in defence industry who are frustrated, they should travel overseas with me trying to sell Australian defence exports. It's a patience game. You have to go back again and again and again.

            The rewards are great if you win, and they're worth fighting for. But if you expect a quick decision and a quick win, you're not going to get anywhere. I'm only just starting to be recognised in Riyadh and Abu Dhabi as a regular visitor, but I've been to both places three times in two years. As every Australian businessman knows, hopping on a plane and flying anywhere in the world from Australia is a big effort.

            You need to keep ... It's a drip, drip, drip on the stone story in defence exports. It's the same across the whole industry. If you think you're going to get into defence industry make a quick buck, try something else.

Phil Tarrant: Well observed, I think. Mr. Pyne I really enjoyed the chat today. Thank you.

Minister Pyne:         Thanks Phil. It's been good chatting to you.

Phil Tarrant: It's good. Let's keep engaged and connected, and we'll obviously keep reporting what you're doing, which is many things. I think we must get a press release a day from you guys so-

Minister Pyne:         Good.

Phil Tarrant: ... there's lots happening. Maybe to check defenceconnect.com.au if you're not yet a subscribing to our daily morning market intelligence so you're the first to know what's happening in defence defenceconnect.com.au/subscribe. If you get your information from social media, just search Defence Connect, you'll find us. I will be back again next time. Until then, by-bye.

Listen to previous episodes of the Defence Connect podcast:

Episode 435: PODCAST: Putting veteran families first, with the Families of Veterans Guild’s Renee Wilson
Episode 434: SPOTLIGHT: Mission engineering – a missing piece of the capability puzzle, with Downer’s Rachel Hatton and Nathan Rickard
Episode 433: SPOTLIGHT: Introducing the Australian Digital Defence Industry Matrix, with BenchOn’s Tim Walmsley
Episode 432: SPOTLIGHT: What does sovereignty mean in a post-DIDS industry? With Stephen Kowal, CEO of Atturra
Episode 431: PODCAST: Developing Army’s hand-to-hand combatives program, with Paul Cale
Episode 430: PODCAST: Aussie innovation supporting navies around the world, with Jeffrey Hawkins, Pivot Maritime International
Episode 429: PODCAST: Commercialisation essential to the success of space and defence industry, with Brian Lim
Episode 428: PODCAST: Firebrand topics on Ukraine, Israel, and Australian conscription, with Corporal Matthew ‘Willy’ Williams OAM
Episode 427: PODCAST: Unpacking the surface combatant review with the Honourable Kim Beazley AC
Episode 426: PODCAST: WA ready, willing and able to support defence industry opportunities – Paul Papalia CSC MLA, Minister for Defence Industry and Veterans Issues

Announcer:    Welcome to the Defence Connect podcast with your host Phil Tarrant.

Phil Tarrant: G'day everyone, it's Phil Tarrant here. I'm the host of the Defence Connect podcast. Thanks for joining us today. We've actually transported our studio down to Canberra and Parliament House today in the office of someone who has been integral in developing defence industry and shaping the way in which our capabilities are going to be moving ahead in the decades in front of us. The Honourable Christopher Pyne, MP, Minister of Defence Industry. How you going, Chris? Thanks for joining us.

Christopher P.:         Phil, it's nice to be with you. Thanks for asking me to do it.

Phil Tarrant: I've got a bunch ideas here or thoughts around what we can chat about today. Very much just around the way you see the world with defence industry right now and how you see that shaping up into the future. Before we get there, something I'm sure that you'd be happy to talk about is just what happened in South Australia over the weekend. After was it 15 or 16 years of-

Christopher P.:         16 years.

Phil Tarrant: 16 years of a Labour government, you've got a Liberal man there now, and I think his government was formed the other day or yesterday and lots of plans ahead. I guess the question is around, what does this mean for defence industry seeing that South Australia is the home for defence in many ways?

Christopher P.:         Well, Steven Marshall, the new Premier is also the Minister for Defence Industry, so he clearly sees it as a very high priority, and that it has the potential to be quite transformative not only to our strategic, industrial base, but also to the South Australian economy in particular.

