For the past ten months I’ve had the great honour and privilege of serving as Australia’s Defence Minister.
Today I thought I’d share with you first, some facts about the Defence Organisation.
Then I’d like to provide you with an overview of the reform projects I’m pursuing to ensure that Defence is able to;
1. Do all it needs to do to defend the nation, its people and their interests; and,
2. That it can undertake those tasks as effectively and efficiently as is possible.
But here are some interesting facts about the organisation I’d like to share:
• The Defence Budget of $22 billion – and growing
• Our workforce is more than 90,000 – about 54,000 of those are in uniform as permanent members of the ADF while another 19,000 wear the uniform of Army, Navy or Air Force as part of our Reserve Forces.
• The Defence pay-roll is around $8 billion each year. We make 700,000 payments annually and manage 1.3 million credit card transactions each year to more than 300,000 active suppliers.
• The Defence material Organisation alone is larger - in terms of staff and budget - than 10 of the 19 Commonwealth Government departments. It alone has over 7000 employees and a budget this year of $9.6 billion.
• The DMO is currently managing more than 230 projects over the value of $20m, and another 180 “minor” projects. It currently manages build and sustainment projects worth $100 billion.
• Defence manages $4.7 billion worth of general stores inventory, fuel and explosive ordnance;
• We have 64 significant bases scattered around Australia and stewardship of 3.4 million hectares of land;
• Defence owns or leases more than 600 properties;
• We are one of the largest managers of feral animals and native species in Australia;
• We are one of the largest hoteliers in the country;
• And one of the largest restaurateurs, serving 7.5 million meals in around 140 messes each year
• Defence oversees the cleaning of 3.5 million square metres each week
So you can see that defence is a big and diverse organisation, the management of which is an enormous and complex task.
And like any large organisation, reform in Defence is by necessity, an ongoing task.
The defence reform project I have set in train will shine a torch-light into every corner of the Defence organisation.
From capability to catering, from management structures to maintenance, from I.T. to infrastructure, from recruitment and retention to research.
But there a four key priorities I want to touch on today. For key priorities that are essential to Australia’s future national security;
1. Re-aligning our strategic needs with our force structure and capability planning decisions;
2. Putting the Defence Budget back on track;
3. Reforming capability procurement; and,
4. Overcoming our people challenges
There is no more important a role for any government than the Defence of the nation, its people and their interests.
But the dollars available to Defence are not finite.
So to do all we need to do we need to make sure every dollar spent is a dollar well spent, and that Defence operates as efficiently as is possible.
The starting point is aligning is ensuring all capability and force structure decisions are made for the right reasons.
Everything we do in Defence must be justified on strategic grounds.
Good Defence planning requires Government to look at least 20 years in to the future in assessing our future strategic environment - including potential threats to our interests.
This of course, is not an exact science, it can’t be.
Those threats could range from a direct attack on our sovereignty, through to the implications for our interests of an unstable South Pacific, right through to the potential security implications of climate change and severe weather events.
Having been made the assessment should then guide force structure and capability purchasing decisions.
In other words, the size, shape and mix of our forces and the number of fast jets, warships, submarines, tanks and artillery guns we will need to protect our interests.
The document which will provide that guidance in the coming decade and beyond is our new Defence White Paper.
The document the former Government was working from was developed in the late 1990’s and released in the year 2000 - eight years ago.
The world has changed so much since then:
• September 11, and subsequent terror events in Bali, Jakarta, London and Madrid;
• The wars in Iraq and Afghanistan;
• The emergence of WMD in the hands of non-state actors;
• Advances in space and cyber-warfare technologies;
• The threat of nuclear capability in the hands of rouge states like Iran; and,
• Huge shifts in the global distribution of power including the rise and rise of China and the emergence of India.
The failure to produce a White Paper before now has not been without consequences including a very a real disconnect between our Strategic outlook and our force structure and capability decisions.
The new White paper will allow us to put those important elements of the defence planning back together and ensure that future decisions are the right ones for Australia.
My second priority is reform of the Defence Budget. At more than $22b, the new Government will spend more money on Defence this year than any other Government in the history of the Federation.
And we will continue to grow funding by 3% over the coming decade.
But there are a number of reasons this won’t be enough in the absence of a serious reform package.
