Tag Archive for: Australian Defence Force

The cost of Defence ASPI defence budget brief October 2022-2023

Executive summary

Shortly before the recent election, the previous government released a defence budget that continued its record of delivering the funding it promised in the 2016 Defence White Paper (DWP) and subsequent 2020 Defence Strategic Update (DSU).

The Albanese government’s first budget was not designed to focus on Australia’s security situation or defence spending. Tasked with sharing Australia’s difficult economic situation with the Australian public, the budget has more immediate fish to fry.

For those Australians who want to see increased defence spending, this was not going to be that budget as it would have directly undercut existing defence reviews due within months. Certainly, the Prime Minister has stated that the government will do whatever is necessary to ensure Australia has the defence force it needs in these strategically uncertain times.

But this budget gives no indication of how much the government is willing to spend to do that. With the Defence Strategic Review (DSR) under Stephen Smith and Angus Houston conducting its work and not due to report until March next year, the government has stuck with the existing funding line it inherited from its predecessor. That’s an artefact of the 2016 Defence White Paper—a document developed in a different era and quickly overtaken by events.

So Defence is in a holding pattern while the government keeps its powder dry and waits for Smith and Houston (noting their interim report has recently been handed to the government). No doubt it has had conversations with the DSR leads indicating its comfort zone for additional spending, but that hasn’t been made public.

What we can say from the information set out in this budget is that any increase to defence spending will require difficult reprioritisation. While the government received a revenue windfall this year due to high commodity prices, those are forecast to return to normal. And with the government committing to deliver the tax cuts agreed by its predecessor, its income is under further pressure. At the same time, it’s facing five growing spending pressures: interest on the growing debt, the National Disability Insurance Scheme, health care, aged care, and defence—and that’s before any increase to the existing defence funding line. The result is a forecast for deficit spending for the next 10 years.

That’s not a good situation for the DSR leads. They’re tasked with delivering new military acquisitions faster in the next decade, but the existing acquisition plan is probably already unaffordable (without increased spending), with many entirely new capabilities or expensive replacement projects. And with nuclear-powered submarines and frigates on the untouchable list, the challenge of delivering more sooner gets even harder, as those two programs will consume tens of billions of dollars over the coming decade even before they deliver their first vessels.

Moreover, inflation is rapidly eroding Defence’s buying power by billions of dollars every year. By the end of the forward estimates, Defence may have lost around $18 billion in buying power even if inflation rapidly returns to the Reserve Bank of Australia’s target rate. That’s the budget papers’ predictions, but those predictions haven’t been very accurate in recent years.

This year, despite nominal growth of over 7% in defence spending, real growth is under 1% once inflation is taken into account (although, with inflation difficult to predict, it’s also difficult to reliably quantify real growth). It’s hard to see Defence affording its ambitious acquisition program with a budget that’s essentially static in real terms.

Inflation is also driving nominal GDP growth at a predicted 8% this year. That means that defence spending is falling as a percentage of GDP for the second year in a row despite the government delivering the funding set out in the 2016 Defence White Paper and 2020 Defence Strategic Update. Predicted defence spending has also fallen significantly just since the March budget, from 2.11% to 1.96%, despite the funding line remaining fundamentally unchanged.

In summary, there is no pot of gold available to cover increased defence spending. That doesn’t mean the government can’t or won’t increase defence spending, but any increase will require either higher taxes (which appears unlikely, since the government is proceeding with its predecessor’s planned tax cuts), greater borrowing (accelerating the vicious cycle of debts and deficits), or cuts to other priorities that have constituencies of their own.

When we look at Defence’s big three areas of spending—capital acquisitions, people and sustainment—there have been no significant changes since the March budget. With the Australian dollar at a 20-year low against the US dollar, the Defence budget has received a large automatic top-up to maintain its purchasing, but there’s no adjustment to compensate for inflation.

There are a few changes to spending, but they’re broadly consistent with what we would see in a mid-year budget update. For those who follow capability, the top 30 acquisition projects and sustainment products hold some interesting information, but the lists are quite consistent with previous plans. We’ll have to wait for the outcomes of the DSR to see anything new.

Similarly there’s been no adjustment to Defence’s personnel allocation since March. But that still means the ADF needs to find roughly 13,000 more people this decade to operate the capabilities on its shopping list, even though it’s only managed to grow by an average of 300 per year since the 2016 White Paper. Smith and Houston may need to consider whether it makes sense to acquire capabilities that the ADF can’t crew, or at least how the ADF can maximise its combat power without many additional people. Of course, another HR strategy is one based on ‘if you build it, they will come.’

The situation is also difficult with Defence’s civilian and external workforce. To deliver its ambitious capability program, Defence has relied on growing numbers of contractors. They’ve helped Defence spend record amounts in its acquisition programs in recent years, despite the impact of Covid-19; however, they come at a cost. That growth may be over; in the October budget, the government is seeking $144.6 million in ‘savings from external labour and savings from advertising, travel and legal expenses’. That’s not a large percentage of Defence’s total budget but, if it means the organisation can’t hire the people it needs to manage the acquisition program, it’s hard to see how Defence will deliver more capability sooner.

Overall, while there were no surprises, the October budget hasn’t made the job any easier for Smith and Houston.

