Tag Archive for: Australia

Even with intended reforms, US defence trade rules threaten AUKUS cooperation

Recent efforts by Australia, Britain and the United States to harmonise their defence trade controls are welcome, if long overdue.

But there are reasons to worry that AUKUS Pillar 2 may be carved out of the very regulatory framework intended to facilitate it. This is a problem if the development of advanced capabilities is to be a truly collaborative effort.

Indeed, If AUKUS technologies cannot be insulated against long-standing issues associated with the reach of US defence export controls, Australian and British companies will continue to encounter longstanding disincentives to participating in advanced capability projects with the United States.

Granted, Australia would certainly benefit from these harmonisation efforts. The sum of the three countries’ respective export control reforms would see approximately 70 percent of defence trade made eligible for license-free movement between the three countries, fast-tracking everyday defence industrial cooperation between verified entities in Australia, Britain and the United States.

It has been a longstanding Australian objective to accelerate defence industrial integration with the United States. In that sense, these AUKUS-inspired reforms may yet succeed where previous efforts failed.

But, worryingly, the potential benefits for AUKUS technology collaboration are currently far less clear. This is due to two interrelated factors.

Firstly, AUKUS defence trade control harmonisation efforts should not be mistaken for fundamental reforms to the US International Traffic in Arms Regulations (ITAR).

This is an essential distinction, given that the creation of an AUKUS platinum standard for export controls is premised on the comparability of Australian and the British defence trade controls to America’s own defence trade control regulations, including the ITAR. The explanatory memorandum accompanying Australia’s recently passed Defence Trade Control Amendment Bill makes that much clear.

Though the harmonisation efforts include licensing exemptions for each country from one another’s regulations, these are not blanket in coverage. This is crucial with respect to the ITAR, for what has been proposed in Washington are limited licensing exemptions for certified AUKUS entities, not fundamental reforms to many of the ITAR’s well-known flaws.

This means that those items not covered by the AUKUS exemption involving substantive US input will remain subject to the ITAR’s more problematic aspects, including extraterritorial jurisdiction and broad definitions of defence ‘articles’ or ‘services’. Particularly problematic is the so-called taint, arising from the use of American defence articles or services in joint capability development projects which requires operators or owners to acquire licenses from the State Department for defence articles made with certain US parts or knowledge, even when the final products are predominantly allied-made.

As detailed by former US ambassadors and charges d’affaires to Australia, the ITAR taint has historically created months of delays to routine repair work on US air force and naval assets in Australia, including by preventing easy transfer of even the most mundane of defence materials like bolts and screws.

But as William Greenwalt, former US undersecretary of defense for industry, and I wrote in our report on ITAR reform last year, the taint has also frequently seen US-origin defence material and services designed out of allies’ capabilities and supply chains. It has also prevented Australian companies from delivering made-to-order product variants for US war fighters, because they’ve  wanted to avoid risk of US regulatory capture due to the inclusion of what could be interpreted as US intellectual property.

This leads to the second factor: the scope of the excluded technologies list (ETL), a list of items and services ineligible for the so-called AUKUS exemption.

Comprising the 30 percent of intra-AUKUS defence trade not captured by the licensing exemption, the ETL is based on a combination of the three countries’ commitments to international non-proliferation regimes, particularly the Missile Technology Control Regime (MTCR; 25 percent), as well as national-level policy decisions not to make these technologies more freely available to AUKUS partners for legal or political reasons (5 percent).

Many of these technologies will be essential to the development of advanced capabilities through AUKUS Pillar 2. In fact, officials have presented the ETL as explicitly intended to capture Pillar 2 technologies, citing the need to safeguard shared capability advantages, though they have also stressed that these technologies remain attainable with an appropriate export license.

This is understandable, but still problematic. Put simply, the ETL in its current format could amount to the exclusion of AUKUS technologies from the AUKUS country exemption. This means that these technologies would remain subject to standard defence trade licensing requirements in all three countries—including the ITAR.

And that would mean that the well-known issues with US export controls would continue to apply to the very technologies which these regulatory harmonisation efforts were intended to minimise. The practical result would be that, even if more than 90 percent of componentry found in a future AUKUS advanced capability were eligible for a license waiver, the ITAR would still taint that capability if any of the remaining 10 percent of components were on the ETL and were US-made or featured notable US design input.

In the absence of structural reforms to the ITAR or further amendments to the contents of the ETL or the conditions for their transfer between users, the well-known problems associated with US defence trade controls would almost certainly continue to impede high-end defence technology cooperation. This is problematic if co-innovation and co-development leveraging the best technologies available from all three countries is a desirable end-state for AUKUS Pillar 2.

To be clear, defence trade control harmonisation is absolutely required. I have argued previously that developing trilateral protections is as essential as developing trilateral capabilities.

But without immunising the ETL against the ITAR taint, AUKUS risks moving slower than the speed of strategic relevance. Consider, for example, that the three countries trail their chief competitors in several Pillar 2 categories, such as hypersonics. Encouragingly, government officials working on AUKUS see the ETL as a starting point, while industry is also alert to the need to amend the ETL to facilitate both pillars (Pillar 1 being focused on nuclear submarines). Doing so is no enviable task, and will not be straightforward. For instance, reinterpreting the three countries’ obligations under the MTCR with respect to discrete technologies would be a heavy political lift, considering the three governments’ commitments to the highest non-proliferation standards and enduring negative perceptions across Asia of AUKUS Pillar 1 as a proliferation risk.

But realising the potential, and the spirit, of AUKUS will require creative thinking and a willingness to countenance greater risk-taking across the three systems. That approach must include in technology sharing, lest regulatory harmonisation efforts produce an arrangement that is AUKUS by country, not by technology.

ADF needs more presence with Australia’s northern partners

The Australian Defence Force should foster a deeper presence with partners in our near north, especially Papua New Guinea. This would enable joint training in littoral warfare to master new technologies, facilitate recruitment of PNG personnel into the ADF and allow for greater contribution to regional security.

Described as Australia’s ‘security shield’, PNG is a key partner in the ADF’s task of defending Australia and contributing to collective security in the Indo-Pacific, part of the strategy of deterrence through denial outlined in the 2023 Defence Strategic Review and the 2024 National Defence Strategy. We must leverage and expand on existing ADF presence in the region, starting with PNG.

PNG needs to be a priority because it is considered by some to be the next Pacific battleground for US-China competition and influence, with China signing a mining agreement with PNG earlier this year. if Australia doesn’t seek further ties, someone else will.

Close to Australia, PNG has long been intimately linked with Australian security. The 1942 PNG Kokoda campaign was crucial in halting the advance of Japan through the Pacific, and the Battle of Milne Bay saw the Allies deliver the first defeat of Japanese forces on land. The New Guinea offensives of 1943-44 were the single largest series of interconnected military operations in Australian history, and the 1943 operation at Lae represented Australia’s first major amphibious landing since Gallipoli. When Australia’s defence strategy refers to littoral warfare in our northern approaches, it is referring to this region.

