Going with the flow: Australia's defence industry

Australia's defence industry, much of it foreign owned, is nervously awaiting the publication of a defence White Paper that will provide a clear alignment between strategy, capability and budget.

Related work includes a review that will define future force structure and capability needs, together with eight companion reviews across defence activities ranging from IT to industry. These will provide a key input to developing defence business and budget priorities up to 2030.

The Australian defence market is currently ranked eighth in the world by Jane's Defence Budgets in terms of its growth rate, market size and accessibility for international defence companies. In absolute terms, it has the 14th largest defence budget, according to the Stockholm International Peace Research Institute.

While the centre-left government of Prime Minister Kevin Rudd has reaffirmed its intention to increase the AUD22 billion (USD14.5 billion) defence budget by three per cent in real terms each year until at least 2017-18, this pledge may yet fall a victim, in whole or in part, to the global financial crisis.

With the Australian Department of Defence also facing spiralling operating costs that are unlikely to be offset by internal savings, the funding of big-ticket items such as up to 100 Lockheed Martin F-35 Lightening II Joint Strike Fighters (JSFs) and a possible fourth Air Warfare Destroyer (AWD) now seems likely to threaten the finance available for other capabilities.

Publication of the White Paper, originally scheduled for December 2008 but now expected in April-May, will be followed closely by a new rolling 10-year Defence Capability Plan (DCP) detailing major equipment purchases up to 2019.

Although substantial infrastructure and sustainment contracts have continued to flow since the commissioning of the White Paper in December 2007, a number of acquisition approvals have been held up and industry is anxiously waiting to assess its commercial implications.

The Australian defence industry spans the four major sectors of maritime, aerospace, land and electronics and is focused almost entirely on meeting the requirements of the Defence Materiel Organisation (DMO) - the government agency responsible for the acquisition and through-life support of capital equipment and systems for the Australian Defence Force (ADF).

In 2007-08 the DMO was managing approximately AUD100 billion worth of projects and sustainment and domestic industry carried out AUD4.29 billion worth of acquisition and sustainment work for the organisation.

To this industry output can be added annual exports of defence and defence-related products worth some AUD600 million, about half of which originated from the top 50 Australian-based suppliers of materiel to the DMO.

While nearly 32,000 people are employed in the industry on a full-time basis, about 50,000 are estimated to be working on DMO projects on either a part-time or full-time basis, according to DMO figures.

Image: Export orders for Australian shipbuilding include the construction by the then Tenix Defence of two ANZAC-class frigates and two offshore patrol vessels, including HMNZS Wellington, for the Royal New Zealand Navy. (New Zealand Defence Force) 456 of 3,787 words