Rethinking the Future of Australian Defence Industry Policy

Fri, 22 Mar 2024

By Olivia Wenholz.

Last December, the Australian Industry Group (Ai Group) and ANU launched a report on Australia’s Defence Industry Policy. The report argues that a fundamental rethink of Australian defence policy is required, and offers five recommendations.

Building the Australian defence industry is critical for our national security in a geopolitically contested era. But our current paradigm for defence industry was built in a different era, and needs to be updated to reflect our contemporary environment. Australia’s current approaches to defence industry are no longer fit for purpose in the face of the very real threats we face today. The report argues that a

change is required to recognise defence industry not as an input to capability but as national capability in its own right.

Ai Group Chief Executive, Innes Willox, said: "This new research maps out a path for Australia to identify the priority defence industry capabilities we need to have locally, a method for building those capabilities to scale using the broad suite of industry policy tools and stronger government-business collaboration."

Peer country case studies

The report examines how Australia should reframe defence industry policy by drawing lessons from five peer countries: Sweden, France, the UK, Israel and Canada. While facing different strategic circumstances, their experiences illustrate how the possession of an independent, sovereign but internationally linked defence industry is itself an asset during a period where the risk of major conflict is rising. Their experiences offer pertinent lessons for Australia. The report identifies several factors that shape effective policy:

fostering defence-civilian industry embeddedness;
utilising a broad range of industry policy tools;
ensuring formal and informal coordination between government and business;
balancing competition and strategic relationships;
and leveraging international markets for scale.

Recommendations

The report then connects these lessons to Australia, considering how our defence industry policy could be reformed to deliver on the needs of a National Defence Strategy. As the Vice-Chancellor noted, the five recommendations for future defence industry policy in Australia are far-reaching:

To consider Australian defence industry as a capability in its own right
To embed and manage defence industry as part of Australia’s broader national industry structure and policy
To prioritise and then support defence industries to achieve scale and surge capabilities
To use the full range of policy levers at government’s disposal to shape defence industry outcomes
And to manage this at the whole-of government level by establishing a Defence Industry Capability Manager.

Challenges that require a truly national response

At the launch event, ANU Vice-Chancellor Professor Brian Schmidt anchored a panel including Ai Group CEO Innes Willox, Ai Group Head of Defence and National Security Kate Louis, and report authors Dr Jeffrey Wilson (Ai Group) and Professor Stephan Frühling from the Strategic and Defence Studies Centre (SDSC) in the Coral Bell School of Asia Pacific Affairs at ANU.

The panel discussion was chaired by Professor Helen Sullivan, Dean of the ANU College of Asia & the Pacific, who remarked, “The report makes significant recommendations and insights on a topic of national importance, and it shows how the challenges it identifies require a truly national response.”

The Dean added, “This joint project between Ai Group and ANU is a good example of the depth of scholarship and the partnerships that we in the College and at ANU want to bring to bear on the major public policy questions facing Australia. SDSC has long played an integral role in shaping Australian strategic and defence policy, and is Australia’s oldest and largest body of scholars dedicated to the analysis of the use of armed force in its political context.

The VC noted, “As the national university, it is our responsibility to use our research to address the hard questions Australia faces – working in partnership with groups like AIG, who have the same ambition and capacity to influence the direction of our nation.”

Asking the fundamental questions

Our university’s motto is ‘First, to know the nature of things’. This report demonstrates how important this is by asking seemingly simple questions that are fundamental to our future progress.

What is the purpose of defence industry policy?
How can it work, what has to be in place for this to happen?
What is the defence industry in the first place?

A long-term, whole-of-nation approach

By examining how other countries answer these questions, this report has been able to suggest a new direction for Australia. The VC emphasised the long-term, whole-of-nation approach that the report calls for, and noted that the defence industry innovation we need is part of a continuum. One that starts with universities and foundational research in both STEM and the humanities and social sciences.

Achieving this will require us to build government expertise that does not currently exist. These are the changes we need. It will be a generational undertaking, but we need to make this change, and action needs to be taken now, to set the nation on the path to the industrial capability that is likely to be needed.