In recent times, Australia and PNG have drawn even closer as regional neighbours. Australia supported PNG through Covid-19 and development assistance, the Defence Cooperation Program and disaster response. The two nations signed a bilateral security agreement in 2023, and Prime Ministers Anthony Albanese and James Marape walked the Kokoda Track together to commemorate Anzac Day this year.

Australian presence in PNG could emulate the existing engagement at the Royal Malaysian Air Force (RMAF) base at Butterworth. The air force base hosts an Australian Army company and air force squadron plus a joint health command, and allows for regional aerial surveillance and intelligence gathering. A PNG version of this arrangement could specialise in littoral warfare training for Australian and PNG soldiers, and in building joint capability in the littoral battlespace.

Joint training in the new and emerging technologies of littoral warfare could also help strengthen local security, if new skills in aerial surveillance could be applied to tackling illegal, unreported and unregulated (IUU) fishing and instability in the highland region. ADF reserves could participate in this effort. Army reserves already rotate through RMAF Butterworth and conduct domestic amphibious training. This would follow the recent trend of the military co-opting civilian expertise: commercial drone operators are now being used by military contractors in the Middle East.

ADF littoral training in PNG could take place at the Igam Barracks at Lae, constructed in 2022, and the Lombrum Naval Base, currently undergoing redevelopment. Supporting ADF capability would complement and expand on the bases’ existing roles in maritime and regional security. Australian presence at these bases may also support recruitment of PNG personnel into the ADF by facilitating entry pathways. PNG soldiers could form part of a Pacific Battalion, aligning with ADF workforce changes that allow for non-citizen enlistment.

A stronger partnership with PNG should be complemented by multilateral training exercises in littoral operations with other near north partners including Indonesia and Timor-Leste, and even those further afield such as the United States, Japan and South Korea. Joint training could take place at Shoalwater Bay in Queensland and in the littoral and jungle areas of PNG, as well as the archipelagic environment around Indonesia and Timor-Leste.

The Australia-PNG model could be applied to other partners in the region to further boost Australian presence and capability. Each arrangement should cater to the political, security and economic climates of the partner nation, and utilise its strengths. For example, Timor-Leste and Indonesia could offer avenues of increased cooperation and presence in the littoral domain, as well as further north into Southeast Asia.

A deeper Australian presence in the Indo-Pacific would allow for a greater contribution to regional security. For instance, Australia could support Thailand, Vietnam and the Philippines in their efforts to modernise maritime military operations to combat piracy, IUU fishing and territorial encroachment. Australia could utilise its naval shipbuilding capacity or invest directly in related industries in the affected countries to address the economic factors that underline piracy and IUU fishing. Other ways to increase Australian presence in the region could include establishing a new maritime security program for Southeast Asia or developing dual-use ports at strategic points such as Thailand’s Kra Canal.

By building stronger defence ties, Australia can contribute to the strength of the region, helping partner nations tackle urgent issues such as domestic insecurity and climate change. Deterrence by denial relies on shifting the calculus and cost-benefit analysis of an adversary. A key aim in Australian security should be to boost our presence in our near north, not only through personnel and infrastructure, but through deeper regional relationships and interoperability.

The house always wins: how to boost ADF recruitment

The Australian Defence Force needs bold, creative initiatives to attract and keep enough personnel to reach expansion targets.

Ask Australians in their 20s what matters to them right now, and housing will rank high. The response from Defence should be ‘Well, do we have a deal for you.’

Defence should be making strikingly good housing offers.

There has been a lot of talk about innovative ways to attract the best Australian talent to Defence but not much action. At the Air and Space Power Conference in Canberra in May, Defence Secretary Greg Moriarty admitted that ‘attracting people to the ADF is proving challenging‘, and he tasked his department to ‘think really creatively‘. The 2024 National Defence Strategy also underlined this challenge, reinforcing the priorities laid out in the 2023 Defence Strategic Review and announcing a workforce review to be tabled in 2025.

Part of the problem lies in the language used by uniformed and civilian leaders when discussing the issue: they don’t emphasise the enormity of the task.The ADF doesn’t just need to be competitive by the ordinary standards of the labour market; it must lead the competition at length. Jobseekers applying for a uniformed position are signing up to the possibility of losing their lives on the job, so they make decisions far more cautiously than those considering civilian employment.

Current salary and conditions from the ADF are clearly not persuasive enough in their weighty decision-making. The ADF needs something else to convince possible candidates for service.

The government has formerly made attractive housing offers to recruit the best talent to the ADF. In 1918 it established the War Service Homes Scheme, which helped servicemen who returned from World War I and later World War II and the Korean War. The government handed out Defence Force Retirement and Death Benefits pensions to the baby boomers. And it launched the Home Purchase Assistance Scheme (HPAS), Home Purchase Sale and Expense Allowance (HPSEA) and the Defence Home Ownership Assistance Scheme (DHOAS) for Generation X. These tangible benefits were decisively better than those offered by other potential employers.

The existing support schemes, however, are not enough to win over those currently considering a military career. The HPAS, HPSEA and DHOAS have not kept pace with the increases in cost of living or housing prices, and no longer provide a significant incentive to join the ADF.

Now, Defence needs to offer something more in its promise of housing support. It could provide super-cheap living-in accommodation, better and cheaper married quarters, increase rent allowance for those living off base, and increasing HPAS and DHOAS payments. These initiatives can be paid for with the salaries of the 5000 people whom the ADF has budgeted for but failed to recruit. The initiatives would also have second order effects of injecting more federal funds into construction and the property market.

Increasing the size of the ADF is a daunting problem when the unemployment rate is low and many industries are competing for the best talent. The ADF isn’t even in the same class as those industries. The perils of military service put it out on its own.

For the ADF to win over potential recruits, it needs creative ideas that would land a knockout blow on Millennials and Gen-Z. Give them what they want—strong support on housing—and it might just win them over.

China’s control and coercion in critical minerals

This is the first of two parts of an article on coercive threats to critical minerals supply and what Australia and its critical minerals partners are doing and should do to counter them.

 

Markets for critical minerals are no longer shaping up to be the next components of the global economy to be dominated by China. They already are.

While Western nations were sleeping, China built vertically integrated supply chains for several critical minerals vital to the energy transition and high technology applications, including defence equipment.

Critical mineral supply chains are increasingly subject to Chinese government manipulation focussed on creating and maintaining monopolies and monopsonies. The scale and scope of this competition is presenting Australia and its partners with significant economic and security challenges. The Australian government’s 2 June divestment order to China-linked entities with shareholdings in rare earths developer Northern Minerals is an example of what will be needed to counter China’s domination of critical minerals supply.

Stricter foreign investment oversight may mitigate some of the more egregious attempts to grab control of minerals projects in Australia. Meanwhile, various coercive behaviours are directly affecting Australian mining interests at home and abroad and threatening growth of more diverse, secure and sustainable critical mineral supply chains. Several recent developments have highlighted the growing intensity of these threats.

