In this episode of the Defence Connect Podcast, Marles is in the studio to explain why a self-sustained, export-focused defence industry is critical to the Australian economy and how the government can best maximise the industry’s potential.
Tune in as he and host Phil Tarrant go in-depth on the shifting sands of the defence industry – from long-standing international relationships to manufacturing and procurement, and how the government can better engage with local SME talent to bring its national mission of self-sustainability to fruition.
Enjoy the podcast,
The Defence Connect team.
Listen to previous episodes of the Defence Connect podcast:
Episode 89: PODCAST: Potential powerplant for SEA 5000, Rob Madders, Rolls-Royce Australia Services
Episode 88: PODCAST: WA’s position in the defence supply chain, senator Linda Reynolds CSC
Episode 87: PODCAST: A proposed bid within AIR 7003, Warren Ludwig, General Atomics
Episode 86: PODCAST: Australian defence as a global player, Karen Stanton, HTA Group
Episode 85: PODCAST: Development within the underwater battlespace, Capt Tim Green RN
Episode 84: PODCAST: CIVSEC 2018 – A focus on future threats
Episode 83: PODCAST: Developing the roadmap for defence industry’s growth, Dr Sheridan Kearnan, Department of Defence
Episode 82: PODCAST: Traversing the breach between innovation and violation, Tony Bannister-Tyrrell, Coras Solutions
Episode 81: PODCAST: Showcasing amazing people doing incredible things – Patrick Kidd, CEO, Invictus Games Sydney
Episode 80: PODCAST: Eye in the sky, Keirin Joyce, LTCOL – SO1 UAS, Army UAS (Drone) Sub-Program Manager
Phil Tarrant: Oh, g’day everyone, it's Phil Tarrant here. I'm the host of the Defence Connect Podcast. Thanks for joining us today. Special guest today, someone who is from the other side of the political spectrum, in terms of our current sitting government. Richard Marles, who is the Shadow Defence Minister. Richard, how you going, mate? Thanks for joining us.
Richard Marles: I'm great, Phil. Thanks for having me.
Phil Tarrant: So, we write about this a lot, we talk about this a lot at Defence Connect. The shifting sands of defence industry. Today, I really want to pick your brain and get your take on it, the way you see the world. I know you've been championing, sort of, bipartisanship approach to defence moving forward. I know you work quite closely with Christopher Pyne -
Richard Marles: - I do.
Phil Tarrant: You guys have an interesting relationship that I like to watch off and on, on sky when you guys are there. But, he announced today some changes to the tender process, so this is all very relevant, about how we maximise the training industry involvement. What's your take on this?
Richard Marles: I think defence industry is obviously very important for our national economy. It's also important in strategic sense for our sovereign capability. Lide has championed that for a long time. Ultimately, the way we see the world is that, for a range of reasons, the conservatives have come around to that way of thinking as well. So we do now have a bipartisan position, really, about supporting a domestic defence industry, where there is as much Australian industry content associated with what is being procured by the Australian Defence Force, as possible. That's obviously a good thing.
What I hope the bipartisanship does now is, allows us all the freedom to perhaps think a little bit more deeply about this and make sure that defence industry going forward is sustainable. It's in this respect that I think there is a requirement to do some more thinking. Having Australian industry build what we are, procuring the Australian Defence Force is great, but when you look at the major defence industry companies around the world. Often what they do for their home defence force is central and may have been the beginning of their business, the really successful ones are explore oriented.
I think that's the thing now for us. How do we build an export-based Australian Defence industry? I think there's a question to be asked, do we have a defence industry? A long-term sustainable one, which doesn't have an export focus. I would suggest that it's absolutely critical that we get that. How do we make sure that we bring that about?
That's why, speaking with the Australian Strategic Policy Institute, recently, said that it feels to me like the decision around our defence industry is kind of a bit half pregnant at the moment. Great that we're building stuff for our own defence force, but are we making this the national mission that we need to in order to create a long-term, sustainable export-based defence industry in the future?
Phil Tarrant: I was actually going to talk to you about your half-pregnant point. How's that been taken, do you think by defence industry? And people within defence. So I'm talking about government, as well.
