Australia’s deputy prime minister and defence minister, Richard Marles, opened ASPI’s Sydney Dialogue with a warning that Australia must establish a much stronger technological base. An edited version of his speech follows.

Can I start by acknowledging the Gadigal people, the traditional owners of the land on which you are all meeting this morning. And let me also acknowledge the Ngunnawal people, the traditional owners of the land from which I speak to you, right now.

And in acknowledging both, say how proud I am to be a part of a government which is completely committed to seeing our First Nations peoples recognised in our constitution through the establishment of a Voice to Parliament. Later this year, Australians will be given the opportunity of placing their vote in support of that recognition.

Climbing the technological ladder is really Australia’s great challenge.

And it is particularly our challenge, more our challenge than almost any other country in the world.

The Harvard Index of Economic Complexity is a measure that has at one end of the spectrum the most high-tech sophisticated services economy, which happens to be Japan. And at the other end, the most basic subsistence economy, it is, in many respects, an index of modernity—an index of technology.

Right now, Australia ranks 91st on that index. We are sandwiched between Namibia and Kenya.

And while that’s obviously not a true reflection of where we stand in the list of modernity in the world, it does speak to the fact that as an economy we are highly dependent upon our primary industry.

Now, primary industry is really important for our country and right now it is the hope.

But we as a nation must be more than that.

And that really means that we have a national challenge to climb the technological ladder, and in the process, change our relationship, our cultural relationship to science.

In many respects, I think there is no greater microeconomic reform in Australia today than infusing our economy with science and technology, which is why what you’re talking about over the next two days [at the Sydney Dialogue] is so profoundly important for our country.

And while we have a proud history in science and in discovery, as commercialisers of that science, of infusing it into our own economy, we do poorly relative to other developed nations, and this we must change.

That is a challenge across our general economy. But it’s also a fundamental challenge in respect of our defence industry.

And it’s essential to advancing our national interest in the world that we climb the technological ladder when it comes to defence industry. Because in so many ways, the history of human contest is ultimately a history of technology competition. And we must be at the forefront of that.

As [ASPI executive director] Justin [Bassi] said, the AUKUS announcement, and the technology-sharing arrangements embodied in AUKUS between Australia, the United States and the United Kingdom, are very central to our strategy in terms of improving the technology within our defence forces and within our nation’s defence industry.

Certainly, acquiring a nuclear-powered submarine capability for Australia and becoming just the seventh country in the world to be able to operate that technology will be a very significant step forward in capability for our nation.

But the pillar two area of AUKUS, which seeks to look at other emerging technologies, is going to be fundamentally important for our nation as well. In areas such as hypersonics, artificial intelligence, quantum; making sure that we are at the forefront of all of that is critically important in terms of making sure that when it comes to human contest, we are right there with a technological edge.

And this is very central to how we are thinking about our strategic circumstances and how we’re thinking about advancing our national interests in the context of those strategic circumstances.

So, I really wish you all the best for the coming two days. It’s important that we are talking about what technologies we can bring to bear within our wider economy and certainly within our defence industry.

But as we think about the new technologies which are out there, and the new technologies that we can infuse within our economy, it’s also really important that we are not just having another conference about new technologies, but that we are having the conversation about Australia’s relationship to technologies.

That’s actually what we have to change. We need to be thinking about how Australia specifically should be and absolutely can be at the centre of global technology advancement. To say that is our great national challenge.

And with that, I really wish you all the best for the coming two days.

And I hope the Sydney Dialogue fulfils all the promise that you have for it.

The issue of nuclear non-proliferation is back in the headlines, thanks to details announced last week about Australia’s acquisition of nuclear submarines under the AUKUS pact.

The deal, which may cost Australia upwards of $300 billion over the next 30 years, involves Australia purchasing three Virginia-class nuclear-powered, conventionally armed submarines by the early 2030s. Australia will also build its own nuclear-powered submarines using US nuclear technology by the 2050s.

Australia, the UK and the US have said the deal complies with their nuclear non-proliferation obligations.

