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Like bees to a honey pot, foreign defence manufacturers flock to Australia

When the government announced that it would spend $400 billion over the next twenty years on defence materiel and that it would, in opposition to its supposed commitment to free trade, adopt a protectionist requirement for local content, foreign defence manufacturers flocked like bees to a honey pot.

  • Lockheed Martin opened a new R&D centre in Melbourne in August 2016.
  • Rheinmetall Defence Australia signed a Global Supply Chain Agreement (GSCA) with the government in October 2016. There have also been extensions of existing agreements recently with Lockheed Martin, Thales and Raytheon.
  • US technology accelerator fund Techstars opened an office in Adelaide in January 2017.
  • Boeing Australia opened a new office in the Adelaide CBD in April 2017, and Northrop Grumman announced that it would invest $50 million in the establishment of an Electronic Sustainment Centre of Excellence at Badgerys Creek in May 2017.
  • DCNS, Austal and Lürssen have established or expanded their Australian offices in Adelaide, and Huntington Ingalls Industries has also established an Australian subsidiary.

Local defence industry is dominated by a handful of local subsidiaries of foreign-owned companies – Lockheed Martin, Raytheon and Boeing (US), BAE (UK), EADS (Europe), Thales and DCNS (France), Broadspectrum (Spain), SAAB (Sweden) being some of the largest.  Only one of the firms—the government-owned ASC Pty Ltd—is Australian owned and controlled.

When the government says we need a domestic arms industry to boost our national security, they seem to ignore this vulnerability as pointed out by ASPI.

Because foreign-owned Australian primes account for very small proportions of parent company revenue, they’re unlikely to command priority if a commercial or strategic conflict of interest arises. For example, if a foreign parent must choose between supplying Australia or its home country with munitions in a crisis, there’s no question about what would happen.

It’s all about the jobs and growth, they cry.

Well not really.

Defence industry accounts for 0.24% of jobs in Australia, and 2.9% of jobs in the manufacturing sector. In terms of annual revenue, defence industry accounts for 0.22% of Australian industry and 1.7% of the manufacturing sector. It represents only a trifling fraction of the overall Australian economy.

Remembering that ASPI is the institution funded by government (and increasingly the defence industry) to give policy advice, their latest report was rather sceptical about Malcolm and Christopher’s big announcement.

“according to the government’s own figures, there’s only around 25,000 people employed in the sector, representing 0.25% of the ten-million strong Australian workforce. Even the $90 billion naval construction program is promised to deliver only 5,800 jobs—a drop in the ocean. Given the government’s emphasis on the jobs and growth impact of defence production, you’d think that the government’s decisions on defence acquisitions were being informed by rigorous economic analysis. Yet…the best that the Defence and minister’s staff could come up with were misleading figures taken out of context from the national accounts. It must be asked; is the economic analysis underpinning the looming wave of ‘nation building’ defence mega-projects any better?

…even if 10,000 jobs are eventually created because of the Government’s preference to build major defence platforms in-country—which is more jobs than Defence has announced during 2016-17—that will still only amount to less than 0.1% (or one-thousandth) of the Australian workforce.

But that’s the political economy of naval shipbuilding in a nutshell: investment decisions are driven by a small number of vested interests who gain a lot, and costs are spread across millions of taxpayers who each pay a little.”

Net defence funding, excluding capital and materiel acquisitions, housing and superannuation costs, is over $95 million per day and is slated for substantial increase.

Add in a warchest of $400 billion to spend on things that go bang, and a government-protected defence industry, and it’s no wonder the sharks are circling.


14 comments

  1. Peter F

    Kaye, I am now finding the actions of this mob totally depressing, and I have been called an ‘unreal optimist’ in the past. I am heartened by the fact that you and others keep us informed.

  2. Kaye Lee

    Peter,

    I know it can feel overwhelming but we actually live in the best place on earth. Are we perfect? Far from it. The desire for improvement is good but we should not lose perspective of the reality that we are, comparatively, very lucky.

    Having said that, complacency is also our enemy. We must remain vigilant to protect what we have against the self-serving greed of amoral capitalism and active in striving to get better and to help those who are worse off.

    Too many people have forgotten the importance of the collective well-being.

  3. MikeW

    As Elvis Costello sang: ‘I don’t know how much more of this I can take…’

  4. diannaart

    What will Bill Shorten say/do?

    Should Australia invest more into defence/offence than into renewable technology, public education, health, science, environmental care, electric cars, public transport and so on…?

