Defence industry is a capability, not a simple supply chain

‘The consideration of industry as a capability, not just as a fundamental input to capability, is a mind shift needed in the Australian Department of Defence for the development of an Integrated Force.’

That’s the headline message in Shoal’s submission to the Senate Foreign Affairs, Defence and Trade Legislation Committee inquiry into the performance of the Department of Defence in supporting the capability and capacity of Australia’s defence industry.

For many years, the Department has had an obvious preference for overseas supply, and lack of clarity on what it wants a domestic industry for. The reluctance to procure systems from the domestic defence industry has resulted in ad hoc efforts to build industrial capability and capacity in-country, and Australian industry has largely become a sustainment partner for overseas acquired capabilities. It also implies that the Commonwealth’s procurement approach perceives that domestic industry is a higher risk. Adding to this is an overall confusion in the way that Defence addresses the separate outcomes of economic contribution and industrial participation, the social contribution to national resilience, and the arguably more important contribution to strategic outcomes.

The Defence Strategic Review requires a domestic defence industry where the capabilities and capacity support the development and the sustainment of the Australian Defence Force.  Particularly in relation to the development of an Integrated Force, it is difficult to see how continuation of the current focus on industry as a fundamental input to capability is compatible with the whole-of-government approach that is required to address a National Defence Strategy.

The consideration of Industry as a Capability, not just as a simple supply chain focused on a particular military capability, better positions Australia to deter and to defend. Industry as a Capability will provide a strategic approach in the development of National Defence, including:

1. An improved approach to innovation
2. An ability to answer questions associated with the risk if industrial capability or capacity is not available
3. Better development of skilling requirements and workforce development for long term outcomes
4. More effective and efficient development of facilities – including test facilities
5. Better access to, and utilisation of, capital and financing services
6. The development of sustainable workflow across contiguous or related capabilities
7. More efficient access to, and utilisation of, national infrastructure
8. Closer use and alignment of policy levers to address policy objectives.

Shoal’s full submission is available here.

The Senate Foreign Affairs, Defence and Trade Legislation Committee intends to table its report from the inquiry by the final sitting day of March 2024.