The defence sector in Australia is facing many challenges, not least of which is transitioning its workforce to a ‘smart workforce’. This is a clear and present challenge for all sectors, but the Defence Department’s and defence industry’s dependence on technology provides an opportunity for them to better connect ‘Industry 4.0’ with workforce outcomes.

Workforce shortages are a global issue, but Australia has some specific challenges such as very low unemployment and high growth in some sectors. But we shouldn’t think just in terms of the availability of people; we need to think about why an organisation needs people and what they—and only they—can contribute to the organisation’s outcomes.

The fourth industrial revolution isn’t simply about advanced technology. It’s also about how we rethink what’s needed and how we apply technology to support people. Industry 4.0 will enable small-scale, point-of-distribution or point-of-use production and allow products to be tailored to meet specific needs. Smart innovation is underpinned by a smart workforce.

My ASPI report on Industry 4.0 earlier this year emphasised a range of opportunities as well as some big challenges to solve. The report highlighted that the high level of innovation by small and medium-sized enterprises, particularly those based outside the major cities, and a focus on collaboration were key success factors.

However, Australia is starting from a low innovation and skills base. We’re ranked 25th in the Global Innovation Index, just behind New Zealand, and eighth in the OECD skills for employment index. Australia has also historically rated poorly among OECD countries for its management capability. Poor performance in these areas not only hinders Industry 4.0 opportunities but also adversely affects workforce capability.

When people refer to the ‘workforce of the future’ they give the impression there is a skilled-up workforce waiting in the wings. Given Australia’s low unemployment rate of 3.4%, there isn’t an excess of skilled people, which means the ‘future workforce’, in large part, is in our organisations today.

Retirees continue to be a valuable untapped resource. A lot has been invested in those who have now retired from the defence sector and related sectors such as national security, technology, engineering, law and innovation. Many are willing and able to contribute but are seeking flexible and tailored opportunities. Generation Y (those born between 1980 and 2000) will increase as a proportion of the Australian workforce to comprise 75% of our workforce by 2025, but without supplementation, a significant productivity load will be placed on that one age cohort.

Australia is experiencing very high job vacancy rates and some sectors stand out. In healthcare and social assistance, for example, there are around 68,900 vacancies; in accommodation and food services, the estimate is around 51,900 vacancies; and for professional, scientific and technical services it is 42,900.

In a tight employment market, people have choices and they are exercising those choices.

While the government’s renewed focus on skilled migration, including through the Pacific engagement visa program, is welcome, it’s only part of the solution and unlikely to address the nation’s technology capability shortfall in the short or medium term. The shift in workforce capability must be done by transitioning current workforces from obsolete sectors to technology-driven ones.

The Jobs and Skills Summit in September 2022 recognised the challenge and highlighted a range of new and existing measures. These initiatives are worthwhile, but years will pass before we see results. So, what do Defence and defence industry need to do today?

The first thing is to radically rethink what various parts of Defence do and how Industry 4.0 opportunities will be optimised. There are savings to be made that can be reinvested in upskilling the workforce.

Next, the defence sector needs to understand what only people can and must do. Most organisations do this badly or not at all. Continuing with Industry 2.0 people-heavy internal workforces and Industry 3.0 efficiency drives is not what’s needed in an Industry 4.0 world.

After that, the sector must focus on being the place where people want to work. It’s important to appreciate that pay has shifted down the list of reasons for leaving a job: employees say the top three reasons are ‘lack of career-development potential’, ‘meaningless work’ and ‘uncaring leadership’. It’s much easier for someone to say they’re leaving for more pay rather than because they weren’t treated well, their contribution wasn’t valued or their manager was terrible.

Finally, Defence and defence industry need to join forces with other sectors and across regional Australia. In practice this means secondments, joint teams, joint delivery and even sharing commercial opportunities. It may also mean investing in local communications infrastructure to facilitate virtual engagement with regional workers. The benefits include evening out demands on local workforces, more efficient delivery and enhanced workforce capability. To be successful, it will require a deliberate blurring of management lines.

The emphasis on recruitment and retention also needs to be changed to ‘build, borrow and then, if you need to, buy’. Building is about actively developing people to upskill and retaining them.

