Report urges defence sector to invest $1B in Australian SMEs

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The Independence-class littoral combat ship USS Canberra, designed and built by the US arm of the Australia-owned company Austal, enters Sydney Harbour prior to her commissioning on 22 July 2023. Image credit: defence.gov.au

The Sovereign Australian Prime Alliance (SAPA) and Australian Industry & Defence Network (AIDN) have collaborated on a report detailing a strategy to cultivate defence prime contractors and create a new $1 billion fund to acquire capabilities and services from medium and small companies.

Titled “Developing Australia’s Defence Industrial Base,” the paper comprises eight recommendations to the Department of Defence and the Australian Government, aimed at bolstering the nation’s defence industrial base.

The primary goals include enhancing Australia’s deterrence capabilities, fostering self-reliance, and actively contributing to the AUKUS alliance.

The report underscores the urgency of achieving these objectives to de-risk the nation amidst the geopolitical challenges posed by the expansionist policies of the People’s Republic of China and evolving grey-zone warfare tactics.

Australia’s increasing role in the Indo-Pacific, the AUKUS partnership, and concerns expressed through the Defence Strategic Review and Defence Strategic Update further emphasise the critical nature of strategic preparedness.

The key recommendations in the report call for the Australian Government to declare the intent to establish Australian defence industry primes, form a Government Defence Industry Steering Council, and produce a new definition of ‘industrial sovereignty.’

It also advocates for changes to procurement rules, enabling direct partnerships with Australian companies, and the creation of a dedicated $1 billion budget line for sovereign capabilities from medium and small Australian companies.

The paper suggests advancing AUKUS Pillar Two – Advancing the Capabilities of the US, UK, and Australia, and shifting focus from exhaustive lists of ‘Strategic Capabilities Priorities’ to practical priorities.

This shift is intended to streamline efforts and address the dynamic challenges presented by the evolving strategic environment.

Drawing inspiration from comparable nations like Israel, South Korea, Sweden, and Turkey, the report highlights how countries with lower GDP and smaller defence budgets have successfully built defence industries.

SAPA and AIDN stated that the ultimate goal is to reduce Australia’s reliance on multinational primes during potential conflicts ensuring greater independence and capacity for national defence.

Rob Nioa, CEO of NIOA and a member of SAPA, emphasised the readiness of the Australian industry to contribute to the nation’s defence.

“Give us the tools and we will finish the job. In this case the tools are the conditions that will allow strong Australian owned and run defence prime companies to emerge and thrive,” Nioa concluded.