            South Australia is certainly the home of submarine building, maintenance and sustainment, and large platforms in shipbuilding. As everyone knows who follows Defence Connect, it has a large footprint for things like the defence science technology group, BAE Systems, of course, have a large presence there, and most of the significant primes like Saab and Lockheed Martin, Raytheon, Leidos, and so forth. It has a significant defence base.

            I don't know who necessarily made the most of it in the past, but the fact that we now have a Premier who's also the Minister for Defence Industry and very engaged on developing the skills base in South Australia and Australia, and supporting small and medium enterprises particularly in exports means it'll have quite a focus of his government.

            That said, I worked well with Jay Weatherill and Tom Koutsantonis and South Australia was never disadvantaged at any point, because they had a Labour government. Creating jobs, growing the economy is something that transcends politics. Obviously, we have different views about how to do it. The emphasis on tax versus not tax and regulation versus deregulation, but we always wanted to do the best we could for our state and for all the rest of Australia when it comes to defence industry.

Phil Tarrant: With the new minister in place depending who you talk to you obviously SEA1000 submarine programme coming on line and the Future Frigate programme, we need a lot of engineers, we need to bolster our workforce down there. I guess a double-barreled question, number one, are we ready for these big programmes in terms of workers, and what are we going to do to make sure we've got the right workers to deliver these programmes?

Christopher P.:         There's no doubt, Phil, that the work place part of the jigsaw puzzle is the most challenging. We are keeping on schedule. We're making the decisions that need to be made. The infrastructure is underway at Osborne South and Osborne North. The money is available to be spent. The government's making the decisions to keep the programme on track. The hardest part is finding thousands and thousands of skilled Australians to do this job.

            We have a base, but we need to probably add about another 5000 people over the next four or five years who are engineers, scientists, mathematicians, but also really highly skilled tradespeople. 60% of all the jobs in shipbuilding and submarine building are tradespeople, and they're highly skilled in particular niche aspects of that.

            We have a lot of work to do. It's quite achievable, but it's certainly not something we want to start doing in a couple of years. We've been from the very beginning of this national enterprise focusing on skills development.

            The Naval Shipbuilding College successful tenderer will be announced very soon. Work is underway to deliver the Naval Shipbuilding College that will produce about 1000 plus graduates a year when it's in full operation. That's, of course, spread across Australia using all the talents available to us in a hub-and-spoke approach, whether it's the Launceston Maritime College right through to Curtin University or University of New South Wales, RMIT, and of course, the TAFE Colleges in South Australia and Western Australia and elsewhere.

            We have a plan. This year, we'll release a strategic plan for skills and workforce development. Which will add to the suite of the structures that we're putting around what is the largest investment in the Australian economy by the Australian government in its history. That goes with the defence White Paper, the Integrated Investment Plan, the Defence Industry Policy Statement, the Naval Shipbuilding Plan, the Export Strategy, the Defence Industrial Capability Plan, and then will be the skills and workforce strategic plan, which I think will be very welcome across the industry. We recognise that it is a challenge, but we do have a plan about how to get there, and working with all the state governments that can contribute to this is going to be a really important part of what we do.

Phil Tarrant: From what I understand, you've just celebrated 25 years in parliament just the other weekend.

Christopher P.:         I have. I have.

Phil Tarrant: Congratulations. It's a great tenure. I'm just quite interested on the back story for how you actually ended Minister of Defence Industry, how you fell into this portfolio, which you've had under your belt now for a couple years. You have a huge responsibility. That's $195 plus billion to spend over a decade.

Christopher P.:         More now.

Phil Tarrant: More now. How'd you end up on the defence portfolio?

Christopher P.:         Well, the truth is that this is the largest buildup of our military capability in our peacetime history. $200 billion over 10 years and growing every year as the next year of the forward estimates comes into the 10-year plan.