Borrowing requires working with others to share capability. It means thinking about common skills in allied sectors, particularly if there are peaks and troughs in demand. There may also be opportunities to partner with others to develop creative ways to even out cross-sector demand. Borrowing isn’t about poaching; it’s about working together.

Buying means recruiting new people. But studies continue to show that it is far more effective (and much cheaper) to keep a workforce than to recruit a new one. In a tight labour market this is more relevant than ever. It’s also important to avoid the trap of paying people more to stay with or join an organisation—that’s a short-term fix that often ends in tears.

The workforce of the future is here, but it needs upskilling to fit within reimagined organisations. For Australia to be an Industry 4.0 success story, we need to rethink job design and embrace the potential rather than stress about the challenges.

Employees are motivated by more than a decent wage and an impressive job title. People want to be treated well, they want their contributions to matter, and they want to know they have a future in their organisation.

If Australia’s defence sector can achieve these three things, it will be ahead of most.

Media reports this week have claimed that Prime Minister Scott Morrison has commissioned a Defence Department review into potential alternatives to the Attack-class submarine. That’s prompted a flurry of speculation about whether the government is walking away from France’s Naval Group as its partner in the future submarine program, despite the sunk costs approaching $2 billion, plus several hundred million more in penalty costs.

Would the government do that? It’s hard to imagine. Conservative governments in this country draw their credibility and mandate to rule from their reputation as good economic managers. Admitting that they had mismanaged the largest public sector project in the nation’s history would strike at the heart of that credibility.

Walking away would also destroy Defence’s credibility. Every significant government decision in this space beyond the initial decision to build the submarines in Adelaide has been based on Defence’s advice.

Defence recommended the submarines’ very demanding set of operational requirements on factors such as range and endurance. Defence recommended the three contenders for the competitive evaluation process, and Defence picked the French as the eventual winner. Defence requested and got the $89 billion budget for the Attack class. Defence rearranged its investment program and delayed other projects to free up cash for the submarines.

It’s hard to see Defence now recommending a different course of action, and for the government to adopt a different course against its recommendation would be a massive vote of no confidence.

Then there’s the hit that would come to relations with France and to Australia’s international credibility as a partner. We’ve already done that once to a strategic partner in the submarine saga in choosing the French after raising the hopes of the Japanese that they would win the contract.

You don’t decide to change course in a $90 billion program without good reason. So, what would prompt the government to do it? Many commentators have expressed a vast range of concerns about the program and the constant questioning is a public relations ulcer for the government. But the government itself and Defence have been resolute in their support for it.

At Senate estimates hearings, Defence has consistently insisted everything is on track—for example, stating that the cost estimate has been steady at $50 billion (in constant dollars) for five years and the design is progressing well. It has conceded a few months’ delay here and there to some design milestones but suggested it could make that time up. To suddenly walk away would mean that narrative was not true—another hit to credibility.

That’s unless the government has suddenly learned something truly new and significant about the viability of the enterprise.

Then there’s the issue of what the government would walk away to. There’s no immediate stand-out candidate for a Plan B. Any developmental submarine that sets new records for size is going to come with risks and take a long time to deliver, plus the French have a five-year head start. Potentially, if the government and Defence downsized their capability aspirations, that could open up the field somewhat—potentially to the Sweden’s Saab Kockums and its ‘Son of Collins’ design.

It was always been mystifying that the Swedes were not invited to participate in the original competitive evaluation process. A number of voices have suggested the government should fund them to develop their design in parallel with Naval Group, generating competition and providing the government with some choice. That could send a strong message to the French firm.

On the other hand, if the point is to make France prioritise the Attack-class program, particularly as its own future ballistic missile submarine program commences, then telling them that we might not go with them after all could send mixed messages; we want them to commit but we won’t do so ourselves.

Much of the discussion around the future submarine has related to the level of local industry content. Ironically, the government originally said it had no intention of imposing a hard target for local content—until it came under irresistible pressure from industry and the opposition to accept a guarantee of 60% that Naval Group itself had offered. Now there is some suggestion the government should walk away because Naval Group might not get there, at least in the early stages of the program.

But this is letting the industry tail wag the capability dog. If the government is convinced it’s getting the right capability at an acceptable price delivered when it needs it, then walking away over a few percentage points of industry share, well before the design is complete, is short-sighted.