Deciding the future: the Australian Army and the infantry fighting vehicle

Introduction

The aim of this report is to inform government decision-makers and the public on the ability of Project LAND 400 Phase 3—the infantry fighting vehicle (IFV) acquisition—to meet the needs of Australia. I examine a number of factors that provide context for the government’s upcoming decision, whenever that may take place. Those include how IFVs fit into the Australian strategic environment, the ease with which the ADF can deploy them, their vulnerability to threats, and the ongoing utility of armour in the light of lessons unfolding from the ongoing Russian–Ukrainian War.

To set the information into a useful context, this report explains the nature of contemporary land warfare and speculates how the Australian Army is likely to fight in a future conflict. To further assist those making the IFV decision, this report offers a number of scenarios that outline potential operations that the government may direct the ADF to undertake. It also identifies current gaps in ADF capability that will need remediation if the IFV is to achieve its potential, as well as the other opportunities that might not be taken up because of the focus on this investment.

The report’s analysis results in some key questions for decision-makers to consider as they decide on the infantry fighting vehicle acquisition:

  1. Does the government believe that its IFV investment will deliver an appropriate balance of protection, lethality and mobility (both tactical and operational)?
  2. Does the government agree with the requirement for an infantry vehicle with STANAG 4569 Level 6 force protection and equipped with an active protection system?
  3. Is the government confident that the number of the IFVs obtained will generate a deployable and sustainable force that represents a sufficient return on the investment?
  4. Does the government accept that the IFV options under consideration will enable the ADF to offset existing gaps in capability and allow it to conduct operations in a contested maritime environment, including sea and airlift, long-range fires and logistics?
  5. Is the government confident that the Army’s combined arms system is deployable in contested environments, particularly in a maritime scenario?
  6. Does the government believe that the IFV will provide utility in the range of contingencies that the government envisages the ADF will need to meet?
  7. Does the government agree that the IFV will contribute to the requirement that the ADF be able to shape, deter and respond to threats as mandated in the 2020 Defence Strategic Update (DSU)?

Budgets, the economy and the Defence Strategic Review

Current debate over how to defend Australia in a more threatening strategic environment points to an urgent need to strengthen the capabilities of the ADF, partly through purchasing new types of weapons incorporating the latest technologies. 

Standing in the way of that need being realised are two factors. One is a trillion dollars of government debt and intense demands for higher expenditure on other public priorities ranging from health care to climate change. The other is a perception that any shift in defence investment away from more established to new types of weaponry would threaten jobs and growth. 

Among the few options available to Defence to overcome both obstacles is avoiding a significant price premium for preferring the domestic over foreign supply of major weapons platforms and systems through a more targeted approach to Australian industry participation. 

That option need not detract from Australia’s independence or economic welfare. Indeed, available data indicates positive outcomes can be achieved, on both fronts, if at least part of what’s saved through avoiding high price premiums in some areas of defence capability development can be re-invested in others.

However, that depends on avoiding the defence industry policy pitfalls of the recent past. Linking an updated defence capability plan to an outdated industry policy is, at best, a high-risk venture. More realistically, it represents a path to disappointment.

This paper addresses how Defence can not only save money when purchasing a new cadre of weaponry but do so in a way that benefits the economy. Both issues relate to affordability which may ultimately determine the impact of the Defence Strategic Review.

Marles’s Defence Strategic Review—an exploding suitcase of challenges to resolve by March 2023

Stephen Smith and Angus Houston have an enormous amount to do and almost no time to do it.  Prime Minister Albanese and Deputy Prime Minister Richard Marles chose them to be the independent heads of the Defence Strategic Review.  

The Review is to report before March 2023 so that the Albanese government can make decisions on it at the same time as they are deciding about the path that gives Australia 8 nuclear submarines within an AUKUS partnership that makes these safe and effective. 

Before they even get to thinking about their task – ‘to ensure Defence has the right capabilities to meet our growing strategic needs’ —Smith and Houston will need to confront the ugly fact that Defence’s current plans are already unaffordable despite the large and growing defence budget the Albanese government has committed to. 

Nasty choices and sub-optimal trade offs are needed before any new ideas that take money are even put forward. And the only mega project not yet agreed to that can provide potential savings is the $20-27bn Army plan to buy an additional 450 heavily armoured vehicles for purposes that aren’t clearly connected to Australia’s needs in our region. These must now be made clear if it is to proceed, in whatever form.

But even multi-billion dollar megaproject is a distraction to the real work. The Review must give Marles what he needs to provide practical, urgent direction to defence in four big areas:

  • Climate change and the Defence Force’s inescapable – but unwanted – role;
  • China’s direct security challenge in Australia’s near region – making our strategic environment uncomfortably clear, not complex as we like to tell ourselves;
  • New ways to increase Australian military power quickly – because no taxpayer is going to give defence more funding if it can’t show it has different, faster ways to increase the ADF’s, military power; and
  • The danger of prioritising ‘integration’ in all things in pursuit of the military nirvana of ‘every sensor a shooter and every shooter a sensor’ – because this highly aspirational goal is the enemy of getting capabilities into the hands of our military fast.

This Strategic Insight unpacks the exploding suitcase of Defence and sets out the key paths the Review can take.