The situation is becoming acute in several countries in resource-rich Africa, where Australian companies contributed 29 percent of the continent’s exploration spending for all minerals in 2023. (Canadian companies contributed another 29 percent.) Russia-influenced deterioration of security in several mineral-rich African nations is supporting China’s aspirations.

Two Australian companies, operators of world-scale lithium properties that are being developed into mines in the Democratic Republic of the Congo (DRC) and Mali, have been edged out by China-based joint-venture partners amid disputes with national governments, plummeting share prices and suspensions from the ASX. Control of the resources will consolidate China’s role as effectively the world’s central banker for lithium: it already controls around 80 percent of processing and an increasing share of global mine production.

The DRC property is the Manono Project, which has the largest hard-rock lithium resource in the world. A dispute with China’s Zijin Mining Group over the project’s ownership has resulted in Australia’s AVZ Minerals being delisted from the Australian Stock Exchange. AVZ said in September it believed China and Congolese companies, including state-owned Cominiere, were ‘acting in concert to crystalise disputes with AVZ and disrupt and delay the development of the Manono Project with the aim of seizing control’. The International Center for Settlement of Investment Disputes made orders in AVZ’s favour in January, but the company says the DRC government has failed to comply with them.

In the situation in Mali, Australian company Leo Lithium Ltd agreed in May to sell its stake in the large-scale Goulamina lithium project under development there to China’s Ganfeng Lithium, relinquishing project management. That followed a dispute with the government of Mali and its September 2023 suspension from the ASX. Leo Lithium’s shares were valued at 51 cents at the time of suspension, down from a high as $1.25 in mid-2023, shortly before the dispute emerged. Ganfeng Lithium paid Leo Lithium the equivalent of 43 cents a share. Leo Lithium said the sale was in the best interests of its shareholders in light of ‘challenging’ sovereign and security risks in Mali.

Australia, through its mining companies, has been the largest foreign investor in Mali and neighbouring Burkina Faso. Russian influence in recent years has worsened Mali’s longstanding political instability and driven further deterioration in security for the population and businesses there. Security of mines in West Africa, which the Australian Department of Foreign Affairs and Trade has sought to support through its annual mine security conference there, has become ugly.

On 30 May, the US government sanctioned companies linked with the Kremlin-controlled Wagner Group operating in Mali and the Central African Republic (CAR), saying ‘Wagner Group personnel have engaged in an ongoing pattern of serious criminal activity, including mass executions, rape, child abductions, and other brutalities against innocents in the CAR and Mali.’ The Wagner Group has taken over several of Mali’s gold mines and allegedly is producing gold to fund the Russian regime.

Market manipulation is another method of coercion. China’s supply chain dominance for several critical minerals gives it the market power to crush competition, as industry leader Angus Barker points out.

China’s investment in low-cost but environmentally harmful nickel laterite mining and smelting in Indonesia has delivered cheap nickel for batteries and stainless steel made in China. This has driven down global nickel prices, threatening the viability of higher-cost but more socially and environmentally responsible nickel production. China’s investment in new lithium mining capacity in Africa and Australia and its domination of processing could distort the market for that battery mineral.

China-linked supply also dominates markets for several other minerals and metals, including rare earths needed for both the global energy transition and defence equipment. Australia’s Iluka Resources highlighted the situation at its recent annual general meeting, with managing director Tom O’Leary saying, ‘There are clear, ongoing efforts, including by Chinese state-owned entities, to extend their nation’s monopoly by controlling Australia’s rare earth deposits.’

China has used its virtual monopoly in rare earths to apply geopolitical coercion. In 2010 it withheld rare earths supply to Japan amid a territorial dispute. This helped to trigger Japanese investment in the Weld Range rare earths project of Lynas Rare Earths in Western Australia.

Recent Australian government crackdowns have targeted the use of some coercive actions. In 2023 the Foreign Investment Review Board (FIRB) rejected a bid by the Chinese company Yuxiao Fund for a higher stake in the Browns Range project in Kimberley, Western Australia, of ASX-listed Northern Minerals. In early June the government sanctioned associates of Yuxiao Fund after discovering they had tried to circumvent FIRB rules in taking up further shares. Just before this order to dispose of shareholdings, Yuxiao Fund had successfully petitioned for removal of Northern Minerals’ executive chairman after he reported the share buying by Yuxiao Fund’s associates.

It has now emerged that Northern Minerals suffered a malign cyber security breach and data theft in March. Coincidence? Possibly. But why was this particular small mining company targeted?

One explanation is that the output of heavy rare earths from Browns Range will be processed at the under-construction Eneabba rare earths refinery operated by Iluka Resources, also a heavy rare earths producer. This will be the only non-China production of this scarce product used in high performance permanent magnets essential to components of defence equipment such as guidance systems.

Rare earths mining and processing proposals in the United States, including the Lynas Rare Earths processing plant in Texas, have been subjected to fake social media attacks in recent years, seemingly designed to stir up local opposition.

Supply chain allies, including Australia, the United States, Britain, the European Union and Canada have taken some steps to counter coercion, but as part two of this article will explain, more concerted action is needed to assure more diverse and secure minerals supply.

Paying for A Future Made in Australia

Australians want a bold vision for their future economic prosperity. They want not just to create new opportunities but to align them with our values and international commitments, not the least of which is the clean energy transition. Critical minerals should be central to this vision, and dig-and-ship is no longer the answer. The government’s 2024–25 budget outlines the vision and commits new funding to it, but more is needed to address commercial, technological and economic fundamentals.

More will need to be done, and we’ll have to pay for it. The government should invest more broadly in the sector via small loans at the early stages of project development. Demand-side investments are also needed. One option is to pay for it by improving taxation of the oil and gas sector.

The budget is bullish on critical minerals, squarely locating them in the $22.7 billion Future Made in Australia program. The nation’s mineral sector will feature significant upstream and downstream mineral production and even end-use manufacturing: $836 million to the Solar Sunshot program and $549 million for battery manufacturing through to the early 2030s.

In that vision, Australia’s extractive sector is more complex, the sector dovetails into advanced domestic manufacturing, and our economy is better integrated with those of our Indo-Pacific partners. Australia would capture greater value from our natural resources, play a bigger role in the international clean energy transition and have a greener domestic economy.

The government is taking steps in the right direction—even if it’s uncertain whether Australia’s end-use manufacturing is viable—but we need to do more and to pay for it, particularly where we aim to compete against immense international industrial policies, such as the United States’ US$369 billion Inflation Reduction Act.

Central to the government’s critical minerals measures is the Critical Minerals Production Tax Incentive, a 10 percent tax credit on processing and refining beginning in 2027. It will cost the government an estimated $7.0 billion over the next decade (and potentially $16 billion by 2040–41).

In any regular market, that incentive should create strong outcomes for some existing projects in lithium, nickel and rare earths that already integrate processing capacity. It should also attract greater capital investment and incentivise integrated domestic processing for future projects. And those projects are vital for the clean energy transition. For example, 90 percent of lithium demand in 2040 will be driven by clean energy technologies.