Richard Marles: Well, certainly in terms of defence industry companies that I speak to, they all accept the idea that being export focused is where we've got to go. The requirements of the Australian Defence Force, right now, are significant, we are going through a big bill. Particularly in naval ship building with the frigates, the OPVs, the Pacific Patrol Vessel's, and of course the submarines. But by its nature, doing work for just one defence force is going to be lumpy, there are going to be times when there's a lot of work and times when there isn't.
For example, we are dealing with the Valley of Death, really, in relation to ship building right now. Between the completion of the Hobart-Class Air Warfare destroyer, and whenever building ramps of for the OPVs and the future frigates going forward. That sort of Valley of Death is going to be a recurring feature unless we get our companies engaged in doing ship building for other parts of the world. It needs to be export focused.
You definitely get a sense from companies in this space, in Australia, that we need to have that focus. It's then a question of, really, seeing this as a national mission. I think then, there's a ... We need to be asking and answering this question: Why do we want a defence industry as distinct from any other industry in this country? What is it about this industry, such that we want to make it a national mission?
I don't think that is being articulated enough in the public discourse at the moment. Again, in that speech to Aspey, what I tried to put forward is that to me it is part of how Australia projects in the world. It's the idea that if you look American power, it is in part about aircraft carriers and marine bases, but it is also, because it's the home of Lockheed Martin and Northrop Grumman. I mean American Defence industry is part of the projection of American power. I think it can do the same for us. But we need to be doing that thinking, if we're going to make this the national mission, which is committed to by both political parties, but over the long term, as well. That's what you need to do, if we're actually going to see this built.
Phil Tarrant: What's your read on the tender process announcement that Christopher put out. Talked about SME-engagement and they want to champion SMEs in the space. All of the SMEs I speak to often lament about the challenges of entering the global supply chain.
Richard Marles: Yeah.
Phil Tarrant: But even before that, the challenges of dealing with Australian defence industry. So your connectivity with Australia's SME sector and the defence space.
Richard Marles: Yeah.
Phil Tarrant: Is there much hope there for them?
Richard Marles: Firstly, I hear the same complaint as I go around. Look, I think again, this is an area where I don't want to make political mileage out of this, it's more about trying to solve the problem. I think all too often from what we see in politics, and I understand, I'm not a political prude here, is that you'll see both parties throwing punches at each other whenever there's a complaint by anyone in the community made about any particular piece of policy. But given that we are basically in a bipartisan space, and given that elections are unlikely to be won or lost on this issue, we can give ourselves the space to drop our political weapons, so to speak, and just work through this as a problem.
I get that it's not, from the government perspective, governments are big animals. Dealing with small, medium enterprises doesn't come naturally. That's been the case across governments of all persuasions. I really think that we do need to be working, though, on ways in which we can better engage small and medium enterprises. Because a lot of the opportunities to become export based business actually lie in that sector. It is smaller companies with, perhaps, a piece of technology that's been developed in a certain way, which may well be world-leading. We need to be giving those companies the opportunity to participate. It may well be doing work for the Australian Defence Force, initially, which gives them the break they need to walk onto the global stage.
But also, you can take this to another level, as well. Not necessarily in the high-tech space, but just providing work to bases around Australia. There's a lot of ... In Darwin, for example, or Townsville, very much defence-focused towns, where there's a whole lot of companies there that could be providing all sorts of services to the Australian Defence Force. They don't necessarily need to be high tech, but there's the capability in those cities to do that.
I think ways in which we can engage local companies like that need to be explored, because certainly there is a sense that they miss out.
Phil Tarrant: The government's indicated considerable spending in the next decade around defence, the white paper, which I'm sure you're very familiar with, which we'll have quick chat about. But, at a local level, so you're local constituents down there in the great city of Geelong. Are they, number one, aware of the opportunities for them to build a business within the defence space? And what are you doing to, sort of, give them a leg up?
Richard Marles: I think there's a couple of things to say. That they're becoming more aware, and there's a story that you're seeing around Australia, which is far enough, of parts of Australia that have traditionally been involved in manufacturing, where that's been hollowed out in recent years. You've seen that across Victoria and South Australia, real examples of that. But Geelong is very much an example of that, as well. We've had both our Alcoa and Ford closed in their fracturing business within Geelong, having been in the case of Ford since the 1920s. Making cars in Geelong. And in the case of Alcoa they've been smelting aluminium for more than 50 years.