And that’s where the discussion needs to focus—on the capability. Are we getting the capability we need when we need it, and is it value for money? Many minds are already made up, such as those who believe we should be getting nuclear-powered submarines, or those who believe other approaches offer more capability for less money and/or risk—whether they involve smaller submarines, autonomous systems, long-range strike missiles and aircraft, or combinations of them all.

The government isn’t in that camp. But it does need to know what triggers would mean it wasn’t getting what it needed. For example, at what point do delays mean that a Collins life-of-type-extension can’t fill the gap? Or what technological developments that put the survivability and therefore utility of conventional manned submarines in doubt would make it reconsider the current path?

To define those triggers and know when they have been tripped, the government needs independent advice. It’s not clear that the government is getting it. From its Senate estimates testimony, it appears the Naval Shipbuilding Advisory Board takes a narrow focus, looking at the program from a project-management perspective. Broader questions about whether it provides the right capability or value for money are outside its remit.

Morrison has reportedly asked senior naval officers to review something relating to submarines (although it’s not clear what exactly). But again, this is not an independent review. Those who developed the original advice to government are not the best placed to evaluate it.

Certainly, the government is right to be concerned about Defence’s capability program. Despite concluding in last year’s defence strategic update that we can’t rely on having 10 years of warning time before a conflict, much of the program is still more than 10 years from delivery—including the future submarine. But walking away from the Attack class won’t necessarily fix that problem.

Getting submarines right is important, but we also need to cure ourselves of the fetish that has grown up around them. They’re a valuable capability, but not the only one we need. Defence needs a range of complementary assets to cover the risks and shortfalls associated with each one.

To do this it has to more aggressively develop and acquire emergent technologies—regardless of the path we take with submarines. The recent announcement of a cooperative program with the US in the development and production of hypersonic strike missiles is certainly a step in the right direction. The rapid acquisition of large unmanned underwater vessels would be another.

Whatever kernel of truth is sitting behind the recent media reports, it’s good to see the prime minister getting energised about defence capability. Defence is a monopoly provider of security services to the government and therefore the Australian people. The government is planning on spending $575 billion in taxpayer dollars for those services over the next decade, so it needs to be a smart, questioning and demanding customer on our behalf.

Cabinet created the Australian Strategic Policy Institute as a small body with a big brain—and, most importantly, a strongly independent voice.

Creation stories tell much. And the release of the cabinet records for 2000 by the National Archives detail the genesis of ASPI, which reaches its 20th birthday this year.

Two decades ago, the Howard government knew why it needed ASPI. The Defence Department was a monopoly provider of advice and expertise. Cabinet wanted fresh perspectives on big equipment headaches like submarines and, more broadly, Oz strategy.

Taking office in 1996, the Howard government found defence one of the last policy areas without a sustained contest of ideas between the bureaucracy and outside experts. ‘Well’, said John Howard’s first defence minister, Ian McLachlan, ‘we must change that’.

ASPI came to be born so the defenceniks at Russell could no longer win arguments and drive policy because they held most of the knowledge and much of the history.

Defence would pay for a body designed to make life tougher for Defence. Sharp Canberra logic drives such counterintuitive ambition. Strong design must ensure the mission can’t be mugged by bureaucratic bastardry or strangled by money.

At the general election in October 1998, the Howard government’s defence policy promised to establish an institute of strategic policy.

In April 2000, McLachlan’s successor as defence minister, John Moore, brought to cabinet a proposal for the creation of ASPI.

The purpose of the institute, Moore told cabinet, was to ‘provide a centre of expertise of direct value to government by providing independent policy relevant research and analysis that will enhance the quality of policymaking on defence and strategic issues’.

The need for independence was repeatedly stressed: ‘The credibility of the ASPI will be substantially determined by the reality and appearance of the independence of its operation and outputs from government.’

Moore offered cabinet two key arguments for ASPI.

First, to develop alternative sources of advice to government on strategic and defence policy:

The principles of contestability have been central to our Government’s philosophy and practice of public administration, but these principles have not yet been effectively implemented in relation to defence and strategic policy, despite the vital national interests and significant sums of money that are at stake. The Government has found in relation to the Collins Class Submarine project for instance, and more generally in relation to the [Defence] White Paper process, that there are almost no sources of alternative information or analysis on key issues in defence policy, including the critical questions of our capability needs and how they can best be satisfied. The ASPI will be charged with providing an alternative source of expertise on such issues.