But this is a manipulated market. Subsidies alone won’t overcome the challenges facing the sector, and industry alone can’t overcome state-backed market manipulation.

In 2023–24, the government committed significant investments into major critical minerals projects ($400 million in loans to Alpha HPA; $840 million in loans and grants to the Arafura Nolans project) and conditionally approved $185 million in loans for Renascor’s Siviour graphite project (although that may be revised).

Those are huge loans, and we can expect only a few more in the near term. The budget indicates that the government’s critical minerals investment agencies—the Critical Minerals Facility, the Northern Australia Infrastructure Facility and Export Finance Australia—are approaching their limits.

In a capital-intensive sector, the government has committed more than $1.2 billion to a small number of projects, but massive loans alone can’t build this sector and quickly diversify supply chains.

The government will need to invest more broadly through smaller loans at the earlier stages of project development. Those projects are riskier but could more quickly attract private capital. That would also link to other government initiatives, including $566 million in exploration funding and $182.7 million (over eight years) to speed up regulatory approvals.

On the demand side, we need to continue to invest in Australian end-user solar or battery industries (and research and development) and expand Australia’s integration into existing markets in the United States, Japan, South Korea and Taiwan. Notably, this budget commits $5.8 million to a critical minerals trade-enhancement initiative run by the Department of Industry Science and Resources and the Department of Foreign Affairs and Trade.

Areas where government can commit to critical minerals investments in coming years are plentiful, but funding is not. To properly fund the Future Made in Australia policy, we must find a new source of serious revenue, and improving taxation of the oil and gas sector may be the best option.

As argued by the Australia Institute, Australia’s petroleum resource rent tax (PRRT) is lacking compared with international standards. Many liquefied natural gas projects expect never to pay the tax. There is a counterargument here that the second-order impacts of LNG projects, including direct jobs and broader industry activity, compensate. But, at a time when we need to create resilient supply chains and invest in our future economic prosperity, someone must pay the bill.

Australia’s LNG exports generated $92.8 billion in revenue in 2023, up from previous years. However, the government expects to collect less PRRT this year than in previous or future years. Our LNG production tripled from 53 billion cubic metres in 2010 to 154 billion cubic metres in 2022, but we aren’t seeing commensurate economic or government revenue impacts. Other leading global LNG supplier nations, such as Qatar, collect far more from their oil and gas sectors.

Until recently, Australia has been an attractive destination for LNG investment, and we’re near to major customers—Japan, China, South Korea and Taiwan. The government’s new Future Gas Strategy, which commits Australia to LNG through to 2050 and aims to reduce regulatory approval lag time, as well as the forthcoming revision of the National Hydrogen Strategy, are strong political signals that will counter growing concern about our regulatory environment.

The government’s vision for critical minerals and a Future Made in Australia boldly attempts to move Australia’s economy forward amid slowing global growth and recent domestic economic stagnation. Future budgets will need to build on that investment and identify new income sources to do so.

The facts about Australia’s nuclear submarine program

Australia’s planned acquisition of nuclear-powered submarines is undoubtedly ambitious and risky.

But the frequent negativity among Australian commentators is detached from the reality of the success to date of the plan’s progress and the wider strategic reasons for the project.

More than a year since the announcement of the Optimal Pathway for Australia to get its submarines, the agreement is largely on track. So far, it has hit every major milestone, the latest being the announcement of the partners that will build and sustain the submarines. This doesn’t mean it will stay on track. But it is time we stopped jumping at shadows and acting so insecure as a nation.

Discussion in the media of Australia’s nuclear-powered submarine acquisition has taken on an odd fervour. It often centres on gotcha reporting that frequently misinterprets signals from our AUKUS partners.

This approach is unhelpful. It should lead Australians to ask when they stopped believing in themselves as a nation. Why are we so convinced that acquiring the world’s best submarine capability in an era of heightened global tensions is beyond Australia’s abilities? Why don’t we think the women and men who will be asked to put their lives on the line in a conflict deserve a submarine in which they are more likely to survive?

Among the litany of criticisms, there is a spectrum of positions that range from former politicians and academics seeking to defend their legacies, to the easy assumption that something that is justifiable but risky is not going to work.

There are many valid concerns around the opportunity cost and risk. Do the strategic circumstances justify such a massive acquisition? What are the risks of Australia’s nuclear-powered submarine project failing? So, it is important to lay out some facts.

AUKUS is a technology capability pact

AUKUS is not an alliance of mutual obligation. It is not a commitment to support the US in a conflict over Taiwan. It is a technology capability pact that aims primarily to support Australia in the acquisition of the world’s most technologically advanced submarines.

There are, of course, other elements that have now been grouped under AUKUS Pillar 2, but its genesis is in Australia’s acquisition of nuclear-powered submarines. Australia may already be obliged to be involved in a conflict over Taiwan, but this is not because of the acquisition of nuclear-powered submarines.

What is the strategic justification for this capability? The world, and more specifically the Indo-Pacific region in which we are located, is changing dramatically. While comparisons to the 1930s are almost always unhelpful, what we do know is that states such as Russia, China, Iran and North Korea, which seek to challenge the existing global rules-based order, are feeling emboldened. Nowhere is this more apparent than in Russia’s invasion of Ukraine.

But this is also happening in the Indo-Pacific; China’s regular aggression towards the Philippines within that country’s exclusive economic zone is one example. Others are the rapid acceleration of China’s military modernisation alongside its demonstrations of military power in the waters and air off Taiwan, the militarisation of the South China Sea through China’s artificial islands with their missile batteries and surveillance radars, and the near-constant cyberattacks. The list goes on.

These changes do not mean conflict in the region is probable. But the barriers that have prevented it are eroding. They include the United Nations Charter and UN Convention on the Law of the Sea, underpinned by a US capability advantage in the region. This deterioration does increase the likelihood of conflict, and therefore the risk to Australia and its strategic interests.

Investment in a defence force that can respond to regional aggression that impacts on us is a central part of the deterrence strategy outlined in the Defence Strategic Review.

Investment in capabilities that would cause China to think twice about impinging on Australia’s interests is essential to conflict prevention. Should Australia’s deterrence strategy fail, having a capable defence force to respond and protect Australia’s strategic interests will be essential. Think of it as our insurance policy. So, there is a clear strategic reason for bolstering Australia’s defence capabilities.

The best investment?

Why are eye-wateringly expensive nuclear-powered submarines the most effective investment for, first, deterring aggression and, then, defending Australia if the deterrent fails?

The first point is that this is not a one-size-fits-all approach. The government is investing in the delivery, and potential acceleration, of many capabilities that bolster defence, including missiles, ships, and cyber capabilities, while enhancing its application of diplomatic statecraft within the region. Whether the government is investing enough, given the greater risks of conflict, is a longer conversation.

Australia’s strategy is not solely contingent on submarines. But the acquisition of nuclear-powered submarines is the most complex, and the most expensive, part of it.