The Australian Defence Force and its future energy requirements

The global energy system is undergoing a rapid and enduring shift with inescapable implications for militaries, including the ADF. Electrification and the use of alternative liquid fuels are occurring at scale across the civilian economies. Despite that, fossil fuels, such as diesel and jet fuel, will be around for a long time to come, given their use in long-lived systems like air warfare destroyers, Lockheed Martin’s F-35 aircraft, M1A2 Abrams tanks, and in capabilities still in the design stage but planned to enter service beginning in the mid-2030s such as the Hunter-class frigates.

Australian supply of these fuels is provided by globally sourced crude oil flowing through a handful of East and Southeast Asian refineries. Supply arrangements for these critical commodities are likely to become more fraught, however. This is already occurring because of the fracturing of global supply chains and the drive for national resilience in many nations, driven by Covid-19, the return of coercive state power and, of course, Putin’s war in Ukraine. Australia’s dependence on imports for liquid-fuel security, at least as it pertains to the ADF, extends well beyond insufficient reserves and refineries.

The government and Defence must recognise this long-term risk to a fundamental input to our military capability and start acting to mitigate it for the future.

The cost of Defence ASPI defence budget brief 2022–2023

The cost of Defence ASPI defence budget brief 2022–2023

One hundred & thirty-three million, one hundred & ninety-one thousand, seven hundred & eighty dollars & eighty-two cents per day.

Executive summary

Shortly before the recent election, the previous government released a defence budget that continued its record of delivering the funding it promised in the 2016 Defence White Paper (DWP) and subsequent 2020 Defence Strategic Update (DSU).

This year, the consolidated defence funding line (including both the Department of Defence and the Australian Signals Directorate) is $48.6 billion, which is 2.11% of GDP based on the Budget papers’ estimates of GDP. That funding represents a very substantial nominal growth of 7.4%. It’s the 10th straight year of real growth, but with inflation running hot, it’s hard to determine a precise percentage; we’ve estimated it at 3.8% based on the Budget papers, but, if inflation stays around 5%, the real growth figure will be less. That will hurt Defence. Just as inflation eats into Australian families’ budgets, it’s eroding Defence’s buying power.

Despite disruptions to supply chains, Defence and its industry partners have achieved significant increases in acquisition spending. While Defence may have fallen short of its acquisition spending target in 2021-22, it still achieved a $2.1 billion increase on the previous year, which was itself a $1.5 billion increase. That’s translating into growing local spending, both in absolute terms and in relative terms compared to overseas spending. We’ve written previously that the Australian defence industry will need to eat a very large elephant as Defence’s acquisition and sustainment budgets grow.

So far, it’s demonstrating that it has the appetite to do that.

Capability continues to be delivered across all domains. There’s no doubt that the ADF is getting better. But we’re seeing the realisation of risks inherent in an acquisition program built around megaprojects. Such projects take years or decades to design and deliver, while spending huge sums for little benefit in the short term. When they encounter problems, those problems are big. The Attack-class submarine program has cost over $4 billion and delivered nothing. The Hunter frigate program continues to experience delays and won’t get a vessel into service for over a decade. The Boxer combat reconnaissance vehicle project has spent close to $2 billion, but only 25 training vehicles have been delivered. While the nuclear-powered attack submarine (SSN) program has the potential to deliver a huge step-up in undersea warfare capability, it’s the mother of all megaprojects and has a risk profile to match. As the megaprojects ramp up (with over $20 billion in infantry fighting vehicles potentially added to the list of committed funds), their cash flow requirement will increase, tying the government’s hands at a time of rapidly growing strategic uncertainty and evaporating warning time.

The new government will have some significant issues to address. Perhaps the biggest one is the size of the defence budget. The incoming government has said that it supports the current level of funding. While that continues to grow in real terms, it was originally developed in 2015 and hasn’t changed since then, despite the significant worsening of our strategic circumstances. Russia’s illegal and unjustifiable invasion of Ukraine has reminded us that war has not gone away and remains a tool of authoritarian states. China’s influence in our near region is growing and could result in a permanent Chinese military presence. The US is looking to its allies and partners to do more, as they must.

As always, the government will need to adjudicate between competing priorities for funding. At a time when Australians are dealing with the rising cost of living, spikes in energy prices and the grinding pressure of housing affordability, it may be tempting to reduce defence spending in the face of competing budget priorities. However, the government should be aware of the results of doing so. The budget is already full, with no pots of unallocated cash. Any short-term windfall delivered by the cancellation of the Attack-class submarine is already gone-as the cancellation of the SkyGuardian armed uncrewed air vehicle to help deliver a $9.9 billion offset for the REDSPICE cyber program reveals. So even holding the defence budget strictly at 2% of GDP will result in substantial, multibillion-dollar reductions to the DSU funding line, inevitably leading to cuts in capability.

Furthermore, it’s not clear that the DSU funding line is even sufficient to deliver the current investment plan. That program includes platforms far larger or more numerous than those they’re replacing as well as entirely new capabilities, all requiring a much larger workforce. Many capabilities have ended up costing more than was originally budgeted for in Defence’s investment plan. The SSN program will cost significantly more than the Attack class; it’s anybody’s guess how much more. So the first order of business should be for the government to understand the affordability of the current plan.

