In the recent years, Australian Governments have made repeated announcements about building/rebuilding a viable, sustainable and innovative domestic industry for defence. The most recent example is that of Defence Minister Marles promising $262 million to get Australian companies into AUKUS Pillar 1 supply chains. 

Whilst the Marles’ approach has merit for companies that manage to achieve this feat, the overriding question is whether this the best strategy, and the best use of public money. 

The problem for Australian security is that we seem incapable of making the transition from the “ten years warning time” of the past to the “conflict with no warning” that has been government policy since the 2020 Defence Strategic Update, restated and emphasised in the 2023 Defence Strategic Review and the 2024 National Defence Strategy. 

Despite the rhetoric, this new environment is seemingly unimportant to policy makers and policy implementers.

Industry for defence has two main outputs – one economic and one strategic. For a country like Australia, with a domestic industrial sector that incompletely supports the defence effort, the importance of each varies with the prevailing strategic circumstances. Success for the economic output is measured by employment, by the generation of materiel for domestic consumption, and by levels of export.

The focus of the economic lens is therefore on income and on price. Materiel produced domestically needs to be done in a way that is price competitive with similar products available from overseas suppliers. This is the generator of income. Without cost competitiveness, the foreign supplier will be chosen. The underlying assumption when buying offshore is, therefore, that the international supply chains will provide the materiel required in more-or-less the timeframe required. And if this doesn’t happen it doesn’t really matter as we have time. Time to wait. Time to waste. 

But this is not the situation that we are in now. The government has repeatedly told us we no longer have the luxury of time. No more the luxury of procrastination and delay. No more the luxury of worrying about whether a piece of equipment might be cheaper somewhere else, because cheaper doesn’t count for much when you need it in extremis, but you don’t have it and can’t get it. 

We are in a new paradigm, where the strategic trumps the economic – or at least it should.  

This is not to argue that we need to be self-sufficient. That is an unreasonable and unrealistic proposition. 

What is important is that funding for defence materiel is finite and can only be spent once. Therefore, we need to ensure that risks are properly assessed, and capabilities that need to be addressed domestically are properly prioritised. 

We don’t do this bit. We recognise the risks in documents such as the 2010 Defence Industry Policy Statement and promptly ignore them. By the time we get to the 2024 Defence Industry Development Strategy we are content to focus on subsystems and components, but not on capabilities. As if, somehow, capabilities are beyond us industrially. 

Risks associated with the domestic design and manufacturing of defence capabilities need to be assessed, not just on the cost and schedule risk of doing something, but on the strategic risk of not doing it. What are the risks to national security associated with the inadvertent or deliberate withholding of foreign resupply? What are the risks of not controlling the intellectual property?

This should lead to a different approach in the distribution of public funds to build an industry for national security. One that builds real capability. Capability that will have ongoing benefit to the defence effort during conflict. Capability that will create real, strategically relevant jobs. Not an industry built on government announcements on numbers of jobs generated, and the hope that supply chains will continue to be available. And one where an investment made now can make a difference in the short term, not in some long-distant, fanciful, meaningless timeframe.

One thing that is obvious is that, if we are engaged in the same conflict as our materiel suppliers, they will look after themselves first. This is right and proper, and to be expected. We seem to think that we will be looked after – because we have a special relationship.

So, the obvious next question is what should the government be doing with our money? Where should investments be made that address defence weaknesses?

Firstly, we need to set some prioritisation criteria. Resilience (could say self-reliance but that term has gone out of fashion), and asymmetry seem a good place to start. Both lead to deterrence without the false expectations associated with large, complex and exquisitely beautiful platforms.

Resilience requires fuel security, maintenance, and long-range missiles. Reliance on imported fuel and reserves in Texas won’t cut it. The government should invest in, and support, the commissioning and operation of domestic refineries. Non-fossil energy sources may be the future, but we are told that the threat is now. Therefore, we need to act now. Maintenance, and the ability to repair battle damage, keeps our systems available for operations. The industrial effort to manufacture platforms is wasted effort if the platforms are not available when required.

Domestically designed and produced long-range missiles are required as they are within our current capability. Small stockpiles, and domestic fabrication of short-range weapons, don’t provide any deterrence, let alone any ability to respond sustainably. Sovereign space capabilities are also required for the critical command, control and communication functions – as a bare minimum. 

Asymmetry is a must to offset the vulnerabilities associated with a small, disengaged, population, and a smaller defence force. Drones, in all environments, can offset the reliance on manned platforms, and provide the mass that we can’t generate. Not just from a few anointed suppliers, but many suppliers located across the country. Long-range drones that loiter. Hypersonic drones that swarm. And we need counter-drone capabilities that can be quickly adapted to a changing operational environment because others will be using them.

There will be other capabilities, but prioritisation is about investing money where it has the greatest impact. Expanding beyond these critical resilience and asymmetry elements depends upon the size of the budget.

The geostrategic environment is changing rapidly. The security of foreign supply chains increasingly carries strategic risks. We need to develop and manufacture locally. We need to control the critical intellectual property. Why, therefore, does government continue to build an industry that is unlikely to address the challenges that it has quite explicitly stated are we are likely to face?