The second argument was that defence policy was inhibited by a poor understanding of the choices and issues involved:

The ASPI will be tasked to contribute an informed and independent voice to public discussion on these issues. These roles will take some time to develop, but there are significant advantages to launching the ASPI now, at a time when public interest in defence issues is high. It is intended that the foundation of ASPI should be seen as a long-term investment by the government in good strategic and defence policy, and as such it fits in well with the White Paper process.

How to structure a new, nimble, noisy beast was one puzzle of a protracted birth, a five-year process from idea to election promise to cabinet debate to establishment. In April 2000, cabinet liked the idea but asked the defence minister to do more work on ‘alternative structuring arrangements’ for ASPI.

By August, the defence minister was back with seven options: an internal Defence strategic policy cell; an independent board within Defence; a university-based research centre; a special research centre also based in a university; or a stand-alone centre which could be a statutory authority, an executive agency or an incorporated company.

Cabinet went with the original proposal, establishing ASPI as a wholly Commonwealth-owned company.

In the words of the defence minister, endorsed by cabinet, the institute would maintain a small staff; ‘the centre would not publish views in its own name, it would publish views of the authors of particular research without endorsement’; and ASPI ‘would be required to publish a range of views on contentious issues’.

ASPI has lived out those principles, making it a marvelous place for any analyst—or, indeed, a journalist fellow. ASPI embraces its independence by giving its people the freedom to think and write.

Those principles are the basis for the sentence I put on any submission I make to a parliamentary inquiry: ‘As ASPI does not offer institutional views, this is my personal submission.’ The day-to-day lived experience is that in eight years penning a weekly column for The Strategist I have never once been told what to write. As importantly, I’ve never been warned off by being told what not to write.

Independence, indeed. And, just quietly, a weighty freedom, depriving the writer of all excuses—the only person responsible for those words is you!

See the culture at work in this farewell piece by one of the ASPI originals, Mark Thomson, as he retired after 16 years writing about defence economics. It’s classic Mark: clear-eyed judgement that’s both balanced and sharp. This, after all, was the man who revolutionised Canberra’s debate on military spending by explaining the defence budget to Canberra (and to much of the Defence Department, as well).

Handing over the torch as he departed, Mark offered a simple read of the ASPI creed: the most valuable thing you have is your independence.

Cabinet’s plan has worked. ASPI has a distinct identity, clearly separate from the Defence Department. One secretary of Defence told me ASPI could say things to the minister that he couldn’t. Another was so enraged by ASPI criticism of a Defence position that he declared hostilities and froze contacts (a difficult thing to do simultaneously).

In 2000, cabinet was told the initial cost to Defence of paying ASPI’s total budget would be $2–3 million a year. In the latest five-year funding agreement, running to 2023, the annual payment by Defence is $4 million; ASPI is a smaller slice of Defence’s budget than when it started. These days, though, ASPI gets only 35% of its budget from Defence, and 32% from other federal government agencies. The rest of the cash comes from state and territory governments, overseas governments, defence industries and the private sector, and universities and civil society.

Such diversity is another strength of cabinet’s design, and one more element in the independence that cabinet mandated.

Last week Defence announced that the Royal Australian Navy’s contract for a new submarine rescue system is on the department’s ‘project of interest’ list. US company Phoenix International may receive millions of dollars in compensation after a report recommended that the contract it was awarded be terminated. Defence has assured the public that the delays ‘do not impact our ability to provide an ongoing submarine rescue capability for our submarine fleet’. That’s wrong.

For starters, Australia has a responsibility to ensure the safety of its submarine crews.

As the material quality of submarines has improved, accidents have become less frequent. When they do occur, though, they attract a lot of attention. Almost exactly three years ago, the Argentinian submarine ARA San Juan disappeared with all hands and the global submarine rescue community mobilised on a scale not seen since the loss of the Russian submarine Kursk in 2000.

Many navies can operate collaboratively to meet their rescue responsibilities. But Australia’s geographic isolation creates an obligation for a sovereign capability, since the amount of time it would take for any other country’s system to react, transport and mobilise exceeds the ‘time to first rescue’, which is usually 72 hours from the time of an accident.