Then it will need to assure itself that the planned force structure is aligned with what the government thinks the ADF should be doing. It’s easy to make a case for the tactical utility of any capability, but how does it fit in the overall strategy? The government will need to make decisions about which sovereign capabilities it needs to hold and where it can rely on allies and partners. And the nub of our current security challenge is that the former are growing while the latter are shrinking.

A further challenge that the government will need to consider is Defence’s people problem. The number of contractors in Defence’s external workforce continues to grow at significant cost, but Defence can’t deliver its ambitious capability program without them. Is that growth the best option available to Defence or simply the only one? Moreover, the investment program will require 20,000 more uniformed personnel to operate the capabilities it’s acquiring. With the ADF averaging net annual growth of only 300, is that target attainable? And, if it’s not, is the future force structure viable?

In these testing times, the government needs to seize every opportunity available to it to increase capability rapidly, even if that means overruling Defence’s long-term vision for the future force. That means doing more with what we’re already getting, such as increasing the lethality of the offshore patrol vessels that are soon to enter service.

There are encouraging signs that Defence is engaging more actively with ‘the small, the smart and the many’; that is, cheaper, disposable, highly autonomous systems that can be produced rapidly by Australian industry. Investing more heavily in such systems is a crucial hedging strategy against the risk inherent in the megaprojects; plus, such systems will figure heavily in future warfare, whatever may become of the megaprojects.

Similarly, the new AUKUS partnership’s advanced technologies programs and the sovereign guided weapons enterprise offer the prospect of delivering meaningful capability soon. Yet we’re two years into the guided weapons enterprise and still have heard nothing about which weapons will be produced and how it will be done. We can’t apply the kinds of timelines and processes inherent in the megaprojects to these lines of effort.

Overall, the government has its work cut out for it. Whatever path it chooses, it will need to bring the Australian public along on the journey. To do that, the government will need to reset the conversation about the defence budget and how it’s spent. That will require a commitment to transparency, accountability and sharing information. That means accepting the risk that bad news will get out along with the good, but an informed public is fundamental to democracy.

Understanding the price of military equipment

Executive summary

Confusion reigns in discussions about the cost of the Department of Defence’s equipment projects. Whether we’re talking about media articles, parliamentary committee hearings, letters to the editor, duelling internet commentators or any other forms of discourse that address Defence acquisitions, the only thing that’s clear is that we’re almost always talking past each other when it comes to the cost of military equipment. Defence doesn’t help when it releases only a bare minimum of information. This sorry state of affairs reached its peak several years ago, when it turned out that when Defence said that the cost of the Attack-class submarine was $50 billion it really meant that the cost was somewhere around $90 billion.

The situation gets even murkier when commentators compare the cost of military acquisition projects here in Australia with ones overseas. It’s very rare that we can make a direct, apples-to-apples comparison between local and overseas projects, and very often it’s more like apples-to-orangutans. Being completely unaware of the basis of the costs they’re comparing doesn’t stop some commentators from making strong claims about the rapacity of foreign arms companies or the competence of the Australian Defence Department.

This report attempts to be a guide for the perplexed. It’s not a technical manual, but a plain-English discussion that unpacks the cost of Australian defence equipment projects. While it would be useful for those working in the field of defence and strategic studies to read the whole report, it can also be used a reference tool explaining key terms such as ‘constant’ and ‘out-turned’ dollars or different cost-estimation methodologies.

It’s important up front to acknowledge that the cost of modern military equipment can be eye-wateringly high, and there’s always a ‘sticker shock’ when we compare the costs of military systems with the costs of their civilian counterparts. Those costs are driven by the constant quest for better capability that provides an advantage in a life-and-death business. That striving in turn drives rates of cost escalation that greatly outstrip inflation in the broader economy. No Western country has yet found a way out of that endless cost spiral, and Australia is certainly not an exception.

Anyone discussing cost has to understand what’s included in the price. It’s here that comparisons of Australian and overseas projects are difficult. Australian defence project costs include all the elements needed to get a capability into service, which are known as the fundamental inputs to capability. They comprise much more than the military equipment itself and can include facilities, training systems, documentation, intellectual property, integration of the new equipment (such as a missile) onto existing systems (such as the aircraft that will launch it), science and technology programs, and so on.

Elements other than the equipment aren’t trivial and can sometimes make up half of the total acquisition cost. Australian projects also include significant risk provisions, known as contingency. In contrast, most overseas programs don’t include all of those elements, so their cost can appear significantly smaller.

In this report, I provide a hypothetical example that illustrates how the cost grows as we include these factors. If we start with available off-the-shelf equipment costing $1 billion and adjust for price escalation (including inflation and capability enhancements) and factor in all fundamental inputs to capability and contingency, we quickly get to a total acquisition cost of $3.5 billion. That’s before we include operating costs.

The report also briefly examines a current, real-world example by comparing the cost of Australia’s Hunter-class frigate project with analogous international projects. While we attempt to make some assessments, the exercise confirms that comparisons are difficult when we don’t have visibility of what’s included in the price tag.

We also attempt to debunk the popular and deeply held view that Defence projects frequently go over budget. Based on the public evidence, the opposite is in fact the case. Once the government considers a business case and gives Defence approval to enter into contracts to acquire a particular system with a set budget, the department rarely goes over budget. However, it must be said that, before that point, Defence’s estimates of the funding needed to acquire a capability can grow significantly as its understanding of its requirements and the possible solutions develops. It’s here that the infamous ‘blowouts’ generally occur, not after actual acquisition commences.