But China has said the AUKUS deal represents ‘the illegal transfer of nuclear weapon materials, making it essentially an act of nuclear proliferation’.

So what are Australia’s obligations under the nuclear non-proliferation regime and does this deal comply?

To answer this question, you need to know a bit more about two key treaties Australia has signed up to: the 1968 Nuclear Non-Proliferation Treaty (sometimes shortened to NPT) and the 1986 Raratonga Treaty.

The Nuclear Non-Proliferation Treaty essentially requires nuclear-weapon states that are a part of the treaty (the US, the UK, China, Russia and France) to not pass nuclear weapons or technology to non-nuclear-weapon states. (Of course, other countries do have nuclear weapons but they aren’t part of the treaty.)

Crucially, the treaty only relates to the use of nuclear materials associated with nuclear weapons. It has a specific carve-out in it for the provision of nuclear materials for ‘peaceful purposes’ (in Article 4).

The treaty also outlines processes to ensure the International Atomic Energy Agency monitors nuclear programs and nuclear materials even if used for peaceful purposes (including uranium and the technology to use it).

Australia has a number of subsidiary arrangements with the International Atomic Energy Agency that outline how these safeguard arrangements work.

Despite what critics may say, Australia’s nuclear-powered engines under AUKUS comply with the written rules of the treaty and these subsidiary agreements.

On the face of it, you might think the term ‘peaceful purposes’ would rule out use for military submarine propulsion. But the definition focuses on using nuclear material for purposes that don’t involve the design, acquisition, testing or use of nuclear weapons.

All AUKUS partners have emphasised that the nuclear-powered submarines Australia is to acquire will only carry conventional weapons, not nuclear weapons.

Australia’s agreement with the International Atomic Energy Agency clarifies what is covered by the treaty and the concept of peaceful purposes.

Article 14 of this agreement says ‘non-proscribed military purposes’ are allowed.

Effectively, the Australian government has interpreted this to mean that nuclear materials can be used for naval nuclear vessel propulsion. That is a usage unrelated to nuclear weapons or explosive devices.

Some have suggested this argument creates a risky precedent that nuclear materials—beyond the supervision of the International Atomic Energy Agency—could be used to make weapons.

But Australia has undertaken to comply with its safeguard obligations with the International Atomic Energy Agency for the AUKUS deal. This builds on its existing practice related to nuclear materials held for other ‘peaceful purposes’ (like research and medical uses).

Australia is also a signatory to the Raratonga Treaty (also known as the South Pacific Nuclear-Free-Zone Treaty), a regional agreement that supports the Nuclear Non-Proliferation Treaty.

Signatories to the Raratonga Treaty have effectively agreed to maintaining a nuclear-weapon-free zone in the South Pacific.

The Raratonga Treaty entered into force in 1986. It provides that no ‘nuclear explosive devices’ can enter the nuclear-free zone outlined in the agreement. It also includes other limitations on the distribution and acquisition of nuclear fissile material (which are materials that can be used in a nuclear bomb) unless subject to specific safeguards.

The Raratonga Treaty accounts for differences in opinion about Australia’s and New Zealand’s approaches to vessels carrying nuclear weapons (New Zealand doesn’t allow nuclear-weapon-carrying vessels to visit its ports, while Australia does).

But more importantly for the AUKUS deal, this treaty doesn’t strictly exclude a signatory from using nuclear propulsion. That’s as long as the engine isn’t considered ‘a nuclear weapon or other explosive device capable of releasing nuclear energy, irrespective of the purpose for which it could be used’.

Provided the engines meet this definition, the AUKUS deal complies with the Raratonga Treaty as well.

Australia will have particular obligations under this treaty to deal with the nuclear waste. Defence Minister Richard Marles has outlined that waste from the vessels will be kept on Department of Defence land on Australian territory (and not disposed of at sea).

More detail is still to come. But the US and UK have decided that the risks involved in sharing nuclear-propulsion technology with Australia are worth it to hedge against a more aggressive China.

