If the government sticks to its, ahem, guns and decides to source the next generation of Royal Australian Navy submarines from Japan, it will be a brave and correct decision. It will also be an important one, not merely in saving billions of dollars, but in severing the toxic link between defence policy and industry policy.

The bravery will come not merely from taking a decision that will lead to fewer future jobs in South Australia but from unequivocally breaking a pre-election promise. There will be no word-games or casuistry that can cover sourcing them from Japan instead of building them in Adelaide.

Even so, the government is right to do so and deserves credit for it. The decision will save perhaps $15 billion of taxpayers’ money in sourcing an off-the-shelf product rather than reinventing the propeller with another new/heavily modified pre-existing design “for Australian needs”, and shift the risk of delays — and rare are the major defence procurement projects that aren’t beset by delays and cost blowouts — onto the manufacturer.

More critically, it will establish a powerful precedent for the separation of two policy areas that both sides of politics have connived at linking — defence procurement and industry policy, such that equipment supply to our armed forces, from warships down to clothing, become a form of manufacturing protectionism justified by national security and “strategic considerations”. It’s a link that has even been used to justify propping up other sectors. “Building a skills base for automotive also means we have the skills capacity to build a fighter aircraft,” said then-“innovation” minister Kim Carr in happier times under Kevin Rudd.

“It’s time Australian defence procurement was less unique and more like that of other government agencies … “

Mixing defence and industry policy means advocates can invoke not just the “strategic” economic value of propping up particular sectors, but can claim nebulous national security considerations also justify it. Buying subs from Japan “could irresponsibly put our national security at risk as a maritime nation,” Bill Shorten said, without any evidence or explanation of why building them in Japan and maintaining them here is problematic from a strategic point of view. Beijing apologist Hugh White warned months ago that we might upset China if we bought subs from Japan (though Hugh thinks pretty much everything Australia does upsets China) — a novel assessment of national security that would give the power most likely to pose a military threat to the shipping lanes Australia relies on a veto over how we seek to defend them.

Australia certainly isn’t the only country that mixes defence and industry policy. Indeed, compared to the likes of the US, France and the UK, we’re amateurs about it: around a third of our major defence procurement spending flows to offshore firms. Defence spending is used around the world as an unsubtle form of industry intervention, most particularly in the United States, where the defence budget, a multiple of those of rival countries, flows not merely to a vast defence industry but even more strongly to services, construction, oil and healthcare companies that have made billions from US military ventures.

Nor is Australia the only country that bungles defence procurement or equipment development; virtually every country has think tanks and commentators bemoaning cost blowouts, missed deadlines, too much bureaucracy and underperforming products from defence manufacturers. Purchasing products developed and tested elsewhere significantly reduces these risks — risks Australia would have to take on in building its own submarines, which even if built to a pre-existing design like the Collins class, would be heavily modified by the RAN to meet what it insists are its own special needs, thereby adding to the cost.

As the American Enterprise Institute noted in its assessment of the ongoing problems of Pentagon procurement, a core problem in defence acquisition is the military’s insistence on “defence-unique solutions”, affecting both what is procured and how it is procured. It’s time Australian defence procurement was less unique and more like that of other government agencies, where value-for-money is the guiding objective, rather than vague goals of propping up “strategic” industries.

Peter Fray

72 hours only. 50% off a year of Crikey and The Atlantic.

Our two-for-one offer with The Atlantic was so popular we decided to bring it back.

But only for 72 hours.

Use the promo code ATLANTIC2020 and you’ll get 50% off a year of Crikey (usually $199) and a year of digital access to The Atlantic (usually $70). That’s BOTH for just $129.

Hurry. Ends midnight this Thursday.

Peter Fray
Editor-in-chief of Crikey

Claim Now