Some commentators have suggested that focusing on the cost ignores the value those systems provide—why quibble over a few billion here or there when the security of the country is at stake? I’d argue that it’s difficult to assess value for money if you don’t understand how much money you’re paying. This study aims to help Australians understand how much they’re paying. It’s only then that we can make informed decisions about military spending.

Chapter 1: Introduction

One of the greatest areas of confusion in public discussions of the cost of defence is the price of military equipment. It’s hard to know what Australia is paying for its weapons, which makes it hard to know whether we’re paying the right price or getting value for money.

The Defence Department doesn’t release information on the price it’s paying for particular items, but only high-level project costs—and then only for some projects. Those numbers include a wide range of elements beyond the equipment itself. Public discussion is confused and confusing when commentators take the project-level numbers and crudely reverse-engineer the cost of individual items from them.

To address that shortcoming, commentators look for relevant cost information overseas. But often the issue gets even murkier when Australian costs are compared with overseas numbers. Some national defence agencies, particularly the US Defense Department, publish very detailed information, yet their numbers are generally not amenable to a direct apples-to-apples comparison with Australian data.

The following is an example that illustrates why we need to be cautious even when using numbers from a reliable source. The Defense Security Cooperation Agency (DSCA) manages the US’s Foreign Military Sales program which allows partner countries to acquire US-made military equipment at the same price as the US military. The DSCA has to notify the US Congress of potential sales that have been approved by the US State Department. Those notifications are public and are a useful source of information, but they can be misleading when misused.

In April 2020, the DSCA notified Congress of the potential sales of 10 AGM-84L Harpoon Block II air launched anti-ship missiles (Figure 1) to India for US$92 million and of 10 of them to Morocco for US$62 million.1 It would be wrong to assume that India was being gouged US$9.2 million per missile while Morocco was getting them at a bargain price of US$6.2 million. Both sales also included ‘containers, spare and repair parts, support and test equipment, publications and technical documentation, personnel training and training equipment, US Government and contractor representatives’ technical assistance, engineering and logistics support services, and other related elements of logistics support’.

In fact, the cost of a Harpoon missile itself is nowhere near US$9.2 million, or even US$6.2 million. At almost the same time as those DSCA announcements, the US Navy awarded a contract to Boeing in May 2020 worth nearly US$657 million for 467 Harpoon Block II missiles and support equipment for various foreign military sales customers.2 So the price of an individual missile was less than US$1.4 million.

This example shows that we need to be careful even when comparing numbers taken from the same source that seem to have similar scope. But it also shows that the cost of a weapon itself is only one part of the total cost of a project or program and that the weapon is only one part of an effective military capability. Depending on whether you’re developing a cost for the weapon or for the capability, you’ll come up with dramatically different numbers.

Figure 1: Harpoon anti-ship missile: US$1.4 million, US$6.2 million or US$9.2 million?

Source: Defence image library, online.

Unfortunately, many commentators aren’t careful when using cost figures whether from here or overseas. This results in murky numbers being used to justify strong claims such as that the US’s latest nuclear-powered submarine would cost substantially less than the Attack-class conventional submarine, or that Australia is being taken for a ride by unscrupulous company X or country Y, and so on.

In this report, I start by looking at why the ‘sticker shock’ for modern weapons is so high to start with. I then look at how different definitions of cost sit along the spectrum from weapon to complete capability resulting in very different scope. I explain key concepts in cost estimation. The report then provides a hypothetical example illustrating how these definitions and concepts increase the cost as we move from weapon to capability. We’ll reinforce that with a real-world example drawn from the Navy’s Hunter-class frigate program. The report ends with a chapter that examines the validity of the popular view that Defence’s projects often go over budget.

Full Report

To continue reading, please download the full report here.

About ASPI

The Australian Strategic Policy Institute was formed in 2001 as an independent, non‑partisan think tank. Its core aim is to provide the Australian Government with fresh ideas on Australia’s defence, security and strategic policy choices. ASPI is responsible for informing the public on a range of strategic issues, generating new thinking for government and harnessing strategic thinking internationally. ASPI’s sources of funding are identified in our Annual Report, online at www.aspi.org.au and in the acknowledgements section of individual publications. ASPI remains independent in the content of the research and in all editorial judgements. It is incorporated as a company, and is governed by a Council with broad membership.

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© The Australian Strategic Policy Institute Limited 2022

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First published May 2022.

Cover image: ADF’s new Australian designed Hawkei protected vehicle at the Thales Protected Vehicles facility in Bendigo, Victoria. Defence image library, online.

Funding

No specific sponsorship was received to fund production of this report.

  1. Defense Security Cooperation Agency (DSCA), ‘India—AGM-84L Harpoon air-launched Block II missiles’, media release, US Defense Department, 13 April 2020
    DSCA, ‘Morocco—AGM-84L Harpoon air-launched Block II missiles’, media release, US Defense Department, 14 April 2020: https://www.dsca.mil/press-media/major-arms-sales/morocco-agm-84l-harpoon-air-launched-block-ii-missiles ↩︎
  2. US Defense Department, ‘Contracts for May 13, 2020’, US Government ↩︎

Building genuine trust

A framework and strategy for Indigenous STEM and cyber pathways

Executive summary

Indigenous recruitment and retention in the Australian Defence organisation is defined by a high target of 5% participation in the armed services and 3% in the Australian Public Service component of the Defence Department by 2025. The participation target is a point of pride and a source of clear goodwill and has provided momentum in several areas of Defence for Indigenous employment and pathways.