So big shocks, local shocks to the economy. In that context, when looking around for what else can we do with those sort of manufacturing skills, defence industry is a natural place to look. I think that is a large part of the South Australian story, as well. It's an important thing to be aware of. We do have a whole lot of talents within our community now, which can usefully be brought to bare in the defence industry space. It's a high-tech space, and that's exactly what we want to be doing within our manufacturing, more generally, climbing the technological ladder.
In combination with university, so in Geelong it's Deakin University. But you'll see university's engaged in South Australia and Victoria spaces, as well. I think there are real opportunities. Those regions need to become more focused. As to say, South Australia is clearly very focused and I think you're seeing a growing awareness for the potential for the defence industry for local economies in Victoria, as well, and Geelong is a part of that.
That said, there's a company, Chemring, in the northern part of Geelong, which makes flares for a number of aircraft's, including the Hercules. They're doing that for the JSF. Marand makes trolleys, I often think it's not the sexist part of the -
Phil Tarrant: It's pretty important, though.
Richard Marles: - when it comes to JSFs, when you see a Marand trolley, in the world of trolley's it's about the sexist trolley going around. It is very sophisticated piece of machinery. They're doing that work in Geelong, as well. They're really good examples of the way in which you can get into this space.
Phil Tarrant: Go into the White Paper, 2016 White Paper room. Can you talk me through the process of, you were obviously very aware of what was going to go into it during that process happening. But when you guys received your copy, what did you do with it? Did you ... Obviously digested it -
Richard Marles: Yes.
Phil Tarrant: - in the spirit of bipartisanship.
Richard Marles: Yeah.
Phil Tarrant: What really rose red flags for you, and what did you think, you know what, that's pretty good?
Richard Marles: The interesting thing for me, as a learning experience, I guess, is the White Paper came out in the first part of last year. I became the Shadow Defence Minister in July, last year. So it was one of the very first things I read, and having done that, also then went through a process of trying to look at past White Papers to get a sense of the space. A lot of people recommended that I read 1987 White Paper, which came out of the Dib Review. Really was the forerunner of White Papers since.
There is a lot in common between what you read in the 1987 White Paper and in the 2016 White Paper. That's the first thing that really, really strikes you. So there are some very long running themes, which have had support across governments of both persuasions over that period of time. I actually think that, that does give one a sense of comfort, that this truly is an area of bipartisanship.
Red flags … The White Paper talks about our role in the region as it did back in 1987, and I think it does so in a significant way. I have long been passionate about making sure that Australia's role in the Pacific, particularly, is something that is talked about, becomes more a feature of our public discourse. I think there are real defence implications for us there. I mean if you're looking at our national security framework, the immediate region, Papua New Guinea and the Pacific is a critical part of that. It's important that we're talking more about that than, perhaps, we do.
Phil Tarrant: And what's your take on all this noise. Let's call it noise, about company investment to defence spending turning into contracts, because I speak to a lot of people and they always say, "Yep, all very good." But I'd like to see some signatures on paper and getting down to business, and there doesn't seem too much of that to be coming at the moment. When do you think this ground swell is really going to pick up, and people are going to start seeing work coming out of it?
Richard Marles: I can understand the frustration about how things have been slow. We are critical of the way in which the defence industry space was run by government, particularly this government, particularly in its first term. I do hope that we see coming to fruition as quickly as possible a number of these major projects. There are a lot of jobs that are on the line in respect to that, but it goes deeper in terms of what I described earlier about the need to make sure that we are properly leveraging this opportunity. Which in many respects is a once in a generation opportunity, particularly, in the ship building space, to really create an Australian export-based ship building industry.
This needs to happen as quickly as possible, I obviously get that it doesn't happen overnight, though, and it needs to be done right. Part of making sure that, for example, there's as much Australian industry content involved in each of these builds, is making sure that the design work and that the design around the procurement work – the supply-chain, I mean – is done as thoroughly as possible, as early as possible.
Phil Tarrant: There's a lot of scuttle about on that because when you look at DCNS, or now, Naval Group. Early indications, sort of 90 per cent of industry figure of Australian local content in that. No one's really pinned down on that number, no one's yet too sure about what's happening there.
