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Treasurer Josh Frydenberg has handed down the long anticipated federal budget, as the government pivots the economic narrative with eyes firmly set on a long-term plan emphasising resilience and national security in the post-COVID era.
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By now the true economic impact of COVID-19 and a disastrous bushfire season have become apparent – with a devastating impact upon the nation's long-term balance sheet, economic growth and development, it is safe to say that this budget, Treasurer Josh Frydenberg's second, has big shoes to fill.
In the pre-budget campaigning, the Treasurer reassured the public: "I will lay out our economic recovery plan to rebuild the Australian economy and secure Australia's future. Our plan will create jobs. This is all about jobs. It's all about helping those who are out of a job get into a job. It's all about helping those that are in work, stay in work. Our plan will create opportunity.
"Our plan will drive investment. Our plan will grow the economy and guarantee the essential services Australian's rely on. Our plan will see Australia a stronger nation."
While Prime Minister Scott Morrison has already announced a record $270 billion in funding for Defence over the next decade as part of the 2020 Defence Strategic Update and 2020 Force Structure Plan which are expected to build on the success of the 2016 Defence White Paper and the transformational Sovereign Industry Capability Plan.
Indeed, the Prime Minister's statement in early July prepared the nation, Defence and defence industry for the budget, with the Prime Minister stating, "This simple truth is this: even as we stare down the COVID pandemic at home, we need to also prepare for a post-COVID world that is poorer, that is more dangerous, and that is more disorderly.
"We have been a favoured isle, with many natural advantages for many decades, but we have not seen the conflation of global, economic and strategic uncertainty now being experienced here in Australia in our region since the existential threat we faced when the global and regional order collapsed in the 1930s and 1940s.
"That is a sobering thought, and it's something I have reflected on quite a lot lately, as we've considered the dire economic circumstances we face. That period of the 1930s has been something I have been revisiting on a very regular basis, and when you connect both the economic challenges and the global uncertainty, it can be very haunting.
"But not overwhelming. It requires a response."
Both the Prime Minister and Treasurer intend for this budget to be such a response, with the nation's defence force, supporting defence industry and more broadly, the national security and resilience apparatus to be strengthened as a means of supporting long-term economic growth, development and resilience for the post-COVID era.
All systems go for Defence Strategic Update and Force Structure Plan
The government has remained committed to the 2020 Defence Strategic Update and 2020 Force Structure Plan spending, with the joint media release from Defence Minister Linda Reynolds and Defence Industry Minister Melissa Price stating, "The 2020 Defence Strategic Update and 2020 Force Structure Plan is a 10-year funding model with a 20-year outlook and continues to provide Defence and defence industry with the planning certainty required to support the ongoing development and delivery of critical Defence capability and Australian jobs.
"This 10-year model provides Defence, including the Australian Signals Directorate, with funding of $575 billion over the decade to 2029-30. The Morrison government’s budget commitments position Defence to implement the 2020 Force Structure Plan and address our increasing strategic competition, now and into the future."
Building on this, the joint release explained, "This includes investing in more lethal and long-range capabilities to hold adversary forces and infrastructure at risk, further from Australia, including longer-range strike weapons, offensive cyber capabilities and area denial capabilities.
"We will also invest in capabilities to give Australia better awareness of our region and to support regional engagement, while also increasing our air and sea lift capability to ensure we can rapidly respond to events across our region.
"More broadly, through this investment we are ensuring Defence and Australia has more durable supply chains, while further strengthening Australia’s sovereign defence industry to create more high‑tech Australian jobs and enhance the ADF’s self‑reliance."
Modern Manufacturing Initiative to 're-shore' manufacturing
The government has outlined further details for its recently announced $1.3 billion 'Modern Manufacturing Initiative' (MMI) plan designed not only to reignite the fires of Australia's long-neglected industrial and manufacturing base, but expanding on areas of natural competitive advantage driven by innovation and open up global markets for Australian export growth.
The Treasurer explained, "Our $1.3 billion Modern Manufacturing plan will target six national manufacturing priorities:
- Food and beverage manufacturing
- Resources technology and critical minerals processing
- Medical products
- Recycling and clean energy
- Defence industry, and
- Space industry.
"This plan is built on the JobMaker platform of enabling our manufacturing businesses to be globally competitive through cheaper and more reliable energy. Better skills and training. Lower taxes. Less red tape and more flexible workplaces.
"Mr Speaker, research and development, the adoption of digital technology, and affordable and reliable energy will be critical to Australia’s future economic prosperity.
"In this budget, we are providing $2 billion in additional research and development incentives – removing the cap on refunds, lifting the rate and rewarding those businesses that invest the most."
The Treasurer's statements were echoed by CSIRO chief executive Dr Larry Marshall: "Just as science and technology have been guiding our health and emergency response, so too will they drive our economic response and recovery from this pandemic."