However, the individual areas of success and effort are yet to translate into an effective whole-of-Defence framework with cohesive lines of effort. This policy report suggests how that can change. It provides a framework and strategy for Defence to support science, technology, engineering and mathematics (STEM) recruitment and retention and cybersecurity careers, particularly through engagement with the vocational education and training system and through targeted relationship building with university- and school-based Indigenous STEM initiatives.

We propose that Defence should enact a wider set of supporting measures—particularly in data and reporting to track professional development—that’s more likely to create more sustainable success that delivers organisational improvements and outcomes for Defence. That should include mechanisms to enhance the achievements of the Indigenous Procurement Policy.

Defence must ensure that it meets its immediate skills shortfalls as well as its long-term obligations under the Closing the Gap initiative and the Defence Reconciliation Action Plan to foster genuine and meaningful relationships built upon trust with Indigenous peoples.

We suggest how that’s possible through a framework and 56 recommendations focusing on 12 areas of activity:

  • data, reporting and user-experience web design
  • career pathways
  • defence and technology contractors
  • community engagement
  • procurement and business development
  • veterans’ employment and procurement
  • the vocational education sector
  • universities
  • recruitment
  • retention
  • coordination with other public agencies
  • international partnerships.

Action on those recommendations will ensure that Defence is an employer of choice and fosters genuine and meaningful trust with Australia’s Indigenous peoples. And it will also build Defence’s capability to keep our nation safe and secure in a more dangerous world.

Introduction: Building trust—what’s visible and what are the blind spots?

The recruitment and retention of Indigenous Australians in the Defence organisation is defined by high ambitions. The aim is to reach 5% Indigenous participation in the armed services and 3% in the Australian Public Service (APS) by 2025. However, the implementation of employment pathways is lagging due to weak engagement with the talent pool, especially with Indigenous Australians who are training in science, technology, engineering and mathematics (STEM) fields in the vocational education and training (VET) and university sectors. Weak talent market mapping means that current success rates in Defence recruiting are unlikely to be maintained, particularly as competition to attract and retain Indigenous workers increases.

A common story in the services and Defence APS is the slow progress on the policy reform that’s urgently needed to build Indigenous employment pathways into Defence and through to the wider defence ecosystem, including veterans’ employment. Defence needs to demonstrate that it invests in the long-term training, retention and advance of Indigenous personnel.

Our discussions with Defence personnel have revealed that silos in the Defence organisation work against Indigenous recruitment and retention. The services are driving much reform, but a comprehensive data picture and an annual public report that canvasses what’s working well—that establishes clear process metrics, benchmarks and areas for attention, including in recruitment, retention, training and professional development—means that many work areas are without a clear guide or a definition of success beyond participation targets, so their efforts are unfocused and can be discordant.

Developing measures and public reporting, including on how senior leadership is achieving Indigenous targets within the workforce, will be an important step forward. It will cement Defence’s leadership role as an exemplar to other parts of government and the wider defence industry. It will also ensure that Indigenous employment is addressed as part of the renewed drive to optimise defence data, as outlined in the Defence Data Strategy 2021–2023.1

Setting up Indigenous employees for success within the One Defence team requires Defence personnel at all levels to have greater situational awareness of the grassroots reasons for Indigenous Australians joining, staying in, or leaving the organisation. Developing career pathways requires policy and procedures geared towards addressing the drivers and impediments to jobs and training in cities, regions and remote Australia for Indigenous men and women of different ages.

Addressing career pathways and enhancing retention require a mindset that anticipates employee issues—including cultural factors—and addresses them so that Indigenous Australians decide to join and stay. The cultural integrity framework for the APS, sponsored by Defence, will be an important part of that effort. The framework seeks to provide support for employees and leaders so that Indigenous personnel are invested in as a resource in Defence and in the Australian Government’s broader strategic thinking and so that their experience and insight are valued appropriately.

The ‘pathway’ metaphor is often deployed to describe Indigenous training and employment programs and equity and social inclusion initiatives.2 Pathways are rarely straight lines. Indigenous employment pathways aren’t just about entry points, but are also about systemic training and development opportunities within Defence and beyond into veterans’ employment. Defence will need to approach attraction broadly to reach school leavers and students in the VET and university sectors. Defence and other agencies will need to ensure that the growth of Indigenous opportunities is part of the government’s revised ‘industry cluster’ model for skills development.3

One bright spot is the Indigenous businesses sector, which is a growing source of employment, labour market information and training for young Indigenous people. Defence is a driver in that sector. In 2020–21, Defence outstripped its target of 676 contracts, awarding 6,476 contracts worth $610 million to Indigenous businesses.4 Although that was a doubling of contract value, from $300 million to $600 million in one year, a House of Representatives committee report tabled in August 2021 suggested various measures to increase the capability of the Indigenous business sector in order to push the sector further up the value chain. Since 2015, Defence has awarded $1.86 billion in contract value to more than 550 Indigenous businesses.