Richard Marles: Well it feels to me like, having made that statement previously, people are now walking away from that 90 per cent figure. Again, yeah, I'm concerned about that as well. I think we obviously want as much of an Australian build as possible in the subs. It by some measures is the single biggest procurement in Australian history. It's really critical that, that occur. A Valley of Death has been created by some key decisions. For example, the supply ships being sent off shore to be built.
Phil Tarrant: Mm-hmm.
Richard Marles: By the OPVs, we still don't have a preferred tender in there. It would've been our policy going into 2013 to try to speed that up to try and bridge the Valley of Death that we're really experiencing right now. But it is important that the early work is done thoroughly, first, so that there is as much Australian industry content as possible in each of those projects and the subs is the biggest of them all.
Phil Tarrant: It is. Tony Abbott, as I'm sure you're aware, coming out today talking about getting Nuclear subs back.
Richard Marles: Yeah.
Phil Tarrant: You know ... What's your thoughts on that?
Richard Marles: What's my reaction? Yeah, look I've seen the speech. I suppose ... My reaction really is when we're talking about subs, we feel that we have dragged the government to place where they are now committed to building 12 subs. We were the first party to make that clear, that we need 12 submarines in terms of the future procurement. We like we've been dragging the government to a place where those submarines are now being built, committed to being built in Australia and built in South Australia.
Our focus really is on ensuring that there bipartisanship around that. The focus here is about the existing programme in relation to the submarine build happening in Australia, 12 subs, and that, that be done right, and done as quickly as possible. I think it is important that there is some bipartisanship around that. I mean the issue of nuclear ... Given that we don't have a civil nuclear industry in Australia -
Phil Tarrant: It's a big question.
Richard Marles: - right now. I mean obviously a huge question.
Phil Tarrant: Yeah.
Richard Marles: It's probably his right there.
Phil Tarrant: Yeah. And your take on this announcement of the offshore patrol vessel build. You picked up this beforehand, how big a concern is it that the current government hasn't really announced who's going to be building these things?
Richard Marles: It's a concern and we're experiencing it right now. We've had thousands of people in the ship building industry lose their jobs over the last few years because of the Valley of Death becoming a reality. Now, the Valley of Death was something that could be foreseen, and we did. It essentially arose through how you were going to bridge the gap between the completion of the fit out of the LHDs and the completion of the Air Warfare Destroyers and then the commencement of the OPVs.
Our view was, the way in which you could bridge that gap would be to have the supply ships built in Australia and to bring the OPVs forward. Well the supply ships are now being built in Spain, as people know. We're still at a point where we don't have a preferred tender for the OPVs. So it is a concern. We do need to be seeing that happen as quickly as possible. It's not just a concern for those who lose their jobs and their families, but obviously that it affects them directly. But from an Australian capability point of view, every time somebody with those skills leaves an Australian shipyard, is another person or another body of retraining that we're going to have to go through when we staff up again in the future for the OPVs, the future frigates, the Pacific Patrol Boats, and ultimately the subs. To not have this continuous ship build right now, is costing us dearly. And it is, it's an enormous concern.
Phil Tarrant: What's your thoughts on the set up of the current government. So we have two ministers, essentially. Defence industry and defence, would you guys do the same in case?
Richard Marles: No.
Phil Tarrant: Nope?
Richard Marles: Look I think everyone in the industry and the defence community know this is a political fix to deal with personnel issues that the government has within its own ranks. It doesn't make sense in terms of how you structure this portfolio. We would be approaching this in a much more traditional way, having a single defence minister.
Phil Tarrant: The read I get from defence industry, they obviously, everyone's got different opinions, but I heard Christopher Pyne speak recently at a defence industry conference. He stood up and he spoke very confidently about the government's role and the way he sees what he's doing. To be fair, a lot of the industry that I spoke with afterwards were quite optimistic about that leadership. And it was impressive, the guy is doing a pretty good job.
But do you think it's making it harder for defence businesses to actually know who to deal with in order to navigate the complicated world of, not only politics, but government itself. Because -
Richard Marles: Because there are two, it's two.
Phil Tarrant: Yeah.
Richard Marles: Yeah, no question. I get that all the time. Which is why it doesn't make sense exactly what the division of responsibility is, doesn't make sense. It took a long time to actually see that division of responsibility be spelt out in the government documentation. There's an obvious cross over. Defence industry is the other side of the coin on the fence. Our view is there needs to be one person who has strategic oversight of that space, which is how it's been up until last year. That's what would happen if Labour is elected to government in the next election.