    Why do Neo-cons so love big spending on all things military and yet claim to be all about small government?

    Why are humans so fecking stupid?

  5. king1394

    In the face of climate change, war is a luxury we can not afford. The dinosaurs of the Liberal/National right and the multinational corporations are showing the way to hell

  6. johno

    Gross, is one word that comes to mind on defence spending/ increases.

  7. Roswell

    Not all humans are stupid, Dianna. Only Liberal voters and Crows supporters are.

    Damn, there I go; stereotyping people. I only just told Joe not to do that on another thread.

  8. diannaart

    Roswell

    Exceptions prove the rule. Particularly exceptions such as LNP voters and Crows supporters, to which I, as a Victorian, am obligated to add Collingwood.

    A discerning eye is necessary for the caring moderator.

    🙂

  9. pierre wilkinson

    Just imagine if this government gave up the naval gazing – sorry, ship building – and invested in jobs in health, education and welfare. Imagine the stimulus to the economy of giving workers a pay rise (and keeping their penalty rates). They could double the pension rate and still have change to buy their stupid war toys.

  10. Glenn Barry

    This is just another element of the imitation of that bastion of collective stupidity The United States of America – the LNP are completely lost for idea and mimicking the worst possible characteristics of other nations

  11. MikeW

    Kaye Lee,
    I always enjoy your well written well researched articles, always spot on.
    However I disagree with part of your reply to Peter F. I do not think we live in the best place on earth any more.
    Maybe before this incompetent, lying, secretive, inhuman, bunch of lunatics were running the country it was true, these days unfortunately it is not.
    The gap between the have and have not is widening daily with cuts to all and sundry except the big end of town, poverty and homelessness is running rampant, I could ramble on but I think everyone here knows how bad this government is.
    If my wife and I didn’t have family here we would seriously think about moving back to where we came from in the early 1960’s, then again there’s a conservative government in power over there so things are probably not much better.
    My greatest fear is this government winning the next election, no don’t laugh, never underestimate the power of the mudrake press, I know people who read it and believe every word printed. Lord help us if the coalition win another election.

  12. Kaye Lee

    There are sure things we have to work on Mike. No question.

  13. Kaye Lee

    In March last year, former Defence Minister David Johnston joined the board of Saab Technologies Australia, a subsidiary of the Swedish military contractor, which has been on the receiving end of millions of dollars in government contracts

    .Mr Johnston is understood to have advised Saab on the government’s decision-making process, as Saab sought a multimillion-dollar contract to fit out Australia’s fleet of frigates with a new combat management system.

    In October, Defence Minister, Senator Marise Payne, announced Saab had been chosen to develop the new system which will be used on all of Australia’s future ship projects.

    Two days later, Ms Payne made another announcement, with Saab winning a contract to update the control system of the ageing fleet of Collins Class submarines.

    In November 2014, Johnston said of ASC, “I wouldn’t trust them to build a canoe,”

    Now that he is employed by a company working with them on the subs, Johnston said in September 2017 that ASC is “doing world class work”.

    Mr Johnston’s former chief of staff, Sean Costello, joined French submarine manufacturer DCNS, now known as Naval Group, in 2015 within months of leaving the defence minister’s office.

    More recently, former deputy prime minister and defence minister Kim Beazley joined Lockheed Martin’s Australia Board in June 2016, six months after stepping down as US Ambassador.

    http://www.smh.com.au/federal-politics/political-news/former-defence-minister-joins-military-contractor-upgrading-naval-fleet-20171018-gz3f6h.html

    What a difference a pay packet makes. We have no hope of getting independent advice.

  14. Andrew Smith

    Just posted this comment on David Tyler’s article https://theaimn.com/arms-deals-cabinet-leaks-fake-jobs-figures-reveal-desperate-turnbull-government/

    ‘If it’s not enough for Oz to have been stitched up by global fossil fuel and auto makers, according to The Age, apparently the Efic the Export Credit Agency, is going to receive a boost in funding for defence exports; it’s largest recipient presently is Exxon Mobil…. which although has had no tax liabilities has been subsidised by tax payers and sympathetic policy.

    One guesses that Australia’s new defence export industry shall be compelled to buy expertise, IP and components from global players, then told which markets to ship off their goods and services to, aka UK selling to Saudi?’

    These global players really know how to play nation state governments, while conversely and quietly encouraging anti trade agreement and xenophobic sentiment……

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