In Defence of Australian Business

The Australian defence sector is a diverse community of more than 25,000 people – with more than half of those employed locally by global defence companies and a further 3000 as subcontractors.

While our military operatives defend our borders and keep the peace in unstable parts of the world, our homebased defence sector makes a substantial contribution to the Australian economy.

Recognising its importance,  the Turnbull government has announced $195 billion in defence acquisitions.

In Victoria alone, the defence sector contributes up to $8 billion to the state’s economy. The industry comprises more than 300 businesses that directly employ up to7000 people who make equipment and provide services for defence activities.

One person who knows a thing or two about defence and its value to the economy is Greg Combet, the former Minister for Defence Personnel, Materiel and Science in the Rudd and Gillard governments, has a deep understanding of defence and its value to the economy.

Mr Combet is nine months into a 12 month contract as the defence industry advocate for the Victorian government. His role is to advocate on behalf of  Victoria’s defence industry – nationally and internationally – stimulating investment, boosting jobs, and helping to build the brand.

“When I commenced my role, we identified a number of priorities, the first was to focus on securing Land 400,” he said.

LAND 400 is a $14 to 20 billion project designed to provide the Australian Defence Force (ADF) with world class armoured fighting capability.

Identified in the  Department of Defence’s 2016 Integrated Investment Program, Land 400 Phase 2 of the project will deliver 225 Combat Reconnaissance Vehicles, with Phases 3 and 4 delivering Infantry Fighting Vehicles and training systems respectively. Companies tendering for Land 400 Phase 2 have been instructed to select their own production sites, leading to a competition between state governments in an attempt to attract investment and jobs. Mr Combet has been steering the Victorian government strategy.

Central to this strategy is a need to strengthen and diversify Victoria’s economy, particularly in light of the closure of auto manufacturers and energy suppliers.

The defence industry is working to fill some of the gaps left by these companies.

“When you think about the auto industry, Toyota, Holden and Ford, they have been big contributors to the Victorian economy over many years. However, their production volumes in Australia were too low to achieve success in a highly competitive global marketplace,” Mr Combet said.

“The defence sector on the other hand is less vulnerable to global competition. This is an industry more than any other that depends on government decisions and tax payers money. National security considerations come into play and that means that the defence industry is one that is more aligned with public policy as opposed to global market movements. In other words, the defence industry enjoys a level of economic protection.

“This is why defence projects attract the interest of state governments. In Victoria, we are especially keen to secure Land 400 to help offset the economic impact of the closure of the Toyota, Holden and Ford plants. In fact, with its long history of automotive and military vehicle manufacturing capability, we think that Victoria is a natural fit for Land 400.”

Various regions in Victoria will be hard hit by the closure of the auto industry, including Geelong and the north of Melbourne around the Ford Broadmeadows plant. The Latrobe Valley in Victoria also has its eye on the potential of the defence industry as well, after the closure of the Hazelwood power station.

Mr Combet said the defence industry supply chain is one of the state’s biggest strengths.

“Victoria has a significant defence industry supply chain that is well organised and that has great manufacturing capability. We have got to leverage this strength to help meet the challenges in some of those regions in Victoria that have been hardest hit by industry transition.”

While visiting the Latrobe Valley, Mr Combet has met with businesses, Federation University Australia, Latrobe City Council and the head of Defence Materials Technology Centre, Mark Hodge, to shed light on what it takes for a region to become a key player in supplying defence contracts.

“I was in the Valley for two reasons; one, to get a better feel for the engineering capacity that a number of firms in the area have and secondly; to see if there’s a pathway for some of the local firms into defence industry supply chains,” Mr Combet said.

Infrastructure is an important priority for Mr Combet and the Victorian government. Accordingly, the government purchased motoring giant General Motors Holden’s Fishermans Bend plant with the aim of transforming it into an innovation and employment hub.

The vision for the site is to create Australia’s new home for design, engineering and technology to attract leaders in the areas of aerospace, defence, education, marine design and automotive design.

Mr Combet says it makes sense for the defence industry to consider locating to this new hub because it is close  to tremendous resources – such as research groups and higher learning institutions whose expertise can be leveraged.

One of Mr Combet’s main tasks is to nurture these relationships.

“A really outstanding feature of this state is the university and research sector. We have world leading universities, and key scientific and research organisations like the Defence Science Technology Group and the CSIRO. These are tremendous resources that can drive innovation in industry and ultimately support the capability of the Australian Defence Force.

“We interface with this sector a great deal. Melbourne and Monash universities convened meetings of universities nationally to see how best to contribute to Australia’s next generation submarine program and next generation frigates. These types of collaborations complement a pretty compelling case we have put forward to locate an Australian Maritime Innovation Centre in Melbourne to support the Australian government’s massive naval shipbuilding plan.”

These relationships are expected to filter down to small business suppliers which will further strengthen the Victorian economy. Through these major defence programs, the Victorian government can help SMEs innovate, build relationships with their primes and secure contracts. This will lead to work, finance and access to large global corporations they can work with in development of technologies.

“SMEs help themselves by aligning themselves with primes who require help in building military vehicles, and even digital defence technologies so they can benefit from large scale contracts coming along,” Mr Combet said

“And these types of opportunities will continue to grow. In the next decade the level of defence procurement will be massive. Military vehicle acquisitions alone will be in the vicinity of $15 to $22 billion which logically SMEs should be well- placed to procure a good deal of work from.”

Not only is Mr Combet an advocate for the Defence industry, he is also an campaigner for co- operation between State, Territory and Federal governments.

“While Australia needs to have important defence alignments with countries such as the US, we also need to have our own defence industry capability,” Mr Combet said.

“When Australia chooses a prime contractor on major acquisitions, that is a national security relationship that will last for decades. That contractor has a need to develop its capability within Australia.”

“A cooperative approach between states, territories, defence industry and the Australian government will help to build the industry in Australia so that large and small companies alike can benefit. This approach also services the economy,” he said

By advocating for small business and the role it can play in building Australia’s defence capabilities, Mr Combet is bringing brand awareness to the Victorian  defence industry. To support this, the Victorian government has just launched a brand campaign promoting defence industry capability and to help secure future major defence contracts.

The campaign, Defence Excellence – Mission Possible, will appear in industry publications and defence supplements in major newspapers, as well as at outdoor billboards at key airports and CBD locations, targeting key decision makers and defence prime companies.

The campaign complements the Government’s proposal to the two shortlisted bidders for the LAND 400 Phase 2 project, BAE Systems Australia and Rheinmetall Defence, to base their project activities in Victoria along with its major sponsorship of the Australian International Airshow 2017, to be held at Avalon Airport in late February.

Mr Combet is helping to build on the strengths of the state and the strengths of the SME and research communities so that people recognise that Victoria is a key player in the Defence sector and a critical cog in the economic wheel.

For more information on Victoria’s defence capabilities, visit defence.vic.gov.au



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