Phil Tarrant: Perfect. You did some travelling earlier this year, I think you were out in Iraq and Afghanistan?
Richard Marles: Yeah.
Phil Tarrant: Visiting troops, which is great. What we talk about here is defence industry, but it's all about equipping our war fighters with equipment they need to serve the needs of the government. Do you think there's a lot of connectivity? You're talking with the guys and girls with the boots on the ground. Do you think they understand or appreciate the important role of the defence industry, in terms of giving them an advantage?
Richard Marles: Yeah, look, that's a really good question there. I think the way in which the military personnel themselves perceive defence industry, not unreasonably, is about insuring that they get the best possible equipment in order for them to do their job and to keep them as safe as possible while they do it. That does need to be the first concern of our procurement processes, that we are procuring the very best equipment. To make sure that our defence force can do the job that we expect of it and to do it in a way, which is completely safe.
I do feel though, that there is deeper role that defence industry can play and it goes to the question of why we want to have a defence industry. It's this discussion I was having earlier, which actually compliments the work of the defence force. Is about assisting the projection of Australia within the world. Seeing Australia being taken seriously, which is in part what our defence force is about. I think that role of defence industry needs to be, firstly, better articulated by government. But I think there is an opportunity for that to be, having been articulated to try and give that message to the military itself.
Because without it, and without that greater mission around a defence industry, I fear the sustainability of it in the long-term. Jobs matter, they absolutely matter, but it needs to be more than that, and that has to be articulated.
Phil Tarrant: We caught up with Greg Combet recently, who's the advocate for Victoria Defence Industry. He spoke, and he's spoken about it beforehand, how the current defence procurement process probably doesn't work as well as what it could do. What would you guys do if you were in the seat?
Richard Marles: Well Greg has significant experience in relation this. I think we'd want to have a good look at this. I think the first principles review, which saw a change in the way the procurement process occurred, has been an important document. To be fair I think it is an achievement of this government, and it's one that we fundamentally support. Making sure that there is an end to an engagement, in terms of the procurement, but also the sustainment side of whatever gear is being purchased, is important.
I think though, where there has been a disconnect is, on the one hand we've seen that. But on the other we've actually seen significant cuts to the public service of those who would be engaged in the procurement process. That is an issue. We've got to make sure that we've got the people on the ground who can actually do the work needed to be done, to make sure that we are through the procurement process in the way that we should. That we are smart buy, that we're getting value for money, and indeed that we are seeing the promotion of Australian industry.
You can't mouth those words on the one hand and then cut the department of defence catch on the other and see them not have the people who have the ability to make sure that all that happens. I think that issue needs to be resolved if we're going to see procurement happen at its absolute best.
Phil Tarrant: And what's your thoughts on the 457 Visa changes? So with the ... One of the CO of prime this week, and we had a quick discussion around how it might hamper their ability to get the right people in Australia, working hard to deliver on our defence programme. Do you think it's going to impact it too much? It's a tough one.
Richard Marles: I would be surprised if it did. This is obviously a difficult and contentious area. I mean we have been advocating for changes to the 457 programme, as well, to make sure that as a program it's confined to doing what it's intended to do, and that is provide, or deal with skills gaps in the Australian labour market. But I would be sceptical of an argument, which said that what's happened now is going to adversely affect the Australian defence industry.
Phil Tarrant: Fair enough. What's your thoughts on, obviously we got the mile this week that LHD HMAS Canberra and Adelaide, they appear to be back at sea.
Richard Marles: On the mend.
Phil Tarrant: Yes. You said beforehand that even at your level of government you guys weren't too sure of what's going on, or what the problems were and who was to blame. You know, warranties...
Richard Marles: Yeah. Look, I think again, this is a good example of how we're trying to go about what we're doing in opposition now. Not going the low road and seeking to make as much political mileage out of this as possible. And obviously there'd be fertile ground if you wanted to walk down that path. But really trying to look at this in a sensible and real way, where we're holding the government to account, but doing so in a way, which understands what is actually the dilemmas facing government. Developing a world-class amphibious capability has been a bipartisan effort, in this country for more than a decade.