            Defence is a huge portfolio of its own, because we're engaged in operations and various important international responsibilities, and of course, looking after the Australian Defence Force and growing it. Malcolm Turnbull didn't want the enormous commitment that we're making to defence industry in Australia to be a second priority for the Department of Defence or for the ADF. We genuinely want to grow our Australian industry content.

            Therefore, we need a cabinet-level, senior government minister who's only job is focusing on that defence industry part of the national enterprise, and that has worked. For two years, we have been breaking records each year in the number of cabinet-level decisions, whether it's NSC, NSIC, cabinet itself to administer decisions. We've been breaking records on those decisions in both the two years that I've been the Minister for Defence Industry, because there is one person in the portfolio who's focused like a laser beam on that decision process. It has worked.

            Malcolm, I think, very presciently thought we should bring somebody into that job who would be energetic, enthusiastic, and passionate, as a South Australian, I love manufacturing. I believe very strongly in our advanced manufacturing base in technology, in the sophisticated jobs that are created through it, in using universities in the DSTG in research and collaborations between the research sector and scientific sector and industry.

            I see it as an enormous opportunity to grow our economy and also to provide the capability to the ADF that they need and require in an unsafe world. The synergies came together very well for me to do this job.

Phil Tarrant: As am MP, as a politician, you're obviously open to criticism that comes with the territory-

Christopher P.:         Sure.

Phil Tarrant: ... and you mention a couple of-

Christopher P.:         It's almost an hourly occurrence.

Phil Tarrant: It is. It is. You mentioned some great adjectives in terms of the requirements around what were needed in a Defence Industry Minister. I spent a lot of time in defence industry, and I'd say that by and large the industry would echo your sentiments around what's required to do it well, and that's energy, high tempo, connectivity, being intrinsically connected with what's happening with the industry right now, and how that translates into the needs of the government and the needs of our armed forces. I think the industry would give you a big tick on that regards.

            Obviously, open to criticism, and the decisions you make always going to have people that absolutely love them, and those that loathe them. One in particular only announced recently earlier this month, LAND 400 Phase 2 contentious. Obviously, the Army seemed very happy about the decision that's been made on the new Boxer CRV. Was that a tough call? Can you give us sort of any inside mail on how that played out?

Christopher P.:         Well, the good thing about that decision was that it was a very clear recommendation from the Army about what the capability was that they wanted, and that the Boxer fulfilled that capability. The AMV, which was the offering from BAE didn't fulfil the capability that the Army required. The AMV came a very clear second, and so it was a relatively easy decision. If we'd chosen the AMV, we would have been knowingly choosing a vehicle that had not won the tender, so that would have been an impossible decision to make.

            The truth is Rheinmetall, whether they were building in the Northern Territory, Lord Howe Island, Queensland, or wherever, they were going to win that tender once that recommendation was very clear from the defence force, and state considerations had nothing whatsoever to do with it. It was a decision based on capability, and that's exactly as it should be. If Rheinmetall had chosen Victoria to be its construction base, it would be based in Victoria.

            The problem with tenders is that somebody wins and somebody loses, and the people who don't win usually aren't very happy with the decision. But companies move on, BAE has moved on. They're a contender for the $35 billion Future Frigates project, and there will be the usual process of briefings and post-tender discussions with BAE about their offering, they will take lessons from that I guess, to the next time it may try and tender for the AMV for a combat reconnaissance vehicle for another country.

            But we're very happy with the choice of Rheinmetall. We think it will be a great success. The Army's very pleased with it too, and that's really the main thing. It will protect our soldiers. It will give us the lethality that we need, and the Australian industry content has gone from 5%, which was the initial offering to 55% in the acquisition phase. That's $280 million versus about $2.8 billion of Australian industry content. For the entire project, which is $15.7 billion, it's about a $10.2 billion Australian industry content, which is about 70%.

            From a defence industry point of view, it's a transformative project for the companies, and it'll be involved in that enormous project.

Phil Tarrant: You mentioned the SEA 5000 Future Frigates Programme. Three contenders there, so there's going to be two that aren't successful rather than one, but-

Christopher P.:         There'll be two unhappy people and one happy person.