So, why nuclear-powered submarines? It’s not, as some commentators have suggested, to supplement US forces in a conflict over Taiwan or to support a strategy of deterrence by punishment that would enable Australia to launch cruise missiles into the Chinese mainland.

While theoretically capable of this, neither of these explanations make much sense when you think about the numbers of nuclear-powered submarines Australia is acquiring: three in the 2030s and five more buy 2054.

The discussion about Australia acquiring nuclear-powered submarines is not new, but it has become more urgent due to the strategic circumstances. The nuclear-powered submarines discussion began in Australia in the 1960s. The key to it is that Australia has a vast maritime domain and depends heavily on maritime trade.

Australia’s geography means that we need to be able to position our limited number of submarines quickly and leave them on station longer to protect our maritime trade.

Submarines, especially nuclear-powered ones, have many roles from intelligence collection and surveillance to hunting other submarines, hunting ships, and striking land targets with missiles. Their versatility is part of the allure.

When you think about Australia’s vulnerabilities, its dependence on maritime trade to keep the economy going is one of its biggest. Would our maritime trade be interfered with should China ever choose to teach Australia a lesson?

This is not a far-fetched scenario, as interfering with Australian trade is exactly what China attempted to do with its campaign of trade coercion against Australia from 2020 to 2022. It makes sense that in a crisis or conflict, Beijing would take the same approach. And remember that China has numerically the largest navy in the world with more than 350 ships, including over 70 submarines, to enforce such action.

Australian nuclear-powered submarines, with their speed, endurance and ability to remain submerged for lengthy periods, dramatically changes the calculus for any country seeking to interfere with Australia’s maritime trade.

Nuclear-powered submarines can position faster to respond and generate greater uncertainty in a potential adversary’s mind as to where they might be operating and the danger they might pose. The speed and stealth involved in nuclear-powered submarine operations mean that their impact is disproportionate to the number of submarines we might have.

The ability to reduce the risk of interference with Australian maritime livelihood, and the ability to make an adversary stop and wonder about the safety of its own trade at the hands of Australian submarines, is a significant advantage. Although we have significant maritime vulnerabilities, so does China, with more than 60 per cent of its trade coming via the sea.

Opportunity comes at a cost

The acquisition of nuclear-powered submarines comes with significant costs, not just financial. There are workforce implications, and implications for Australia’s defence industrial base.

Because of the lack of a nuclear industry in Australia, and the nature of the agreement, there is a high dependence on the US submarine industrial base for the delivery of three Virginia-class nuclear-powered submarines in the 2030s. Australia must also depend on Britain to provide the design of the follow-on submarines for delivery beginning in the 2040s—the SSN-AUKUS boats—and to build the self-contained nuclear reactors that will power them. But we are already largely dependent on others for most of our high-tech defence capabilities. This isn’t much of a change.

But why can’t we do this with conventional submarines and accept a higher degree of risk. Conventional submarines are slower and have less endurance. That means you need more of them to achieve the same effect, though it can be achieved.

The greatest issue is that conventional submarines need to snorkel, coming to just below the surface of the water and raising a hollow mast to respirate their diesel engines while they recharge the batteries they use for running fully underwater. The faster they manoeuvre, the more frequently they need to do this. When they do this, they are subject to detection. Detecting conventional submarines in this period of vulnerability will be greatly assisted by artificial intelligence, which helps surveillance operators pick out the sound and visual traces from background noise.

Not only are conventional submarines increasingly likely to be detected, but we must remember that detection puts at risk the lives of the crew. In the event of conflict, detection for a submarine means almost certain sinking, and escaping from a submarine is not often a realistic prospect for the crew.

When you consider the increased likelihood of conflict in the region, the ability of potential threats such as China to interfere with Australia’s essential maritime trade, the ability of submarines to influence this outcome by either deterrence, or disproportionately engaging an adversary’s maritime capabilities, coupled with the likelihood of a conventional submarine being detected and sunk while trying to do this with a significant loss of Australian life, the strategic reasoning becomes clear.

Often missed in the conversation is the deterrent impact of the AUKUS agreement itself, an impact that should not be understated. The fanfare surrounding the original announcement in 2021 and the announcement of the nuclear-powered submarine Optimal Pathway in 2023 were staged specifically to send a message to China.

That message was that China’s aggression in the Indo-Pacific region had reached such a level that the US and Britain were willing to transfer their most sensitive technology to Australia, something they had declined to do in the 1960s.

A strategy of deterrence is built on three key principles: capability, credibility and communication. The signal that came from the formation of AUKUS is in many ways just as important as the nuclear-powered submarine capability itself.

When commentators and the media express alarm about the demands of a submarine industrial base, they miss the point that AUKUS is not just about the capability. It is equally about the communication and credibility that underpin deterrence.

Should the US withdraw from AUKUS following a return of Donald Trump to the presidency or because its own submarine construction program is lagging, it would be fundamentally undermining its own strategy of deterrence in the Indo-Pacific.

In a region of states now hedging their bets, a failure by the US to deliver on its AUKUS promises would see it lose all influence within the region, and it would lose the strategic competition for the western Pacific itself. It’s not that AUKUS is too big to fail, but there is much more at stake for the US than three Virginia-class submarines. When viewed in this light, Australia should not be so nervous.

When it comes to AUKUS, it’s time for Australia to believe in itself. Our value proposition in this deal is significant. We are not simply being given submarine capability. We are an essential element of the US deterrence strategy.

The plan, despite its risk and complexities, is on track, and the Australians who put themselves in harm’s way deserve a capability that increases their chance of surviving.

Submarine agency chief: Australia’s SSNs will be bigger, better, faster

The nuclear-powered, conventionally armed submarines to be built under the AUKUS agreement are on track to be the world’s most advanced fighting machines, says Australian Submarine Agency Director-General Jonathan Mead.

‘They’ll have greater firepower, a more powerful reactor, more capability and they’ll be able to do more bespoke operations, including intelligence gathering, surveillance, strike warfare, special forces missions and dispatching uncrewed vessels, than our current in-service submarines,’ Vice Admiral Mead says in an interview.

With a displacement of more than 10,000 tonnes, the SSN-AUKUS class will be larger than current US Virginia-class attack submarine of just over 7000 tonnes. Australia’s six conventionally powered Collins-class submarines are each about 3300 tonnes.

The SSN-AUKUS submarines to be built for Australia and Britain, with help from the United States, will be a ‘bigger, better, faster and bolder’ evolution of Britain’s Astute-class submarines, Mead says. The design will have the advantage of more US technology and greater commonality with US boats.

Australian steel will be used to build Australia’s SSN-AUKUS submarines, subject to a comprehensive qualification process expected to be completed in the first half of 2025.

The steel is also being qualified to both the British and US standards. Having Australian industry involved will deepen and bring resilience to the three nations’ supply chains, with greater mass, confidence and scale, Mead says.

In April, major US warship builder Newport News Shipbuilding lodged an initial purchase order for processed Australian steel from Bisalloy Steel’s Port Kembla plant for testing and training.