If a submarine sinks and can’t surface, it’s because it has taken in more water than its buoyancy can address. Submariners are trained to escape individually through an escape tower (similar to an airlock), but beyond a depth of 180 metres (approximately equivalent to the continental shelf), a submarine rescue vehicle is necessary.

The rescue vehicle, fitted with a skirt that resembles an inverted teacup, is positioned on the flat surface (or seat) surrounding the escape tower. Pumps are used to reduce the pressure inside the skirt so that the vehicle is ‘stuck’ to the seat by hydrostatic pressure. Once the water is pumped out, the hatches are opened and survivors transferred into the rescue vehicle. The vehicle then returns to the surface and those rescued are transferred to a support vessel.

Australia established its submarine escape and rescue project in 1994. In just 13 months, the project delivered a complete capability centred around a tethered remotely operated rescue vehicle, known as Remora, and a comprehensive hyperbaric transfer and treatment system. Remora could be used to rescue survivors down to the collapse depth of the Collins-class submarines and could operate in all the environmental conditions that prevail in Australia’s submarine operating areas.

Sadly, Remora suffered a severe mishap in 2006 and, after its two crewmen were rescued, sank to the seabed. Although recovered and restored, it was refused certification.

In its place, the government acquired the services, based in Australia, of the UK’s LR5 piloted submersible, which had just been superseded by the NATO submarine rescue system. LR5 can accommodate 16 distressed submariners at a time and can make up to eight trips to the target submarine before it needs to recharge its battery, meaning a rescue capability of 120 personnel.

Since 2009, submarine rescue firm JFD has maintained, operated and upgraded the system. It is now approaching the end of its lifecycle. As a result, in 2015, the government approved project SEA 1354 Phase 1 to deliver a submarine escape rescue and abandonment system, or SERAS, capability that will be compatible with the new Attack-class submarines before LR5 reaches its end of life in 2024.

LR5 is not the solution for SEA 1354 but, in the absence of a workable arrangement to deliver the new SERAS, it may become the gap-filler. There are several areas where its operating limitations give cause for concern.

The most serious of these is that the LR5’s maximum operating depth of 425 metres is about 25% less than the crush depth of the Collins-class submarine. While the area between 425 metres and crush depth could be small in some places because of the slope of the seabed beyond the continental shelf, such a situation would be unacceptable to the offshore oil industry, for example.

If a submarine sinks in water too deep for the rescue vehicle but too shallow to be crushed, a nation should possess the capability to rescue the survivors.

Should a submarine accident occur, this capability gap would require mobilisation of the US Navy’s submarine rescue system. It would be a struggle to mobilise that system to Australia within four to five days of an accident.

The system proposed for SEA 1354 by Phoenix International is a follow-on capability—essentially a third-generation Remora controlled remotely from the surface. The proposed design would comfortably exceed the depth requirement for the Collins and Attack classes and feature a launch and recovery capability in all expected sea states. It would also be able to ‘mate’ at any angle up to 60° in all prevailing currents where Australia’s submarines regularly operate.

The cancellation of the contract will delay the introduction of a new rescue capability for five or six years. The LR5, which is unsuitable anyway, will be out of service in 2024 and Australia will be dependent on other countries’ submarine rescue systems with little prospect of achieving an acceptable time to first rescue of 72 hours in the event of an accident.

Defence needs to work towards a solution with the current contractor and rationalise some of the features of the contract described as ‘inappropriate’ in the report written for Defence. Negotiations between the government and the contractor must progress more quickly for such a serious capability requirement.

A more radical approach, akin to that taken with the Remora project, is needed. There will be solutions to the engineering requirements that seem to be at the heart of the problem and Defence may need to call for more internal assistance to help the navy achieve this. A traditional approach to procuring a new submarine rescue system would not only cost hundreds of millions of dollars, but also take time, a commodity that is in short supply.

The last five years have not been kind to the European Union’s foreign-policy prospects. A new great-power competition is shunting aside the international rules-based order, and aspects of globalisation—from trade to the internet—are being used to divide rather than unite countries. Meanwhile, the EU’s geostrategic neighbourhood has become a ring of fire.

