Op-Ed: Building resilience in the post-COVID economy

Resilience – it’s a word Australians have heard many times over the past couple of months during the pandemic crisis.

COVID-19 has dramatically changed the world. Life as we normally know it has been upended, hundreds of thousands of Australians are enduring uncertainty, pain and hardship.

Government, business and community leaders should be commended for doing their best to mitigate risks, ease the suffering and make people safe.

The Aussie spirit has shone through magnificently in the way people have responded positively to the rallying call to stay home, adhere to social restrictions and adopt stricter hygiene measures to limit the human toll.

Australian business has also risen to the challenge amid the economic carnage and havoc to global supply chains that has been caused by the unprecedented COVID-19 crisis.

Apart from the obvious health impacts of COVID-19, there is also the economic shock that is destined to continue long after the virus has been consigned to medical history.

A recent Deloitte Access Economics report predicted the coronavirus lock-down measures would cost $60 billion in lost wages and profits to families and businesses in the four months from the beginning of April.

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Treasurer Josh Frydenberg has forecast a 10-12 per cent fall in GDP in the June quarter and a doubling of unemployment to 10 per cent. Experts are predicting another wave of large-scale bankruptcies and job losses as government support programs are wound back post September.

Such dire economic outlooks mean that Australia must now dig deep if it is to recover and prosper into the future. Adopting a business as usual approach is not an option.

As a direct consequence of this crisis, a new understanding of national security is evolving – not just in terms of our traditional defence industry but also our technology, health and energy capabilities.

People are realising it is time to rethink and reshape our heavy reliance on the benefits of globalisation and restore key parts of our economic sovereignty. COVID-19 has shown us that we can no longer just continue to rely on other countries to cover for crucial parts of our economy.

Amid all the chaos that COVID-19 has wrought, some clear thinking is thankfully coming through.

Prime Minister Scott Morrison and his national cabinet are undoubtedly devoting much thought to protecting and insulating our domestic economic sovereignty.

Overseas, countries like the US, Spain and Italy are also signalling a renewed eagerness to develop and revitalise strategic domestic industries without having to rely on foreign capital and resources.

This new thinking was certainly demonstrated by the federal government’s recent changes to the foreign investment review framework to “protect Australia’s national interest”.

All proposed foreign investments into Australia now require approval, regardless of value or the nature of the foreign investor.

As Treasurer Frydenberg explained, while foreign investment remains vital to our long-term economic success and stability, the new measures are necessary to “safeguard the national interest as the coronavirus outbreak puts intense pressure on the Australian economy and Australian businesses”.

The government has also established the National COVID-19 Co-ordination Commission headed by Nev Power to focus on a “whole of economy” strategy that will deliver greater self-reliance.

What now needs to follow is a strategic blueprint that builds our nation’s resilience by maximising Australia’s technology, capabilities and resources.

Hopefully, one of the enduring benefits of this strategy will be the re-emergence of Australian manufacturing.

As a 100 per cent Australian-owned prime supplier to the defence industry, NIOA is proud of the robust role it plays in building sovereign capability and stands ready to do more.

The 2016 Defence White Paper provided the defence industry for the first time with a comprehensive policy framework for Australia’s long-term security, including the development of capability, infrastructure and skills for the future.

A key objective is: “Government will recognise the vital role of an internationally competitive Australian defence industry as a fundamental input to capability”.

Throughout the COVID-19 crisis, NIOA has continued to deliver essential services to Australian law enforcement, security, primary production and defence. We work effectively with state and federal governments, ensuring jobs, know-how and investment stay right here in Australia.

This includes:

• A planned expansion of our 8,300-square-metre high-security weapons and munitions logistics, armoury, maintenance and testing facilities in Brisbane;
• Commencement of construction of a 7,000-square-metre artillery shell forging factory in Maryborough, Queensland with joint-venture partner, Rheinmetall, that will re-establish Australia’s ability to manufacture in-service artillery shells. More than 100 on-going jobs will be created when the $60 million facility is fully operational by 2022. Fifty per cent of the capacity of the factory is already committed to export;
• The commencement of a 10-year tenancy to refresh manufacturing capability at the Australian government-owned Benalla munitions facility taking up over half of the output capacity of the facility;
• Private investment in a 120mm tank ammunition loading line;
• Private investment with partner Rheinmetall in a medium calibre ammunition loading line;
• The production and export of 25mm ammunition for the US F-35 Joint Strike Fighter program;
• The opening of new offices in Melbourne to support our expanded workforce;
• The establishment of an export office in the US to support our Australian based initiatives; and
• NIOA is among the shortlisted tenderers for the management of LAND 159 Soldier Lethality Program, which, over the next decade, will replace every weapon system that Aussie Diggers carry.

Much needs to be done to restore and re-align Australia’s domestic munitions manufacturing capabilities that have been neglected over the past 25 years. A once-in-a-generation refresh of munitions is occurring in Australia and a corresponding once in a generation refresh of manufacturing capability needs to occur with it.

We need to address our supply line vulnerabilities, identify emerging technologies that we can harness, build new infrastructure and adopt a commercial focus on export to deliver the scale required to sustain and evolve the advantage over the long term.

Much smaller economies than Australia have much more advanced munitions industries and much higher levels of independence. They have missile production, export their technologies around the world and provide significant net economic input to their economies.

Many business sectors can play an important role in the post-COVID economic stimulus agenda of the government. Munitions manufacture is one of them. The development of rocket motor technology, propulsion, guidance and sensor systems, all have crossover benefits to other industry segments including space and academia.

Australia is already budgeting to spend billions on new munitions and related infrastructure in the IIP. We need to fully harness that committed expenditure to deliver long-term and sustainable benefits for Australia. Simply sending money overseas to benefit foreign companies, governments and national economies is no longer acceptable.

Along with every Australian, NIOA is ready to play its part in overcoming the challenges posed by COVID-19. It will be a long and hard road to recovery, but we as a nation possess the resilience, know-how and determination to restore our economy and shore up our national security and sovereignty.

None of this will be achieved however, without determined leadership and genuine partnerships. Industry can step up and help government with the heavy lifting required to build a new economy.

Governments in turn will need to direct procurement and support to achieve specific economic and resilience outcomes, not just leave it to the free market to sort out. Australia needs to see the maximum economic benefits from these collective efforts including seeing profits remain in Australia, developing IP owned and controlled by Australians and creating jobs for Australians.

While international partnerships will play a pivotal role in the work ahead, we also need to break free of foreign board and foreign government controls on our industrial base where practicable. This will not be an easy road to navigate, but it is the challenge that those determined to make a difference must accept.

As Prime Minister Morrison said in his rallying call to Parliament: "Our sovereignty is measured in our capacity and freedom to live our lives as we choose in a free, open and democratic society. We are not a coerced society. We act through our agreement and our wilful support of the national interest, through our many institutions, including this Parliament and the many others around this country.

"And we will not surrender this."

Rob Nioa is the chairman and chief executive officer of NIOA, Australia’s largest privately-owned supplier of arms and ammunition to the military, law enforcement and sporting markets.