The government has committed to having eight nuclear submarines, Mead says, ‘and we’re on track’.

‘We’re planning on three Virginias and five SSN-AUKUS. That takes the program through to 2054.’

The SSN-AUKUS submarines built by Australia and Britain will be identical, incorporating technology from all three nations, including cutting-edge US technologies.

Those for the Royal Australian Navy will all be built at Osborne in South Australia. ‘Osborne will be the fourth nuclear-powered submarine shipyard among the three countries and one of the world’s most advanced technology hubs,’ Mead says.

The SSNs will all have an advanced version of the AN/BYG-1 combat system, used in the Collins class and in US submarines, and the Mark 48 heavyweight torpedo, an advanced version of which has been developed by the United States and Australia.

Mead says each Virginia has a crew of about 133 and the likely size of the SSN-AUKUS crew is being calculated as design work progresses.

The massive scale of the program and the nuclear element has understandably attracted strong attention, including criticism and questions about how skilled workforces will be found to build and crew the boats. Commentary has included suggestions that AUKUS is ‘dead in the water’.

Mead has no doubt that the project can be completed as planned. ‘Every day we ask ourselves the same question: ”Are we on track?” The answer is “yes.”’

For the program to succeed, it must be a national endeavour involving the Commonwealth, states and territories, industry, academia and the Australian people, Mead says. ‘To develop that social licence, we must provide confidence that we are going to deliver this capability safely and securely and not harm the environment.’

To build a nuclear mindset there must be an unwavering commitment to upholding the highest standards of safety, security, stewardship and safeguards, with all decisions underpinned by strong technical evidence. ‘It’s essential that everything we do is underpinned by strong technical and engineering evidence,’ he says. The reactor will be delivered as a sealed and welded unit that won’t be opened for the life of the submarine.

Mead acknowledges that recruiting is the big challenge.

He says comprehensive training of crews has begun, with Australian officers and enlisted sailors already passing nuclear training courses. ‘Australian officers have also topped courses in both the US and UK, showing that our people are up for the task that lies ahead.’

It’s intended that about 100 Australian officers and sailors will be in US training programs this year and they’ll go on to serve on US submarines as part of their crews. Other Australians will train in Britain and serve in Royal Navy boats.

Mead’s agency now has 597 staff, including engineers, project managers, lawyers, international relations specialists and policy makers. That is likely to rise to about 1000.

Given that Australia is the first non-nuclear nation acquiring nuclear-powered warships, the agency is working flat out to ensure rigorous regulations and safeguards are in place, along with the international agreements to back them.

Mead says Australia’s Optimal Pathway for acquisition of nuclear-powered attack submarines (SSNs) was designed to ensure that Australia would meet the exhaustive requirements to own and operate such vessels as soon as possible.

According to the Optimal Pathway, the first stage will see the first of several US and British submarines operating from the base HMAS Stirling in Western Australia as Submarine Rotational Force–West (SRF-West) from 2027.

In 2032, Australia will receive the first of three Virginia-class submarines from the US. One of the Australian officers now in US submarines is likely to be its commanding officer after extensive service on a US boat. The first two of those boats will be Block 4 Virginias, each with about 10 years’ US service, and they’ll be delivered after two years of deep maintenance and with 23 years of operational life left in them, Mead says, adding that the third US boat will be a brand new Block 6 Virginia. The US Navy has not yet put the Block 6 design into production.

The plan is to have the first SSN-AUKUS completed in Australia by early 2040s. Australia has an option to ask for two more Virginias if the SSN-AUKUS effort is delayed.

Mead says that how long the Collins are kept operational will be a decision for the government of the day as the SSNs arrive. The current plan is to begin big overhauls, called life-of-type extensions, for the Collins class in 2026.

He acknowledges that having the Virginias, SSN-AUKUS and Collin classes all operational could bring supply chain and training issues, but he believes those challenges can be handled. Having combat systems and torpedoes that are common to all these submarines will help.

Australians are on the design and design review teams for SSN-AUKUS. ‘We are embedding more technical and engineering people into the British program.’

Large numbers of Australian workers will soon be embedded in the British submarine construction site run by BAE Systems at Barrow, UK. ‘Many will come from the Australian Submarine Corporation, where they’ve been working on Collins. They’ll deepen their expertise, very specifically on how to build a nuclear-powered submarine,’ Mead says.

BAE will bring the intellectual property to the partnership with ASC to develop Osborne into a shipyard for nuclear-powered submarines.

It’s often suggested in Australia that, because the US has fewer submarines than it believes it needs, it will refuse to hand any over to Australia if its own situation worsens.

Senior American officials have expressed strong alternative views on why the project’s success is very important to the US and why it is in their own interests to make it work.

The US publication Defense News quoted the commander of US submarine forces, Vice-Admiral Rob Gaucher, telling a conference in April that co-operation with Australia would help the US submarine fleet in important ways. These included increasing the number of allied boats working together on operations. Having Australian personnel gaining experience on US boats would help ease a recruiting shortfall in the US Navy that flowed from the Covid-19 epidemic, and having access to the Australian base at HMAS Stirling in WA would extend the US Navy’s reach and maintenance options.

Gaucher said that, because the Australian SSNs would operate in co-ordination with American boats, ‘we get more submarines far forward. We get a port that gives us access’ to the Indo-Pacific region.

He said that by the end of this year the US Navy would graduate about 50 Australians as nuclear-trained operators and another 50 submarine combat operators. They would train on US submarines for the rest of this decade, increasing the number of people qualified to stand watch on American boats.

‘We get the opportunity to leverage an ally who can help us with manning and operating. We get surge capacity because now I have another area [where] I can do maintenance,’ Gaucher said.

Dan Packer, a former navy captain who is now the US director of naval submarine forces for AUKUS, told Defense News that Australia had eight officers in the inaugural training cohort that began in 2023. Three of those eight will be moved into an accelerated training pipeline, and one will eventually be the first Australian Virginia-class commanding officer.

Packer said the US was helping Australia build its submarine force from about 800 personnel to 3000. This year the US would bring 17 Australian officers, 37 nuclear enlisted and 50 non-nuclear enlisted into its training program. ‘And we’re going to up that number every year.’

These personnel would be fully integrated into US attack submarine crews until Australia could stand up its own training pipeline.

At some point, he said, the US Navy would have 440 Australians on 25 attack submarines, with each fully integrated crew including two or three Australian officers, seven nuclear enlisted and nine non-nuclear enlisted sailors. ‘They will do everything that we do’.

Mead says Australian navy personnel have been aboard the US submarine tender USS Emory S. Land for several months learning to maintain and sustain nuclear-powered submarines, and a US Virginia-class boat will visit HMAS Stirling for maintenance this year. Parts will come from an evolving Australian supply chain.

That visit will not include reactor work, ‘but ultimately, we will undertake work on systems that support the sealed power unit, within the compartment that houses it on the submarine,’ Mead says.