Problems in the Indigenous business sector, such as ‘blackcladding’ (creating a management structure that satisfies the ownership criteria for the Indigenous Procurement Policy but in which control of the enterprise can be vested in non-Indigenous managers), are not adequately addressed by current policy. Indigenous business operators have said that they feel discriminated against in procurement panel processes and that they have higher barriers to overcome. Although that view is also characteristic of many non-Indigenous small and medium-sized enterprises (SMEs), it risks undermining Defence’s current achievements.

The size of Defence’s procurement portfolio creates an expectation that it should take a leading role in procurement policy reform. Improved opportunities that reinforce the expansion and maturation of sovereign industrial capability through Indigenous businesses would be a step forward, given that Indigenous businesses have substantially better employment outcomes for Indigenous people than non-Indigenous businesses.5 However, that will be a real challenge, as the sector needs to mature in its training and finances to deliver to Defence. A veterans’ business procurement policy could strengthen relationships with Indigenous veterans.

Initiatives for Defence and other parts of government that tie together training, scholarships and pre-apprenticeship programs would provide a major lift to current efforts. Initiatives to build capability (business incubators, venture financing and ensuring that existing policy tools are being used effectively and opportunities for veterans’ businesses) would increase the ability of Indigenous businesses to deliver higher value contracts. There are risks in all those areas, so Defence’s activities will need to be communicated clearly to stakeholders and political decision-makers, and the linkage of those policies to Defence’s core purposes—delivering capabilities for the government to use to advance Australia’s security—must be clear.

This is a clear point of difference between the broader defence industry and the Defence organisation. Defence’s ambitions include a market-leading participation target, using procurement as a driver of an economic and social uplift, and a commitment to meet Closing the Gap targets. Defence can encourage industry to take up the challenge, given its stake in key areas such as cybersecurity. In the broader business environment, there’s patchy engagement with reconciliation processes (particularly the registration of reconciliation action plans with Reconciliation Australia) among major defence contractors, including those that provide recruitment advertising or provide technology. This is an area where Defence can influence overall change in the sector.

There will always be tension for Defence and government between targeting problems that are clearly visible (and for which data is available) and addressing blind spots. Labour market data on Indigenous Australia is notoriously unreliable, so government action can be misaligned. For example, an effort to improve the quality of labour force statistics by the Department of the Prime Minister and Cabinet’s Central Analytics Hub was shelved because of the Covid-19 pandemic, the bushfire season and data access problems. Defence can be a powerful advocate for improved federal and state data collection as a basis for policy and implementation in this area.

Visible data creates a bias towards taking action that seems relatively straightforward, but which in fact will require concerted efforts on multiple fronts and involve several government portfolios or work areas. For example, the Certificate IV in Cybersecurity qualification in the vocational sector is only four years old. The curriculum was developed by TAFE administrators and several technology and cybersecurity companies and overseen by the Victorian Registration and Qualification Authority, but with no Defence involvement.

A seemingly straightforward solution, such as directing recruitment efforts towards TAFE cybersecurity students, can be surprisingly complicated. Current data (from 2020) shows that 129 Indigenous students were studying for the Certificate IV in NSW, 55 in Queensland and 275 in Victoria.6 Twenty-four registered training organisations across the country are currently approved to deliver the course.7 However, the National Centre for Vocational Education Research public data isn’t disaggregated to the campus level, so exactly where those students are learning (including online) is difficult.

This is why relationship building comes up so often in discussions with those in Defence charged with attracting Indigenous candidates and with their counterparts in the education sector responsible for guiding students into careers. Relationships trump everything when data is ambiguous, and raw numbers (on, for example, completion rates) might not tell the full story of Indigenous perseverance. For example, Indigenous students are much more likely than non-Indigenous students to experience conflict between study and family commitments, including caring for children or other family members, which affects results.8

Defence hasn’t built strong enough relationships through frequent interactions with the VET and university sectors, including Indigenous Elders in universities and Indigenous pro-vice chancellors (some of whom are ADF veterans). Its signature cyber initiatives—the ADF Cyber Gap and Cyber Defence College—don’t have a visible Indigenous engagement strategy or a clear link to the Defence TAFE Employment Scheme. TAFE is a major trainer of Indigenous Australians.

Defence has set itself an ambitious goal in the Defence Reconciliation Action Plan 2019–2022: ‘fostering genuine relationships built on trust.’9 Trust is intangible, but high-trust organisations have lower costs and ensure social cohesion in the face of rising uncertainties.10 How Defence holds itself to account and builds long-term relationships with Indigenous Australians will be a key marker of its future success.

To build trust makes the task of Defence more ambiguous and success more difficult to assess in the short term. Box-ticking exercises will risk jeopardising Defence’s ambitions to be an employer of choice. Defence isn’t a social policy portfolio, but it does have obligations under wider government policies, particularly the National Agreement on Closing the Gap. The population growth of Indigenous Australia is shifting towards the southern capital cities and the more populous states and territories, which is something to keep in mind when allocating resources because of the potential to exacerbate existing inequalities in access.11

The harder task is to forge relationships with communities and address the impacts of Defence’s past policies with Indigenous people, as indicated in the Defence Reconciliation Action Plan. Aspects of this work are being done through the engagement activities of the Indigenous Liaison Officer network and through initiatives such as the appointment of Indigenous elders to military bases. But some foundational blocks are missing, such as an Indigenous youth engagement strategy and a digital service design attuned to the way Indigenous candidates access internet services, including for labour market information.12

Fostering genuine trust is necessary for Defence to truly represent the nation that it protects. There are opportunities to partner with Indigenous Australians, build capacity alongside them and prioritise their leadership so that the collection and use of data, strategies on staff training and development, and strategies on youth, veteran, business and community engagement are developed in genuine partnership.