On the face of the announcements made so far, the deal complies with international law, despite accusations to the contrary from China and other critics.

With Richard Woolcott, you always had to take the smooth with the smooth.

No rough edges for this wattle-proud Australian who was one of our greatest diplomats. His smarts and his steel always presented in suave and subtle hues.

Woolcott encapsulated Australia’s major diplomatic ambition—then and now—in a single phrase. In Asia, he said, we must be ‘the odd man in, not the odd man out’. Typical Dick Woolcott—the central point offered with an optimistic up beat, accompanied by the broadest of smiles.

On Woolcott’s death in Canberra last week at the age of 95, the plaudits aimed high: a ‘legend’, a ‘diplomat’s diplomat’, a ‘giant’.

As a happy warrior, Woolcott used a jest to open his memoir about his 40-year career from diplomatic cadet to department head. He recalled walking into the Department of Foreign Affairs and Trade in 1988, shortly after he’d been appointed its secretary, accompanying the new foreign minister, Gareth Evans:

Beside me, Gareth asked: ‘How many people work here?’

‘About half,’ I replied. ‘But between us we can change that.’

It was a quip about an institution that defined his life. Woolcott talked of ‘the department’ with a mixture of affection and exasperation and enjoyment.

After the serious business of the memoir reflecting on diplomacy from Joseph Stalin’s death to the Bali bombings, Woolcott produced a second book on the lighter side of international life, Undiplomatic activities, filled with anecdotes and tall tales (and launched by former prime minister Bob Hawke on the sidelines of the APEC summit in Sydney in 2007):

Required not only to sacrifice a settled home life in the service of their country, diplomats must also heroically offer up their livers to booze, their stomachs to endless official dinners, their integrity to dangerous liaisons and the weasel art of spin, and their sanity to the pomposity and weird protocols that are an integral part of the international scene.

In explaining those weird protocols, Woolcott several times quoted to me a maxim of another Australian mandarin, James Plimsoll: ‘A decision not to make a decision is definitely a decision.’ Woolcott’s character, though, pushed against no-decision havering.

See Woolcott’s smarts and steel in the two issues he nominated as the most high profile of his career: the ‘disappointing and negative’ experience of East Timor and the creation of APEC (‘an important foreign and trade policy success for Australia’).

As Australia’s ambassador in Jakarta when Indonesia invaded East Timor in 1975, Woolcott and the Australian embassy were better informed about Indonesian military’s plans than Indonesia’s foreign ministry. Even critics who said that Australia’s close knowledge became silent acquiescence recognised the professional brilliance of the Australian embassy’s work, and its intelligence coup in giving Canberra three days’ advance notice of the time and place of the Indonesian invasion.

On 5 January 1976, Woolcott sent a long dispatch from Jakarta on ‘Australia, Indonesia and East Timor’ that became one of the most notorious leaked telegrams in Australian diplomacy.

No matter how unjust the invasion may seem, Woolcott wrote, ‘Indonesia could not have been diverted from this course by Australia.’ Canberra must accept the reality of Indonesia’s incorporation of East Timor, he advised:

It is on the Timor issue that we face one of those broad foreign policy decisions which face most countries at one time or another. The government is confronted by a choice between a moral stance, based on condemnation of Indonesia for the invasion of East Timor and on the assertion of the inalienable right of the people of East Timor to self-determination, on the one hand, and a pragmatic and realistic acceptance of the longer term inevitabilities of the situation, on the other hand. It’s a choice between what might be described as Wilsonian idealism or Kissingerian realism. The former is more proper and principled but the longer term national interest may well be better served by the latter. We do not think we can have it both ways.

The following month the cable was leaked and was on the front page of the Canberra Times. A former Labor leader and foreign minister, Bill Hayden, commented decades later that Woolcott was guilty of writing too vividly in tendering advice. Diplomats, Hayden observed, need to use more obscure language when dealing in ‘realpolitik’.