Phil Tarrant: Yes, this is true, but obviously, the capability component was a lead consideration on LAND 400 Phase 2, and rightfully. Is that still going to be the same way within the SEA 5000 Programme? Is capability going to be central to the frigate that gets chosen?

Christopher P.:         Capability is always the number one priority. I often say that we will not keep the Australian Defence Force and the Department of Defence are on the same page of the government when it comes to growing our defence industry if capability becomes a second consideration to the capability of the defence force. Thus far, the defence force is perfectly delighted with the government's priorities. They are getting the capability that they need, and we're growing the Australian defence industry.

            But the moment that we choose an inferior platform, product, service, whatever it might be, because it's Australian, over a technology or capability that was better, that's an overseas supplier, defence will start to scratch their head and think, "This isn't the direction we need to be going in."

            Now, we're not doing that. We're getting to have our cake and eat it too, if you like. We're getting the capability that we need, but we're growing the Australian industry content. The buzz in the industry is, in many respects, explained by the fact that for years, people from the Department of Defence used to jump into the nearest stairwell to avoid people from the Australian industry, because they didn't have a mandate from a government to grow Australian industry.

            Now industry tells me, they're being chased down the corridor by people from Russell Hill saying we need to talk, because we need to find out what capability you have. If you haven't got what we need, we need to work out if we can build you up, so that you can provide it.

            That's, of course, what's in the Defence Industry Policy Statement. That statement is about providing the funds and the support to get Australian industry to the point where they can provide the capability as well as anybody in the world, if they don't already have it.

Phil Tarrant: That's quite a major culture shift that you've just explained there. When you reflect on the two years since the delivery of the Defence White Paper, it's where we are today and where we are moving forward. A dedicated Defence Industry Minister, I would imagine has a lot to play in terms of that scenario you talk about whereas Army, Navy, Air Force capability people within government chasing down SMEs to make sure that our guys and girls have the right kit, which is great. It's good for industry, and I think it's good for Australia.

            When you look at the agenda, the defence industry agenda, under you at the helm of that moving forward for the next two, five years, what are we going to see just delivering what we said within the White Paper, or is it going to be tweaked and changed over that time?

Christopher P.:         Well, the Integrated Investment Plan is a living document. It's not designed to be static and to be not responding to the needs of the Australian Defence Force. Some projects will be brought forward, other projects will move back. Some projects will be ready to go, some projects will need more time. I don't make any apology about that. If people in the media say that means the Integrated Investment Plan isn't working, in fact, it's the opposite. It means it is working.

            There is absolutely no diminution in spending in the goal to get to 2% of GDP. In fact, we'll get to 2% of GDP a year earlier than we promised, but the projects themselves will move around, and that's as it should be.

            For example, we have a newer focus on our anti-ballistic missile defence, and so we're ensuring that the contract that was won by Raytheon to provide the anti-ballistic defence missile shield for deployed forces, we're ensuring is on track, it's begun.

            We'll have to consider with the Future Frigates what their capabilities are beyond anti-submarine warfare. Not that we want to change the tender or the plan. They will be anti-submarine warfare vessels primarily, but we do need to think about what capabilities they have in terms of anti-ballistic missile defence. That's as it should be.

Phil Tarrant: You said an interesting position is the interface between government and defence industry, and it is a genuine partnership, and you speak about this at length. Now you've implemented a number of different things, including the CDIC and a mechanism for supporting innovation within defence under some of the funds.

            From your view though, every relationship has its challenges and has areas where it can approve. What do you think DoD and CASG can do better to engage industry, but also as a hard marker, what can industry do to make sure that they can really deliver the capabilities required?

Christopher P.:         I think the most critical thing in the relationship between Capability Acquisition and Sustainment Group and defence industry is a truthful relationship. The worst thing that could happen for defence industry is for claims to be made about what they can deliver, and then for them not to be able to deliver it. Because then the people in defence, and I am sure there are still people in defence, who would prefer to be a safe and good customer of overseas equipment manufacturers, will be able to say, "We told you so." Then we'll start losing that debate within defence.

