Defence industry as a catalyst for Australia’s industrial rebirth

As Australia’s domestic defence industrial base continues to grow, the need to embrace export opportunities becomes critical to the enduring success – with policy needed to support the nation’s existing trade and strategic partners serving as valuable markets for industry collaboration and export growth.

While Australia’s defence industry has gone from strength to strength in a short period of time – relying solely on domestic consumption is a fateful trap that has previously hindered the sustainable development of Australia’s broader manufacturing industries. Avoiding this pitfall requires a dramatically different approach to the policies that have been used in the past, paired with a growing focus on leveraging the nation's key economic and strategic partnerships.

This $200 billion program incorporates the first long-term industry development policy in Australia's recent history – the Defence Industrial Capability Plan released in 2018 identifies the government’s long-term vision to build and develop a robust, resilient and internationally competitive Australian defence industry base that is better able to help meet defence capability requirements.

The Defence Industrial Capability Plan sets out a comprehensive plan for Australia’s defence industry. The government is investing in Australia's defence industry and ensuring that it is positioned to support delivery of the Integrated Investment Program over the next decade. The plan acknowledges that as Australia builds its defence capability, we must also grow our defence industrial capability. By 2028, Australia will require a larger, more capable and prepared Australian 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 the importance of the export market, the government established the Defence Export Strategy, which identifies that "Australian industry cannot sustain itself on the needs of the Australian Defence Force alone. New markets and opportunities to diversify are required to help unlock the full potential of Australian defence industry to grow, innovate and support Defence’s future needs".

Further supporting the long-term development of Australia's defence industrial base is the Defence Export Strategy, which focuses on developing "greater export success to build a stronger, more sustainable and more globally competitive Australian defence industry to support Australia’s Defence capability needs" by 2028, which is supported by five key objectives:

• Strengthen the partnership between the Australian government and industry to pursue defence export opportunities;
• Sustain Australia's defence industrial capabilities across peaks and troughs in domestic demand;
• Enable greater innovation and productivity in Australia's defence industry to deliver world-leading Defence capabilities;
• Maintain the capability edge of the Australian Defence Force and leverage Defence capability development for export opportunities; and
• Grow Australia's defence industry to become a top 10 global defence exporter.

This focus on enhancing Australia's exposure and access to export markets serves as one of the critical defining points in a new era of Australian industry policy as a whole – this focus on developing export markets serves as an opportunity for Australia to develop and enhance its "strategic weight" during a period of increasing geo-political, economic and strategic competition and turbulence. 

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Catalyst for re-industrialisation 

While Australia's long-term plan for developing a robust, globally competitive defence industry is still in the early stages of implementation – the early success and increasingly global integration and participation of Australian industry in global supply chains provides an avenue for building on the success to transform the broader Australian economy inline with the Commonwealth government's Innovation Agenda.

This focus on exports echoes the South Korean concept of export oriented industrialisation (EOI) and the related industrial development policies that were used to great effect in the post-Korean War redevelopment of the Korean economy – which is responsible for turning the nation 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. 

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.

National critical industries

Australia as a nation, like many Western contemporaries, has been an economy and nation traditionally dependent on heavy industries – capitalising upon the continent's wealth of natural resources including coal, iron ore, copper, zinc, rare earth elements and manufacturing, particularly in the years following the end of the Second World War.

However, the post-war economic transformation of many regional nations, including Japan, Korea and China, and the cohesive, long-term, nation building policies implemented by these nations has enabled these countries to emerge as economic powerhouses, driven by an incredibly competitive manufacturing capability – limiting the competitiveness of Australian industry, particularly manufacturing.

Recognising this incredibly competitive global industry and the drive towards free trade agreements with nations who continue to implement protectionist policies buried in legislation, Australia needs to approach the development of nationally significant heavy industries in a radically different way, recognising the failures of the past and the limitations of Australia's past incarnations of heavy industry.

Transitioning towards an advanced manufacturing, exporting economy 

Despite Australia's widely recognised position as providing a world-leading research and development capacity – supported by both private and public sector R&D programs driven by organisations like the CSIRO – traditional areas of high wage-costs and low productivity in Australia's manufacturing industry, exemplified in the failure of Australia's domestic car industry and in the series of cost overruns and delivery delays on both the Collins and Hobart Class programs, have characterised Australia's reputation as a manufacturing economy.

Enter Industry 4.0 – the combination of additive manufacturing, automated manufacturing and data sharing, with a coherent National Strategic Industry development policy can compensate and in some cases overcome the traditional hindrances faced by the Australian economy, with public-private collaboration essential to ensuring the long-term sustainability and success of Australia's defence industrial base and broader manufacturing economy.

Building 'strategic weight' and economic diversity off the back of Defence

Australia's position and responsibilities in the Indo-Pacific region will depend on the nation's ability to sustain itself economically, strategically and politically. Despite the nation's virtually unrivalled wealth of natural resources and agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual, yet complementary public policy strategies to support a more robust Australian role in the region. 

Establishing 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, highly-educated workforce and proximity to the rising Indo-Pacific markets.

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..