The creation of APEC in 1989 played to Woolcott’s vision of the central place of Southeast Asia (and Indonesia) in Australia’s Asia destiny.

For Australia, ASEAN held the crucial cards in the effort to form APEC. The initial omission of the United States from the core membership proposed by Prime Minister Bob Hawke in floating the idea reflected this concentration on East Asia. A masterstroke in the diplomatic dance was the dispatch of Woolcott in April 1989 as the prime minister’s emissary to the (then) six ASEAN capitals, plus Tokyo and Seoul.

Woolcott went first to Indonesia, showing deference to Suharto as ASEAN’s central figure. He told Suharto that Australia had come for advice and guidance on how a new regional body should proceed. Woolcott wrote that it was essential to get ‘Suharto’s support or at the very least his interest and acquiescence’.

The reward for this proper show of respect to ASEAN’s leader was an expression of Suharto’s willingness to think about the idea. Armed with that relatively neutral Indonesian position—APEC was an interesting proposal worth discussing—Woolcott then travelled through the rest of Southeast Asia building Suharto’s half-nod into a consensus that overcame Malaysia’s strong opposition.

Malaysia’s prime minister, Mahathir Mohamad, had wanted to kill the APEC concept in embryo, seeing it as a challenge to ASEAN. Malaysian officials complained at the skillful way Woolcott played his ASEAN cards, claiming that Suharto’s simple expression of a willingness to listen had been used to leverage stronger endorsements from the rest of ASEAN. Certainly, Woolcott had made full use of the guidance he received from Suharto and the fact that there was no Indonesian veto.

Woolcott’s shuttle diplomacy was a bravura performance of the art he described in his memoir:

The instruments that Australian ministers and diplomats need in efforts to secure our national future are in the main the capacity to persuade and to influence. In other words, we need competent, professional and effective advocacy and diplomacy backed, of course, by public support for the government’s policy, as well as credible defence capability in the background. Diplomacy is really the art of persuasion and accommodation and of building support in other countries for one’s policies. Very rarely can diplomacy be used to impose a purely national pattern of activities on the international community.

Dick Woolcott saw good diplomacy as a key asset for the country he loved to negotiate its place as the ‘odd man in’—Australia must be an integral part of the Asia that he loved.

The language Australia uses today about the centrality of ASEAN to the Indo-Pacific draws on the vision of earlier ASEANists such as Woolcott. That’s an important legacy from a great Australian who was a great diplomat.

From its inception, the AUKUS pact has been wrapped in expectations. Fundamentally, it is a technology and capability agreement—an accelerator.

That may sound mundane but it is incredibly challenging. To realise its promise, three sovereign nations, Australia, the UK and the US, need to align their capability development, collaborative research and respective defence industrial bases.

Let’s leave the submarines to one side—this article concerns pillar two of AUKUS, the technology programs, which are arguably of greater potential value over the long-term.

In the past, a defence technology agreement would be allowed to progress at a measured pace, with committees and considered research proposals in the respective defence science organisations.

But tightening geopolitical circumstances demand urgency: AUKUS needs to deliver. Politicians won’t be able to wait for favourable winds but need to begin today to do the heavy lifting of organisational change, budget prioritisation and making the case to sceptical electorates.

Australia is the smallest partner, the most exposed geopolitically, and the most in need of a technological uplift. It has the most to gain from AUKUS but only if it is prepared to make the greatest effort. Sustained Australian political investment in the program has to be matched by directed, ongoing financial support and structural change.

Funding has one of two sources: supplementation through the federal budget process or from within Defence’s existing budget. Both, of course, mean the taxpayer pays.

Prospects of supplementation from the budget are slim. Though the Labor government has endorsed AUKUS, and concerns are growing over the strategic environment, defence warranted only passing mention in the October 2022 budget. Defence is not where government wants to spend any spare cash.

Not that there’s much to be had. The federal budget is under significant pressure—measured against expectations, it always is. But worsening economic conditions—inflation, rising interest rates and a slowing Chinese economy—are adding pressure just as public sector demand is increasing.