            Right now, there's an enormous enthusiasm about what the government's trying to do in defence. But there are 18,000 public servants in the Department of Defence and about 50,000 uniformed people. I'm sure there are people within that who are still sceptical about the government's agenda. I try and convince them every day that it's achievable and working.

            The best way to make sure that the ambitions that Malcolm Turnbull and I have for defence industry are realised is for CASG and defence industry to make promises that they can deliver and then deliver them, and then we'll keep winning.

Phil Tarrant: One of the big objectives of your government is defence exports. We obviously have the Defence Export Strategy recently unveiled and just by reading a couple of numbers that you've used, I think the 12th biggest economy, we're the 12th biggest defence spender, we're the 5th biggest defence importer, and we're trying to reach a top 10 exporter. We're sitting around 19th or 20th at the moment, depending on who you listen to.

Christopher P.:         We've just moved into 19th.

Phil Tarrant: We've just moved into 19th. What needs to happen for us to actually be a true powerhouse in defence exporting?

Christopher P.:         Well, the first thing that has to happen is that government has to have an agenda around it, which we've never had before, which we now have. The Defence Export Strategy needs to have money behind it. We now have put money behind it, $80 million over the next four years.

            We've ramped up our approach to expos and trade shows and conferences. We have a grants programme to support small and medium enterprises to get themselves to those kinds of trade shows.

            We're now allowing the uniformed branch of the defence to actually sell our capabilities in terms of equipment, platforms, and services in a way that they've never been encouraged to do.

            We've empowered the Defence Attachés to make defence exports a part of their daily routine rather than an interest if they have it, quite apart from their strategic roles in the 70 missions in which they're represented around the world, more than 70 attachés.

            We've ramped up the Global Supply Chain Programme. Put more money into that to ensure that the primes, and the companies just below primes, become part of the Global Supply Chain Programme.

            We've brought together in the CDIC and in defence generally, all of those different parts that had an interest in exports apart from the export permit office, but all the others that have been involved in Team Defence Australia, we brought them together into one unit, so that they're all working together.

            Today, in fact, we released the Australian Military Sales Catalogue. Last year, it was 14 pages. This year, it's 94 pages. Every state and territory's now working as part of that. We've expanded it's remit dramatically. The companies have responded really well. And there were 20 companies that didn't make it into the catalogue that wanted to be in it, but we didn't feel that they were ready to be put in the catalogue. Next year, it'll be bigger again.

            I believe that we will increase our exports quite quickly. We now have a defence industry minister who is focused on exports, who travels to the countries where we have prospects. Last year, I was in Riyadh and Warsaw and Paris and London, and after Malaysia, this month in Singapore. I'm going back to those places again and again, whether it's Abu Dhabi or Washington or Ottawa to chase prospective export opportunities. We've never done that before. We couldn't do worse than we've done before, and I think we'll move quite quickly along the road.

            The 10-year goal, the top 10 exporters is a 10-year goal, not supposed to happen next month. We've already moved into 19th position, but that is based on the Stockholm Peace Research Institute, and I think that's a pretty flawed model actually, a pretty flawed measure. Part of the defence export strategy is to come up with our own measure, and then to apply it.

            Because for example, the Stockholm Peace Research Institute probably doesn't include Marand's vertical tails for the Joint Strike Fighter Programme, because they're not a stand-alone platform. They're a part of a much larger platform, and yet that's a billion dollars worth of exports on Marand's books. What it does include, I'm not exactly certain, but that's the only measure at the moment. I'm quite sure that we're going to keep moving along the road.

Phil Tarrant: What is the secret for Aussie businesses large and small to crack the global supply chain? Have we got the capabilities, or do we need to improve them in order for us to be better exporters, or we're just not selling ourselves well enough?

Christopher P.:         We've never had a government that supported our Aussie exporters. We have the capabilities in lots of areas. Marathon Targets, the remote weapon systems, the Bushmaster vehicles, Hawkei, the Nulka, the phased array radar, of course, we've been able to do it. We could do more.