These challenges mainly reflect a shift in the global balance of power, which has fundamentally changed the United States’ foreign policy outlook. As the European Council on Foreign Relations explains in a new report, global developments have left EU countries increasingly vulnerable to external pressures that could prevent them from exercising sovereignty. Such exposure threatens the EU’s security, economic and diplomatic interests by allowing other powers to impose their preferences on it. Making matters worse, the EU’s governing institutions have done little to overcome the divisions among member states, and they haven’t played a relevant role in responding to crises such as those in Ukraine, Syria and Libya.

With the nomination of Josep Borrell to serve as High Representative of the Union for foreign affairs and security policy, the EU has an opportunity to relaunch its foreign policy. Borrell, who is currently the foreign minister of Spain—itself one of the EU’s new power centres—will need to work to unite EU institutions and national foreign ministries behind a common EU-level foreign policy.

Beyond that, Borrell will face three challenges. The first is to secure Europe’s strategic sovereignty. From day one, Borrell will need to start developing strategies for managing the bloc’s most vexing diplomatic and security issues, from the threats posed by Russia and China to the potential powder kegs in Syria, Africa and the Balkans. Borrell must chart a new course forward, neither ignoring dissenting views from member states nor settling for the lowest common denominator of what all members say they can accept.

To that end, Borrell should consider offering a package deal, similar to the one agreed by the European Council in nominating a new EU leadership team. Any such compromise should balance a tough stance on Russia with creative engagement on the EU’s southern flank. The EU doesn’t necessarily need new foreign policies, but it does need new mechanisms for implementing its agenda, as well as competent leadership that can inspire confidence within all the member states. In reasserting the EU’s sovereignty, the new high representative will have to deal with everything from US secondary sanctions and the weaponisation of the dollar to growing cyber- and hybrid-warfare threats from around the world.

Borrell’s second main challenge will be to re-operationalise European defence. While the EU has made progress in launching defence-related industrial projects, its operational capacity has shrunk. To reassure the EU’s Russia-facing flank, all member states will need to increase their forward presence there; simply establishing a small ‘Camp Charlemagne’ in Poland would serve as a powerful symbolic gesture. Europeans could also take over certain military operations from the US, not least the mission in Kosovo, where Europeans already provide most of the troops. Moreover, with the US vetoing United Nations support for the G5 Sahel (Burkina Faso, Chad, Mali, Mauritania and Niger) and potentially planning a troop drawdown in some of those countries, the EU may need to increase its presence in Africa.

In fact, this may be a good time for the EU’s high representative to take up the idea of establishing a European security council, which was originally floated by German Chancellor Angela Merkel and French President Emmanuel Macron last autumn. Such a body could offer a forum for honest strategic discussions among the member states, while also leading the diplomatic engagement with the United Kingdom after Brexit.

Borrell’s third challenge will be to restore trust between member-state foreign ministries and the European External Action Service. He can’t possibly tackle all of the EU’s foreign policy issues on his own; he will need a strong team and broad-based support within the EU. In appointing his deputies, he should choose members of the commission who already have a mandate covering the key regional issues of the Sahel, the Balkans and the Eastern Partnership.

Better yet, Borrell should assign specific policy issues to individual foreign ministers, who would then have to report back to the member states and the EU Political and Security Committee. There are some precedents for this, such as when former High Representative Catherine Ashton assigned the Georgia brief to Polish Foreign Minister Radek Sikorski and German Foreign Minister Frank-Walter Steinmeier, and then the Moldova brief to Sikorski and Swedish Foreign Minister Carl Bildt.

Finally, Borrell should consider appointing core groups of member states to convene workshops on divisive issues, with the goal of identifying common positions and raising the lowest common denominator. At a minimum, this could give each member state some skin in the game, possibly discouraging them from abusing EU processes or pursuing unilateral action.

By adopting the broad agenda outlined above, Borrell can help the EU confront the challenges of the coming years as a united bloc. His top goal should be to secure Europe’s strategic sovereignty. The EU is still the world’s largest market, comprises some of the largest national aid budgets, accounts for the second-highest level of defence spending, and can deploy the largest diplomatic corps. If it can put these assets in the service of a larger strategic agenda, it can become a player in the 21st century, rather than the plaything of other great powers.