There are a number of reasons why;
1. We have inherited a budget black hole valued at least $11b over the coming decade, and more likely $15b.
This comes from the failure of the Howard Government to make adequate budget provision in a range of areas including NPOC, and a litany of capability project stuff-ups.
2. The changing strategic environment is urging us to grow both our force and our capability.
3. Because of technological advances, defence cost are typically growing faster than prices more generally.
For possibly the first time ever, the Government has commissioned an independent audit and review of the Defence Budget which will recommend new and more efficient ways of running the organisation.
In addition, I’ve directed that $1 billion be saved in Defence every year for the next 10 years.
Not $10 billion cut from Defence, but $10 billion re-invested in Defence to meet higher priorities.
Managing the Defence Budget takes much more than throwing bucket loads of money at it.
That’s what the Howard Government was doing – growing funding without demanding productivity gains or driving efficiencies.
The worst thing any Government can do to any Government Department is to keep throwing money at it - no questions asked. More money without new efficiencies and productivity targets does not increase purchasing power. Rather, it leads to waste, mismanagement and distorts investment decisions.
Which takes me to my third point - capability and procurement.
Around $10b of the $22b the Government will invest in Defence this year will go to the DMO for the procurement and sustainment platforms and weapons systems.
About 50% of that $10b will be capital investment- the other 50% will keep those platforms and systems operating.
That’s a lot of money in anyone’s language but it’s modest by global standards.
That’s why we can’t afford to waste a cent of it.
Seasprite helicopter and other capability stuff-ups have to end.
There’ll always be some mistakes, that’s the nature of the industry – it can be very complex, particularly in the hi–tech area of systems integration.
But I’m determined the mistakes will be minimised and lessons are learned when they occur.
My key initiatives in this area are the Independent Mortimer Review and an internal defence procurement review associated with the White paper process.
I’m determined that the DMO will run more like a business and less like a bureaucracy and commercial assessment of planned projects begin earlier in the capability process.
I also want to make sure the lines of accountability are clear and that the DMO can compete successfully in the labour market for the skilled people it needs to meet my aspirations.
The fourth priority is people. There is no doubt that the single biggest challenge facing Defence in the coming years is our people and skills shortages.
We must do more to recruit more people and even more importantly, to retain those who we’ve already invested in so heavily in.
The Howard Government recognised this by setting aside some $3b over the next decade to meet this challenge.
My job now is to make sure that money is spent in the most effective way – providing well designed and targeted retention initiatives, and on the recruitment front – marketing to Generation Y in the language they understand through the mediums they rely upon for their information.
Spending more money in Defence more efficiently should be good news for the Hunter region.
Our investment in air combat, and early warning and control aircraft will mean a huge investment in Williamtown RAAF Base. Indeed we are working with the local councils, the NSW Government and local developers towards the development of a Defence and Aviation Employment Zone west of the air base. The Hunter Business Chamber has also been supportive.
Once developed, the zone will provide support to both the civil airport and the RAAF Base, and will be a major factor in growing the Defence Industry in the Hunter.
The raising of two additional Army battalions will result in a significantly greater investment in Singleton.
Newcastle is also well placed to secure hull module work on the new AWDs and despite some recent hiccups Varley will continue to play a major role in the upgrade of Army’s truck fleet.
These are just a few examples.
Having said that, just like the Government must do better in helping SME’s secure more work across the Country, so too must Hunter Businesses work at being as competitive as they can in what is a very competitive market.
That’s why I’ve asked Greg Combet to work with Hunter firms to make sure they give themselves every opportunity to secure Defence contracts.
I know Hunter firms will do this well because they’ve done so well in the past.
Collaboration has been part of the culture in the Hunter for at least a decade and that will be an important part of the Region’s push.
The Hunter is in good shape. It has strong entrepreneurial leadership, an economic base more diverse than ever before and thanks to continuing strong growth in Asia, commodities prices remain strong although there are some dark clouds on the horizon.
Our constraints on sustainable growth remain our coal chain capacity, a skills shortage, limited land for housing purposes, and to an extent, the road infrastructure we need to support both strong growth residential development and business investment.
These are the issues my parliamentary colleagues and I are focussing on in Canberra, although while there are things we can potentially do on the housing affordability front, we have little capacity to deal with natural land constraints.
The Property Council is a major player in dealing with many of these issues and my colleagues and I look forward to working with the Hunter Chapter towards Common goals and ambitions.