Further, government debt, mostly assumed during the Covid-19 pandemic and at its highest level since World War II, was locked in with comparatively low interest rates (though interest payments are projected to rise significantly).

That’s the good news. Now that rates are rising with the need to control inflation, any further debt will be more costly. And while current levels of debt are manageable, prudence suggests paying it down quickly to allow manoeuvring room for the unexpected in a volatile environment.

Given that, it’s of little surprise that Treasurer Jim Chalmers is looking to the private sector to ‘co-invest’. But let’s be clear: while industry has a role, we should not kid ourselves that industry will pony up to meet shortfalls in defence funding. Companies aren’t charities.

In short, any new initiatives, or shifts in priorities, to fund AUKUS projects—including the submarines—will need to come from within existing Defence funding.

That’s going to be tough. The defence strategic review is likely to try to prod Defence into shifting some priorities. But the way Defence is funded—managed largely by itself within an agreed envelope—though tactically convenient, can make it hard to turn the ship of strategy. The internal momentum of existing programs and invested constituencies often outweighs any prospect for change.

New capabilities, like missiles, are welcomed—provided they do not upset the existing order. Politicians are wary of being labelled anti-Defence and so are reluctant to force choices, regardless of need. Consequently, the capability equation within Defence is one of replacement and summation, not transformation.

The final concern about AUKUS funding is the role of the Defence budget in the broader budgeting effort. Simply put, the Defence budget functions as a balancing factor.

Defence is the last portfolio considered in the round of expenditure committees that shape the budget. By then the government knows how much it may need Defence to forego from its envelope over the forward years to offset other budget priorities.

When slicing happens, the programs most at risk are those without an internal service constituency, such as pillar two of AUKUS.

What can be done to help realise the promise of AUKUS?

First, independent funding. A fund for AUKUS pillar two needs to be carved out of the Defence budget and administered separately.

Consider it a future fund for Defence—but one concerned with the here and now, drawing on the breadth of government, not simply the Defence portfolio. After all, the AUKUS technologies involved are not the sole preserve of the military but are inherently civilian.

Second, explicitly embrace dual timelines—short- and medium-term.

In the short-term, focus on what can be done now, with existing capabilities and technologies, for deployment in three to 12 months.

Recombination is common in the commercial sector. It is fundamentally an engineering and product, or capability, manager effort. In business, it can be found in fablabs and hackathons and the continual experimentation of lean start-ups.

The medium-term needs to consider translation of current applied research into capability deployable in the 12-to-36-month window, supported by a broader ecosystem.

Last, create new governance arrangements.

There are two parts to AUKUS pillar two: broad exploration and rapid translation. Neither are suited to the existing frameworks and culture of Defence—or the Australian Public Service, for that matter. Keeping pillar two behind the high walls of Defence will drive up costs and starve any prospective innovation system.

A new approach is needed, especially if AUKUS is to be part of a nation-building effort, to help enforce an AUKUS-by-design ethos, and avoid unwarranted taxpayer subsidisation of industry. In an economy built around extractive industries, that task should not be under-estimated.

At a time when the government is seized with social and economic change and debt is already high, the cost of realising AUKUS will be taken from within Defence. We’ve yet to see whether ministers have the stomach for the shaping and sustained effort needed to realise the pact’s potential.

Every review of Australia’s defence policy and capability is imbued with hope for change. The defence strategic review that’s now in its final months is no exception.

Some announcements have already been made, following delivery of the interim report in late 2022. Deputy Prime Minister and Defence Minister Richard Marles has emphasised strike—or, as he puts it, ‘impactful projection’—backing decisions to purchase the Kongsberg naval strike missile (NSM) and, for the army, HIMARS (the US-produced High Mobility Artillery Rocket System). Defence will also replace and ‘extend’ its fleet of 12 C-130J transport aircraft.

And the government continues to commit itself to AUKUS, even as doubts have been expressed about US capability to deliver nuclear-powered submarines for Australia. The next AUKUS milestone will come in March, when the 18-month consultation period ends (which is also when the defence review is due to report).

