Comment: Defence Industry­ – Triumph of Difficulties Over Needs

The platforms of both major political parties pay lip service to the concept that a strong domestic defence industry is essential to national security. The descriptive term, “the fourth arm of defence” has been legitimately applied to defence industry.

It is in the translation of that principle into ships, aircraft, vehicles, electronics and munitions that those whom Winston-Churchill referred to as the “better-matters” or the “can’t be loners” have emerged triumphant to the extent that Australian industry is allowed to supply no more than 50 per cent of the minimal needs of Australia’s manifestly inadequate defence forces.

The reasons offered always sound impeccably rational, and relate to such problems of cost, technology and diseconomy of scale inherent in purchasing for a force whose size and development are governed totally by economic rather an strategic factors.

When the force is also directed by a civil and military, bureaucracy determined to protect its existing empire, no radical change of direction can be expected without an equally radical change in the political direction of defence policy.

To establish the need for a new approach, the potential disaster inherent in the failure to reduce Australia’s dependence on overseas arms suppliers must be faced.

There are quite serious political, military and economic difficulties that could arise, as they have in the past, if the 50 per cent dependency is not reduced to a figure approaching 20 per cent.

Politically, the degree of dependence is less important than its nature. In a situation where practically all of our high technology equipment and key spare parts, together with most of our large calibre and some of our small calibre ammunition are manufactured overseas, Australia could not engage in sustained operations without allowing a supplier government the right of effective veto over our foreign policy.

In this context, it is not difficult to construct a credible scenario in which, for example, a hostile US Congress compelled a friendly US President to withhold vitally important spare parts or ammunition from Australia.

Militarily, Australia is vulnerable to the interdiction of its trade routes with the US and Western Europe. Particularly if the US were threatened elsewhere, the very threat to our shipping routes could induce the foreign shipowners on whom we depend to take their business elsewhere.

The economic context is much wider than the question of defence self-reliance, involving as it does questions of employment, balance of payments, technology transfer and so on. Put in simplistic terms, there is an opportunity lost in ordering defence equipment overseas through the failure to employ Australians and through the failure to transfer technology to a largely obsolescent manufacturing sector.

There is a more direct and quantifiable cost to Australia’s very difficult balance of payments situation, currently running at around $3000 million in the red annually.

Related to this aspect is that defence money spent overseas is totally lost to the Australian economy, except for that returned through the struggling offset program. Against that loss is the fact that at least 17 per cent and as much as 30 per cent of the cost of any defence project carried out in Australia is returned to the Government through the tax system.

Defence argues with some justification that its already inadequate budget should not be used as a stimulus to Australian industry. The question is, however, one of public finance accounting rather than one of defence or economic policy. It ought not to be beyond the wit of the highly paid administrators of government to ensure that the Defence budget was not disadvantaged by a quirk of the accounting system.

Policymaking in this or any other field should begin with a determination of what needs to be done. That is a political question. Once the need is determined, the administrators have to be charged with finding a way to do it.

Australia is a wealthy country in economic and human terms. We ought to be able to dominate the difficulties instead of allowing the difficulties to dominate us.