He says providing the industrial base to build and sustain the submarines, and crewing them, will involve about 20,000 jobs. A lot of work is being done with universities, technical schools and industry to prepare this formidable workforce.

Mead has long been a student of international relations and says the decision to equip Australia with SSNs was based on recognition that the Indo-Pacific is becoming a more dangerous place and ‘nuclear submarines provide a very effective deterrent’.

He rejects the argument that technology will soon make the oceans too transparent for crewed submarines to operate safely. ‘Our allies and partners and other countries in the region do not see it that way, and neither do we. We’ve done our analysis, and we see that crewed, nuclear-powered submarines will be the leading war-fighting capability for the next 50 to 100 years.’

He’s at pains to stress that the submarines will always be under full Australian sovereign control.

‘They will always be under the Australian government’s direction, operated by the RAN, and under the command of an Australian naval officer.’

The Goldilocks problem in defence industrial policy

Export control regulations can be intensely personal. This is often missed in esoteric discussions of defence industrial policy and its future under the AUKUS partnership. A new study from ASPI brings the point home, illuminating AUKUS regulatory reform not from the perspective of defence officials and think-tank wonks but of Australian businesspeople who deal with it every day.

We debate process tweaks at the Defense Export Controls Branch office (DECO) or in the Defence Industry Security Program. Meanwhile, small-business owners across Australia go home at night wondering about an export authorisation request sitting on a desk somewhere. A three-week delay could mean missing a mortgage payment on the family home.

Small-business owners faced with such challenges struggle to find a voice in ongoing debates over what it will take to achieve AUKUS’s broad strategic goals. At the same time, the largest prime contractors lose hope that Defence will be able to execute its ambitious proposals for expanding the submarine force and empowering industry collaboration. Both groups feel that Defence is not listening to their concerns.

Meanwhile, Defence attends conferences and organises seminars. It posts rule changes for public comment and incorporates feedback into its operational planning. What is the disconnect? Why is everyone talking past one another?

Identifying who has succeeded in Australia’s challenging defence-industry environment suggests an answer to this question.

Long hobbled by meager domestic demand, cumbersome Defence procurement practices and a lack of alignment with international security standards, Australia’s domestic defence industry is composed disproportionately of small enterprises. At the same time, most of Defence’s procurement dollars go to multinational prime contractors and their Australian subsidiaries. Rarely are these local subsidiaries engines of growth. Rather, they are necessary vehicles for serving the Australian Defence Force and are charged with making the most of a difficult situation.

The winners are in the lucky middle: those few Australian companies that have grown big enough to stand out from the crowd. Not too small, they are the champions of policymakers looking for success stories. Not too large, they maintain their local connections and Australian roots. When one of them calls, DECO picks up the phone. Export control administrators understand their products and markets. Everyone wants to help.

When Defence talks to such companies about how to make AUKUS successful, it is gathering feedback from a biased sample. It is talking to winners from the past. If it wants to stimulate growth across the broader defence industry, it needs to enable the winners of the future. That means creating an environment where businesses across the size spectrum can thrive.

Defence must go beyond business-as-usual if it is to realise gains from the AUKUS partnership. The goal is not to make international collaboration possible, but to make it easy. Australian small businesses face a host of disadvantages relative to their peers in the US and Britain. They lack the knowledge and networks necessary to sell abroad. They lack the human and financial resources to build and maintain compliant business systems. They lack the capital to scale up and deliver on orders to a defence customer with 1.3 million active-duty servicemembers rather than 77,000.

Large businesses, on the other hand, lack a sovereign partner comparable to that of the US or British governments. Australian public investment in early-stage research and development is negligible next to that of the United States. It is those public investments that feed defence innovation pipelines and fill gaps where private businesses can’t be profitable. Acquisition practices are similarly rudimentary, too fearful of potential impropriety to leverage the contract structures that will enable the growth of Australian global primes. Trade control administrators rely too heavily on the in-house expertise of large, private-sector partners, failing to appreciate their own critical role.

Free markets, and the creative destruction they embody, power the growth of Western defence industries. But the same market forces that reward innovation and punish inefficiency mean that AUKUS is both an opportunity and a threat. Get it wrong, and it could achieve the opposite of its intended purpose, crushing Australia’s defence industry under the weight of the world’s strongest competitor.

To avoid this fate, the government must be an enabler and a critical element of competitive advantage for Australia’s defence industry. It must bring its export control regulations up to international standards and protect the alliance’s technological secrets. It must avoid the mistakes that plague the US International Traffic in Arms Regulations by doing it better and faster, opening new opportunities for Australian businesses as well as US ones looking for a smoother path to international markets. It must address critical bottlenecks that inhibit growth, from industrial security infrastructure to international business development.

The government must be an active partner with all Australian businesses. Rather than focusing on past successes and celebrating easy wins, it must turn its attention to segments of the defence industry that have been poorly served.

Small businesses need far more help learning to operate in the complex and costly environment of international defence procurement. They need resource support comparable to that provided to foreign competitors if we expect them to succeed.

Large businesses need a sovereign partner that respects their capabilities while understanding the role it plays. Private money spent on ITAR experts is no replacement for Defence Export Controls support in facilitating foreign military sales data-transfer agreements. Ministerial announcements of a new regulatory vision are of little use when mechanisms don’t exist for translating strategy into action.

Australia’s defence industry has a Goldilocks problem. We all love businesses that are not too large and not too small. But achieving Defence’s goals for industrial resilience requires addressing the different needs of small, medium and large enterprises. It requires engaging in honest discussion over the deficiencies of existing programs and reimagining them for a new future under AUKUS.

Australia can lead in clean-energy waste management

As the world transitions to clean energy technology, managing the hazardous waste that it produces becomes an urgent issue. Australia is well positioned to take the lead in this field and create a vertically integrated supply chain for critical-minerals and hazardous-waste management. It can do so by building on its excellent import-export infrastructure and expertise in natural resource extraction and handling.

Ensuring the safe disposal of hazardous waste is essential in a resilient and reliable green industry. The value chains for every currently viable green technology produce materials that are hazardous to the natural environment, and recycling cannot eliminate them entirely.

Thanks to a dry climate, low seismic activity, and sparsely populated areas, Australia is well positioned to build an industrial capacity in clean energy waste management and manage waste produced domestically as well as that of strategic partners. For example, Tellus’s operational Sandy Ridge repository in Western Australia handles, and their future Chandler repository in Northern Territory will handle, waste produced around the country and can even take certain waste from nuclear submarine operations. By working with the traditional owners of the land, such facilities can also give an economic boost to the area, thereby building the community support needed to continue developing domestic green industries.

The investments required to facilitate a clean energy industry have already been made. The Australian government committed $840 million to the Arafura Resources project, which will create the nation’s first combined mine and refinery for minerals. At the sub-national level, the Middle Arm Sustainable Development Precinct in the Northern Territory added depth to the industrial base and infrastructure. The combination of such efforts has created an ecosystem for not only exporting clean materials but operating a world-leading hazardous waste management industry.