These statements were reinforced by CSIRO Futures lead economist Dr Katherine Wynn, who explained that by acting now, Australian industries could increase productivity and cost efficiencies as well as create additional revenue from products, services and markets over the next few years.
Dr Wynn added, "Energy-efficient technologies is one immediate way to reduce energy costs, emissions and demand on the grid while creating local jobs, and we see many opportunities for increased productivity, such as energy-efficient appliances in buildings and electric vehicles in transport that use mature technologies that are readily adoptable today.
"The health sector has always been an essential part of Australia's economy and its importance has understandably been further emphasised during the pandemic.
"We also see potential for more efficient healthcare delivery through point-of-care diagnostics supported by bioinformatics and high-performance computing. The manufacturing sector could maximise its local manufacturing capabilities, creating jobs and adding value to Australia’s growth sectors, particularly in pharmaceuticals, food and beverage manufacturing, mineral resource processing as well as in space and defence."
Expanding on the Treasurer's comments, ministers Reynolds and Price expanded on the government's commitment to boosting Australia's defence industrial capabilities, stating, "The Morrison government is strengthening the Australian Industry Capability (AIC) Program to help maximise opportunities for Australian business in these projects.
"Investment in critical infrastructure, facilities, wharves and ports will continue with around $30 billion being invested over the decade.
"Local industry involvement in the delivery of these projects will be maximised through the Morrison government’s Local Industry Capability Plan initiative. This ensures that local suppliers, contractors and tradies have the opportunity to secure more of this work, creating more jobs for local communities."
Additionally, ministers Reynolds and Price gave additional detail to the government's expanded plans to support the growth of the nation's defence industry as a fundamental driver of economic growth and development, stating, "Supporting Australia’s defence industry is crucial to our economic recovery and the creation of more jobs. We have implemented a $1 billion investment package aimed at boosting Australia’s defence industry and supporting thousands of jobs across the country.
"This includes increased funding of over $110 million for Defence innovation, industry grants, skilling and micro-credentialing, and cyber training for defence industry.
"The Morrison government recently launched the Skilling Australia’s Defence Industry (SADI) Grants program, which will deliver $39 million over the next three years to support a skilled workforce in the defence industry sector.
"In addition to these grant initiatives, the government is announcing a further $4 million to establish the Joint Strike Fighter Industry Support Program, delivering more opportunities for Australian industry participation. This builds on the success of the New Air Combat Capability Industry Support Program, which has delivered 46 grants to 25 Australian companies, worth $21.7 million.
"Already we have fast-tracked a range of capability, infrastructure, skilling and workforce initiatives over the next two years, including a $300 million national estates works program focusing on regional areas, and $190 million on infrastructure projects in the Northern Territory.
"Around 4,000 Australian jobs will be supported over the 2020-21 and 2021-22 financial years through the delivery of this economic package. This reaffirms our commitment to further strengthening the defence industrial base to ensure that it is robust, resilient and internationally competitive.
"The measures will continue to support and grow the 70,000-strong workforce in defence industry, supply chains, and down-stream suppliers who are benefiting from our investment in defence."
Cyber, intelligence and law enforcement winners
The growing prevalence of cyber warfare and attacks against the nation's government, business and private infrastructure, Treasurer Frydenberg announced a major investment into the nation's cybersecurity and warfare capabilities, stating:
"Additional funding in this budget will see a total of $1.7 billion invested in our cyber-security plan to keep Australians safe and secure online.
This is expected to be supported by "a further $450 million is provided for our law enforcement and intelligence agencies to keep Australians safe from foreign and domestic threats".
The ministers explained, "Malicious cyber activity against Australia is increasing in frequency, scale and sophistication.
"This government is making the nation’s largest-ever investment in cyber security through our $1.7 billion 2020 Cyber Security Strategy, which includes $1.4 billion over the next decade to enhance the cyber security capabilities and assistance provided to Australians through the Australian Signals Directorate and the Australian Cyber Security Centre.
"This significant investment, known as the Cyber Enhanced Situational Awareness and Response (CESAR) package, will mean that we can identify more cyber threats, disrupt more foreign cyber criminals, build more partnerships with industry and government and protect more Australians.
"The CESAR package has been designed to boost protection and cyber resilience for all Australians, from individuals and small businesses through to the providers of critical services. It includes a $470 million investment to expand our cybersecurity workforce, with the creation of over 500 new Australian jobs within ASD.
"The package will put our nation on the front foot in combating cyber threats and our investment in a cyber security workforce will help ensure we have the people we need to meet future cyber challenges."
Don't forget to register your interest for the free live stream for the inaugural Defence Connect Budget Lunch to be held in Canberra on Tuesday, 13 October here.
Stephen Kuper
Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.
