Balancing export and domestic consumption – Diversifying Australia’s naval shipbuilding capabilities

A core component of the Australian government's $200 billion investment and modernisation of the nation's defence capability is the $95 billion Naval Shipbuilding Plan, which will oversee the largest modernisation and recapitalisation of Australia's naval capabilities since the Second World War. Released in May 2017, the plan outlines the government's vision for the Australian naval shipbuilding enterprise and the significant investment required in coming decades.

The plan sets out how the government is delivering on the commitment to build a strong, sustainable and innovative Australian naval shipbuilding industry, with the government stating, "The goal of the Naval Shipbuilding Plan is to ensure that the regeneration of the Royal Australian Navy over the coming decades will ensure both a cost-effective solution for the government provide Navy the assured capability to fight and win. The National Naval Shipbuilding Office has been established to implement the Naval Shipbuilding Plan."

As with the broader Defence Industrial Capability Plan, the Naval Shipbuilding Plan identifies the need for Australia to grow the domestic defence industrial base and its capacity to compete internationally – a core component of this is the focus on developing a larger, more capable and prepared defence industry that has the resident skills, expertise, technology, intellectual property and infrastructure to:

• Enable the conduct of ADF operations today;
• Support the acquisition, operation and sustainment of future defence capability; and
• Provide the national support base for Defence to meet current needs and to surge if Australia’s strategic circumstances require it.

Recognising this, the government focuses on four key enablers to successfully and sustainably implement the Naval Shipbuilding Plan:

• Modern, innovative and secure naval shipbuilding infrastructure;
• Workforce growth and development;
• A sustainable and cost-competitive Australian industrial base; and
• A national collaborative approach.

Australia's naval shipbuilding industry has particularly in recent decades been the focus of much ire, with one defence minister declaring that he wouldn't trust Adelaide-based ASC to "build a canoe" following 'valleys of death' as a result of a combination of issues including small unit acquisitions, poor corporate structure and accountability, and inconsistent acquisition programs. 

However, as with the changing currents of the Indo-Pacific's geo-political and strategic order, Australia's naval shipbuilding industry requires the support of a new policy agenda to nurture and develop locally – a key component of this is the development of a National Strategic Industry Act to support the development of the nation's naval shipbuilding industry. But what does this look like? 

Corporate incentives and export-focused shipbuilding hubs

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Supporting the development of Australia's naval shipbuilding industry also requires the legislative power of government to counter-balance industry development policies of allied, yet still competitor nations like South Korea – which leverages the industrial development policies of export oriented industrialisation (EOI) to develop its economy into a major economic and modern, advanced manufacturing powerhouse.  

Korea's industry development is driven by a range of government incentives for industry, including corporate tax incentives, employment incentives and payroll tax incentives. As a result, in order to develop Australia's own naval shipbuilding industry, similar innovative and adaptive policy making is essential to developing a competitive domestic naval shipbuilding industry. 

Australia's naval shipbuilding industry has a small number of export success stories – mainly WA-based Austal, which has achieved extensive local and export success designing and manufacturing a range of vessels for the Australian Border Force, Pacific Island, the US and Middle Eastern Navies largely without government support. 

Supporting the next stage of industry development requires a unique policy approach as well as combining the existing elements of Australia's existing innovation and science agenda with a suite of grant allocation and targeted, contractual tax incentives (signed between the Commonwealth and the company as a memorandum of understanding) linked to a combination of long-term, local job creation, foreign contract success, local industry content, and research and development programs – in specialised export orientated industry clusters. 

Warship centres of excellence 

Australia has a number of naval shipyards beyond those located at Osborne and Henderson. The Williamstown facility just outside of Melbourne and  former-Forgacs naval shipyard located in Newcastle, which were responsible for the fit out of the Canberra Class and construction of the Anzac and Adelaide Class frigates, respectively.

These existing facilities, combined with the model established by the temporary BAE Systems Australia acquisition of ASC Shipbuilding throughout the life of the $35 billion Hunter Class construction phase provides, an ideal model for the Australian government to collaborate with local or international naval warship designers and builders to develop specialised 'warship centres of excellence'. 

Developing these centres of excellence can leverage the policy levers used to develop other national naval shipbuilding facilities and integration within global supply chain and programs to support the development and rehabilitation of local naval shipbuilding capabilities with a focus on capitalising on the growing demand for warships in the Indo-Pacific and Middle East in particular. 

Additionally, this international collaboration also provides further avenues for Australian shipyards to increase domestic unit acquisition of platforms like the Hobart Class destroyers or the Hunter Class (Type 26 Global Combat Ship) vessels in support of international, allied acquisition programs – namely the British and Canadian acquisition of the Type 26 vessels and the potential US acquisition of a variant of the Australian Hobart Class as part of the FFG[X] program, which will see up to 20 vessels procured. 

Diversifying Australia's naval shipbuilding capabilities beyond focusing on Australia's own shipbuilding requirements is a necessity should the broader naval shipbuilding plan be successful – targeting growing export demands in the region and Middle East, combined with international industry collaboration and partnerships, is central to this. 

Developing and implementing a cohesive, innovative and long-term vision for Australia's sovereign defence industry capability can also serve as the basis for developing, and in some cases redeveloping, a robust, advanced manufacturing economy taking advantage of Australia's unrivalled resource wealth – supporting the broader national security and interests in the Indo-Pacific. 

Let us know your thoughts and ideas supporting the next stages of development for Australia's sovereign defence capability in the comments section below, or get in touch with This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..