It is imperative that consumers understand that the premium paid on green minerals ensures that the industry is sustainable. The safeguards not only include labour standards but prevent disastrous ecological damage during production associated with the cheaper products.

Australian critical- minerals producers already face difficulty in competing on price. Through vertical control of supply chains, Chinese firms can manipulate the price of lithium and other critical minerals, grossly distorting market forces and undermining the viability of non-Chinese firms. While there was a market correction in the price of nickel in 2022, the development of the Indonesian nickel mining and processing industry, supported by Chinese investment, has led to ever increasing product surpluses. This prompted Australian private nickel producer Wyloo Metals to announce a temporary shutdown of its mines, while mining company BHP’s Nickel West operations at Kambalda are under review.

Legislation such as the US Inflation Reduction Act may provide some relief. The law includes guardrails that favour US strategic partners in development of critical minerals supply chains. Financial incentives and mandates to use clean materials support allied manufacturers and prevent China from dominating industries that are vital to US national security. As a strategic partner, Australia is well positioned to capitalise on this.

In an attempt to improve transparency about the true costs of critical mineral production, Australia and the United States called on the London Metals Exchange to differentiate between ‘clean’ nickel produced by countries with high environmental, social and governance standards and ‘dirty’ nickel produced at high cost to the environment. The exchange rejected the proposal, however, citing challenges in liquidity of trading.

An alternative way to increase consumer awareness would be to introduce ethical production labels similar to battery passports and build up support through such initiatives as Buy Australian. Coordination among strategic partners is essential to sending strong demand signals and promoting price stability during market distortions. Without this, the risk of closing more mines and processing plants will only increase.

Australia can and should play a leadership role in clean energy waste management and in lifting environmental standards throughout the Indo-Pacific. As the global race for critical minerals intensifies, it’s easy to overlook environmental costs when supply chains don’t have real solutions to the problem of toxic or radioactive waste. But in the long term, such projects will lose public support and jeopardise an industry that is vital to the green transition and national security. Australia must prioritise holistic approaches to green technology or risk ceding its position as a global leader in the mining industry and becoming entirely reliant on China for materials.

Making the most of AUKUS: capitalising on Australian competitive advantage

Opinions vary on the AUKUS partnership’s likely long-term effects on Australia’s military capacity. To some, it is a once-in-a-generation opportunity to foster international collaboration, spur private investment and build a more robust domestic defence industry. To others, it is an invitation to open more Australian tenders to prime contractors from the US and Britain, thereby drowning Australia’s small businesses under a tsunami of foreign competition.

As ASPI notes in a new study, the course the alliance takes depends on Australia’s ability to get details right. Its fate is entirely in its own hands. As in any competitive endeavour, winning will require making the most of existing advantages.

Few technology areas illustrate the importance of Australia’s competitive advantages as hypersonics do. Australia has two important assets which, properly managed, could make the country not only a critical enabler of joint hypersonics research and development but a global leader in its own right. Those advantages are geography and brainpower.

Start with brainpower. In 2020, the United States’ hypersonics research and development efforts were just moving from scattered early-stage research into major prototyping programs of record. That same year, its Department of Defense awarded Texas A&M University a five-year contract to establish and manage the University Consortium for Applied Hypersonics.

Australia got in on the effort early. Defence Science and Technology Group investigations of the capability go back at least to 2006, through joint experimentation with the US Air Force Research Laboratory. In late 2020, the Southern Cross Integrated Flight Research Experiment emerged from that partnership. Six Australian universities are affiliated with the consortium led by Texas A&M. In January 2022, the Morrison government inaugurated the Australian Hypersonics Research Precinct. Spinoffs abound.

Growing out of that nascent innovation ecosystem was the Australian startup Hypersonix, one of the few small companies to challenge the global defence prime contractors and become a well-known name in the field. Hypersonix was recently awarded a contract through the US Defense Innovation Unit to provide a hypersonic drone for testing in early 2025.

But the rate of progress may be peaking. Significant headwinds limit Australia’s ability to take full advantage of early investments. One of these is its system for controlling export of sensitive military technologies.

Contrary to common belief, the main problem is not that Australian hypersonics development efforts are hamstrung by the United States’ draconian International Traffic in Arms Regulations. On the contrary, Australian export controls are inadequate—especially for technologies with strong national security implications like hypersonics. Failing to protect military secrets to the level expected by international partners restricts the ability of Australian businesses and academic departments to participate fully in international innovation efforts. Addressing this gap while avoiding the dysfunction of the US system will be critical to making the most of AUKUS Pillar II.

A second factor restricting Australia’s ability to capitalise on brainpower is its industrial security program. As important as protecting military secrets is maintaining a system for sharing them among those who need to know. This requires secure facilities, robust information technology systems and thorough vetting of researchers and engineers, including university students. The Defence Industrial Security Program, charged with helping private-sector organisations achieve these objectives, is slow, expensive and poorly integrated with its counterpart in the US.

Fixing these problems is largely a matter of legislation, regulation and organisation. Investment will be necessary, but not much compared with other spending. The secret of success is turning the focus away from glitzy hardware and towards the administrative details that enable its development and eventual shift into production.

Along with Australian brainpower goes fortunate geography. Test range availability is holding back US development programs, as highlighted in a recent annual report from its operational test and evaluation enterprise. Over-water ranges inhibit the ability of US researchers to study terminal phases of flight and recover test vehicles. They open opportunities for observation by strategic competitors. Australia possesses vast amounts of the flat, empty terrain that’s low in electromagnetic interference. That land is ideal for testing hypersonic systems.

What does it take to capitalise on this competitive advantage? First, Australia must have classified information management systems that operate seamlessly with those of allied partners. Operational testing requires vast amounts of data. This data is recorded on test vehicles, transmitted through myriad communication channels and shared among developmental engineers.

Australians can’t fully participate in that data-powered ecosystem because of US and Australian rules for classified data handling that restrict access to enabling technologies such as encryption. Compounding the problem are poor integration between partner data-management systems and, again, export control regulations that discourage joint hardware development and draw out timelines for technical assistance agreements.

A second obstacle to making the most of geography is technical standards. Global supply chains are enabled by shared standards that regulate everything from manufacturing to energy. Standards are what allow semiconductors from Taiwan to fit automobiles from Mexico, and Australian components to fit French aircraft auxiliary power units. Standards across the defence industry allow deconfliction of electromagnetic spectrum, safe handling of explosives and so on.

Many of the standards employed by Australia’s defence industry do not match those of international partners. This makes collaboration difficult. Any partner wishing to make use of Australian test facilities would add time and money to its program schedule in addressing such complications.

Hypersonic vehicles are one of many technology areas in which Australia has much to offer. Too often, the critical bottleneck is not scarce resources but a lack of basic planning and coordination. Such prosaic obstacles should not prevent Australia from making the most of its competitive advantages. If we are to fully capitalise on the AUKUS opportunity, we must start by fixing the little stuff.