            We have to always keep improving our capabilities, because it's a competitive market, but we also have to sell our own product. Sell our own book when we're travelling overseas. That's not something we've ever done before. We have a lot of work to do. It's very exciting. Australian businesses are very excited.

            I was the first minister in the defence portfolio to go to the G'Day USA Defence Conference, which was remarkable. I was advised at the time that it wasn't really important for me to go. I said, "But isn't it in Washington with all the people who might want to buy our products and services? Isn't the United States still spending 50% of the world's military expenditure is from the United States budget." I'm going again this year, but we've never had that consistent approach.

            We've always taken the view that if it's Australian it might be good, but it might not be as well. Whereas what we now need to do is say, "It's Australian. It's the best in the world, and we're going to sell it overseas, and we have the backing of the government to do so." That's a big difference.

Phil Tarrant: We've had a very quick snapshot-

Christopher P.:         Quick? It's been 25 minutes.

Phil Tarrant: It has, yeah.

Christopher P.:         Haven't you got a day job?

Phil Tarrant: 25 minutes, well, a very quick snapshot of what is a very wide portfolio that you do manage here. Obviously, a lot of the key programmes coming along, but also these longer term development programmes, funds, CDIC, et cetera.

            Final question, for those businesses out there, and obviously we're attracting a lot of new people into defence industry, whether it's for domestic opportunities or for export opportunities. For those organisations, which come into defence, and a lot of them listen to and read Defence Connect, they see the opportunity, but they often get fatigued by the often sometimes length of time it takes to actually get some action, get some contracts signed. We need to keep encouraging these businesses into defence and defence industry. I think it's absolutely critical. What would you say to them if they're wavering or second-guessing or questioning their decision to move in defence?

Christopher P.:         Well, we have tried to change that, for example, with the Defence Innovation Hub grants. Normally a government would have waited 12 months and announced all the grants at once and got a big bang in the media for a big announcement about defence innovation grants. We're doing it every month. So the business who are unsuccessful can get on and try and find backers for their ideas elsewhere, and businesses that are successful can get on with it. We've changed that culture immediately. That was an early decision.

            Look, these projects are big though. They are big. The scale of the decisions that we're making are very rarely in the millions. They're usually in the 10s of millions, 100s of millions and billions. Decisions won't be made quickly.

            What we've managed to do in the last two years is make them on schedule as promised. And the combat reconnaissance vehicle decision is five months early. Nobody's actually mentioned that, but it's actually five months early. When was the last time a big defence project worth $15.7 billion was almost half a year early? Doesn't happen.

            We are changing the culture. I would say to people in defence industry who are frustrated, they should travel overseas with me trying to sell Australian defence exports. It's a patience game. You have to go back again and again and again.

            The rewards are great if you win, and they're worth fighting for. But if you expect a quick decision and a quick win, you're not going to get anywhere. I'm only just starting to be recognised in Riyadh and Abu Dhabi as a regular visitor, but I've been to both places three times in two years. As every Australian businessman knows, hopping on a plane and flying anywhere in the world from Australia is a big effort.

            You need to keep ... It's a drip, drip, drip on the stone story in defence exports. It's the same across the whole industry. If you think you're going to get into defence industry make a quick buck, try something else.

Phil Tarrant: Well observed, I think. Mr. Pyne I really enjoyed the chat today. Thank you.

Christopher P.:         Thanks Phil. It's been good chatting to you.

Phil Tarrant: It's good. Let's keep engaged and connected, and we'll obviously keep reporting what you're doing, which is many things. I think we must get a press release a day from you guys so-

Christopher P.:         Good.

Phil Tarrant: ... there's lots happening. Maybe to check defenceconnect.com.au if you're not yet a subscribing to our daily morning market intelligence so you're the first to know what's happening in defence defenceconnect.com.au/subscribe. If you get your information from social media, just search Defence Connect, you'll find us. I will be back again next time. Until then, by-bye.