Defence should be suffused with a sense of urgency, given Australia’s strategic circumstances. The 2020 defence strategic update recognised that the assumption of a 10-year warning time for major conflict was no longer appropriate, a judgement echoed by Paul Dibb and Richard Brabin-Smith. The outlook over the next decade is already much less forgiving than it was in 2020.

The nature of the choices made in response to the defence review’s recommendations will show how serious the government is about making changes, meeting strategic challenges and realising that sense of urgency.

In the meantime, though, the government’s recent announcement recognises that strategic strike is at the heart of Australia’s effort to shape and deter. The Australian Defence Force’s strike capability needs to be credible, sustainable and available.

With the retirement of the F-111s in 2010, Australia lost a key strike asset, increasing its reliance on an ageing, fragile platform, the Collins-class submarine. New submarines won’t be in service for another 10 to 15 years, well outside the less-than-10-year window of 2020.

I can’t improve on Marcus Hellyer and Andrew Nicholl’s analysis of the options for long-range strike. Their preferred option is the B-21 strategic bomber, arguing that while the cost per aircraft is high—an eye-watering $1 billion—overall a fleet of 12 would be cost-effective when compared with the nuclear-powered submarines. Also, in a sustained conflict, bombers are more likely to be cost-effective than missiles.

Still, missiles are the obvious short-term fix. Marles, it seems, would agree. But there’s an underlying problem: the conflation of area denial and deterrence.

Both the NSM and HIMARS, the acquisitions committed to thus far, are tactical in nature—in strategic terms, they are both short range (up to around 500 kilometres). They are better suited for area denial than for strategic deterrence.

True, area denial can have a strategic effect—if delivery platforms can be positioned, if those positions are sustainable, and if the missiles are directed at—and destroy—the right target. That’s a lot of conditionality.

Positioning ADF platforms for strategic effect implies access, and survivability, across considerable and presumably unfriendly seas and terrain.

Sustainability is tough. The war in Ukraine is demonstrating how quickly the rate of use of munitions rapidly depletes available supply. The NSM alone costs close to $3 million a missile. Extended reliance on missiles is a fast way to burn money, assuming supply is available, and the more capable and longer-range a missile is, the more expensive it is. Ensuring supply will take time—Defence’s guided weapons and explosive ordnance enterprise will take 10 years to reach its ‘sustain’ phase, well outside anticipated windows of need.

Last, there’s the target. Deterrence requires threatening, credibly, something the adversary not simply values, but values enough: ‘Deterrence rests today on the threat of pain and extinction, not just on the threat of military defeat.’

Deterrence may be brought about by military means, but it is essentially a political matter. Subsumption of deterrence into area denial incorrectly implies that deterrence, and by extension strategy, is a military domain, not a political responsibility. It also risks muddying force protection and force projection: both are needed, but they aren’t the same.

It’s not clear that much thinking has gone into what could deter likely or potential adversaries, as opposed to what areas the ADF would like to deny an opponent. In short, the answer to the former is not likely to be a convenient area of ADF operations; more likely it will be deep in unfriendly territory.

So, while any missiles enabling the ADF to act at a distance is a good start—Australia is, after all, starting from a low base and behind the curve—more is needed. That includes a variety of capability options that can be realised in the short, medium and longer term—a mix of missiles, strategic bombers and submarines, to hedge delivery bets as well as help ensure survivability and build credibility.

If Australia is serious about deterrence—defence on its own is immense and most probably unachievable—then the government has to do some deep thinking about purpose, intent and targets. And it will need to build appropriate governance and habits around the application of deterrence. Deterrence’s political equation is not something with which Australian decision-makers have much familiarity, nor can it be simply delegated to military officers.

Time is getting shorter. How the defence review grapples with the political element of deterrence as much as the military capability mix will tell us much about whether the government is prepared to meet the challenges of what Patrick Porter has described as the ‘age of blood and iron’.