That presented some challenges particularly in boosting defence exports, Dr Sheridan Kearnan, First Assistant Secretary for Defence Industry Policy within the Department of Defence, told Defence Connect.
Following the launch of the new Defence Industrial Capability Plan, Dr Kearnan said there was a lot of domestic engagement between Defence and companies, which ranged from the primes, such as Boeing, Lockheed Martin, Thales and BAE Systems, right down to small "Mom and Pop's Garage activities".
"The thing that has really struck me is … the vast proportion of the Australian defence industry is actually in the small and medium enterprises. That provides an interesting challenge for us, particularly in terms of the export options that we're trying to pursue," she said.
"It's easy to get big defence exports if you're just exporting major platforms. For us a lot of it will be trying to help support these small industries to get into the global supply chains and those sort of things.
"I'm working closely with primes and that sort of space, and to try and get them to diversify as much as possible."
Dr Kearnan said ideally you didn’t want an industry dependent solely on Defence for work.
It should be much more diversified to increase resilience.
"What we want is strong defence industry that will be there when we need it, which is what a lot of the sovereign industrial capabilities are about," she said.
The new Defence Industry Capability Plan, launched in late April, sets a range of priority industry capabilities, such as continuous shipbuilding and Collins submarine support and maintenance.
Launching the plan, Defence Industry Minister Christopher Pyne said that to be considered an Australian defence company required more than an ABN (Australian Business Number) and a local shopfront.
"We want to see Australian leadership, an Australian board and an Australian workforce value-adding right here at home," Minister Pyne said.
Dr Kearnan said that was a clear message from the government, though it was more directed towards the larger companies.
Companies need to possess an Australian-based industrial capability, so this is more about the bigger companies.
She said with the government set to spend $200 billion on new defence capability, there was a lot of interest and excitement from companies.
"I do actually think that there will be a lot of interest in big companies coming into Australia and setting themselves up here," Dr Kearnan said.
"We are a pretty stable economy, very structured. You know the environment that you're coming into to operate but we also are geographically well positioned in terms of our market access into the Asia-Pacific region, which is one of the growing defence markets."
For small Australian companies, there were multiple ways to engage with the Department of Defence.
For newcomers, approaching the Centre for Defence Industry Capability within the Department of Industry was probably key. For other SMEs already playing in this space, there were a multitude of different opportunities that could be pursued.
Dr Kearnan said the development of defence industry policy remained a journey.
"We will be reviewing this down the track," she said.
"It will evolve and part of that is because also the nature of the world that we live in.
"Technology is changing extremely fast. It could be that in this age we live in that it could be very soon that we consider some other area, particularly a very technological area that we want to incorporate into the sovereign industrial capabilities."