The LHDs are central to that. We support the purchase of the LHDs. We think they're a great piece of kit. It is really important that they are up and running as soon as possible, to their full capability. That's the only thing that we want to see. It's disappointing that both vessels are not going to be able to participate Talisman Sabre, but that said I'm glad the Canberra will be able to participate in Talisman Sabre. I think there was a moment there where we weren't sure whether either would participate. Talisman Sabre is a really critical exercise in terms of gaining the proper certification of the LHDs. It's not ... The ultimate timetable here was that they wouldn't get their full certification until the end of the year. I hope that can still be met. There's been an issue in respect to the engine, I think there was a desire to try and get on top of that as quickly as possible. That makes sense to us.
I think the more you can get transparency around these issues, the better. This is a government, which hasn't had a particularly good record in relation to transparency. Ours is not a name to try and gratuitously punch the government on the nose, but it is important that the government is accountable to the Australian public, in respect of what is the two biggest ships in the Australian fleet. We just hope, now that everything possible is done to ensure that those vessels are up and running, getting their full certification on time and playing the part that both parties in this country want to see them play within our defence force.
Phil Tarrant: You think there will be any sort of consequence Nevantis’ bid for SID 5000 because of the...
Richard Marles: Look, I'm probably not in a position to answer that. But these things are complex. What it's doing in relation to that bid is really, a separate issue. I mean it's important that we get the best possible bid in respect of it. I think we need to make sure that the LHDs are up and running as quickly as possible. I suspect that everything is being done to achieve that. I do think the government could do a much better job in being transparent in the way it communicates its issues around this. The Australian people do have a right to know how these vessels are going, with a serious amount of money.
The other problem here is when you get cute about this and you don't put all your cards on the table, and you don't be upfront with the Australian people about what's going on. Often you breed scepticism and questions, which may not be justified. I mean, the best way to get people a clear sense of what you're doing, of engaging in your best efforts, is actually to open up and allow that to be seen. I think the government could do more of that.
Phil Tarrant: That's good. I just want to finish on this point. I know you've been very supportive of building our relationship with China.
Richard Marles: Mm-hmm.
Phil Tarrant: As a fundamental key to championing Australia economic prosperity moving forward. What's your thoughts on defence's decision to terminate the relationship with the data centre global switch, which sort of, 20/20, I mean...
Richard Marles: Look I am, I can understand that in the context of the recent concerns they've had. I think national security issues are going to be something, which is front and centre, in terms of a range of these decisions that are made. So I understand it. We need to proceed cautiously with these sort of decisions. In a broader sense, our relationship with China is important, we've been really beneficiaries of that economic relationship over a long period of time. I'm a huge supporter of the Australian alliance with the US, and people know me in relation to that. I probably define on end of the spectrum, the positive end of the spectrum within our party about support for the American alliance.
But I also think that developing a deeper political relationship, and that may well involve more defence exercises, for example, with China, is really important going forward. It's a country within our region, that's growing. Its peaceful growth within a rules-based order is in our interests. It's one of the most critical relationships that we have.
Phil Tarrant: That's good. Richard, I really enjoyed the chat. Have to keep engaged, keep connected. Let us know what you're up to, if you...
Richard Marles: Yeah.
Phil Tarrant: Just to conclude, if you one message for Australia’s defence industry what would it me?
Richard Marles: Well, it's export. Is I recon, the one message. I mean, how do we leverage the really significant procurement that's going on at the moment in way, which now enables our country to build a sustainable export based defence industry, in the future. I recon that's the opportunity at hand, and that's the opportunity that we have to take.
Phil Tarrant: That's fair. We speak about that, a lot. Thanks for coming in.
Richard Marles: It's a pleasure, thanks for having me.
Phil Tarrant: That's great. Remember to check out Defense.com today. Daily breaking news marking intelligence around the defence industry. Join the rest of the defence industry is listening to it and connecting to it. You follow us on all social stuff, Facebook, Twitter, LinkedIn. You could follow me if you like, on Twitter, @PhillipTarrant. You follow Richard at, what's your Twitter handle?
Richard Marles: My Twitter handle is, I think, @RichardMarlesMP. If you go and search Richard Marles you'll find me.
Phil Tarrant: You can track it down, yeah. I know you're pretty active so…
Richard Marles: I am, I am active.
Phil Tarrant: I watch what you're doing so, it's good. We'll be back again next week. Thanks for tuning in, we'll see you then. Bye-bye.