Full Report

We warmly encourage you to download and read the full report, which can be found here.

Acknowledgements

ASPI ICPC would like to thank all of those who peer-reviewed drafts of this report, including Major General Marcus Thompson, Stephen Chey, Michael Shoebridge, Fergus Hanson, John Coyne, Miah Hammond-Errey and Anastasia Kepatas. We’re also grateful to individuals we consulted in government, industry and academia, including participants at a workshop with Indigenous members of the Australian Defence Force that helped to shape and focus this report.

This report was commissioned by the Australian Department of Defence Strategic Policy and Intelligence Group. The work of ASPI ICPC would not be possible without the support of our partners and sponsors in governments, industry and civil society.

Within this report, the term ‘Indigenous’ is used to refer both to Aboriginal people and to Torres Strait Islanders.

What is ASPI?

The Australian Strategic Policy Institute was formed in 2001 as an independent, non‑partisan think tank. Its core aim is to provide the Australian Government with fresh ideas on Australia’s defence, security and strategic policy choices. ASPI is responsible for informing the public on a range of strategic issues, generating new thinking for government and harnessing strategic thinking internationally. ASPI’s sources of funding are identified in our annual report, online at www.aspi.org.au and in the acknowledgements section of individual publications. ASPI remains independent in the content of the research and in all editorial judgements.

ASPI International Cyber Policy Centre

ASPI’s International Cyber Policy Centre (ICPC) is a leading voice in global debates on cyber, emerging and critical technologies and issues related to information and foreign interference and focuses on the impact those issues have on broader strategic policy. The centre has a growing mixture of expertise and skills, including teams of researchers who concentrate on policy, technical analysis, information operations and disinformation, critical and emerging technologies, cyber capacity-building, satellite analysis, surveillance and China-related issues. The ICPC informs public debate in the Indo-Pacific region and supports public policy development by producing original, empirical, data-driven research. The centre enriches regional debates by collaborating with research institutes from around the world and by bringing leading global experts to Australia, including through fellowships. To develop capability in Australia and the Indo-Pacific region, the ICPC has a capacity-building team that conducts workshops, training programs and large-scale exercises for the public and private sectors. We thank all of those who support and contribute to the ICPC with their time, intellect and passion for the topics we work on. If you would like to support the work of the centre, contact: icpc@aspi.org.au

Important Disclaimer

This publication is designed to provide accurate and authoritative information in relation to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering any form of professional or other advice or services. No person should rely on the contents of this publication without first obtaining advice from a qualified professional.

© The Australian Strategic Policy Institute Limited 2022

This publication is subject to copyright. Except as permitted under the Copyright Act 1968, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Enquiries should be addressed to the publishers. Notwithstanding the above, educational institutions (including schools, independent colleges, universities and TAFEs) are granted permission to make copies of copyrighted works strictly for educational purposes without explicit permission from ASPI and free of charge.

First published April 2022.
Front and back cover images: ‘Silhouettes in the sky’, Marcus McGregor Cassady.

Funding

Funding for this report was provided by the Australian Department of Defence Strategic Policy and Intelligence Group.

  1. Department of Defence (DoD), Defence Data Strategy 2021–2023, Australian Government, 2021, online. ↩︎
  2. Jack Frawley, James A Smith, Andrew Gunstone, Ekaterina Pechenkina, Wendy Ludwig, Allison Stewart, ‘Indigenous VET to higher education pathways and transitions: a literature review’, ACCESS: Critical Explorations of Equity in Higher Education, 2017, 4(1), online. ↩︎
  3. Department of Education, Skills and Employment (DESE), ‘New industry engagement arrangements—Industry clusters’, Skills Reform, Australian Government, 2022, online. ↩︎
  4. Huon Curtis, Khwezi Nkwanyana, ‘Where to next for government policy on Indigenous procurement?’, The Strategist, 17 December 2021 ↩︎
  5. Boyd Hunter, ‘Indigenous employment and businesses: Whose business is it to employ Indigenous workers?’, Centre for Aboriginal Economic Policy Research (CAEPR), Australian National University, 2014. ↩︎

  6. ‘Table builder’, National Centre for Vocational Education Research (NCVER). ↩︎
  7. ‘Organisation / RTO search’, Training.gov.au, 2022. ↩︎
  8. K Hillman, The first year experience: the transition from secondary school to university and TAFE in Australia, Australian Council for Educational Research, Camberwell, 2005. ↩︎
  9. DoD, Defence Reconciliation Action Plan 2019–2022, Australian Government, August 2019. ↩︎
  10. A Green, G Janmaat, H Cheng, ‘Social cohesion: converging and diverging trends’, National Institute Economic Review, 2011, 215, R6-R22. doi:10.1177/0027950111401140; O Schilke, KS Cook, ‘A cross-level process theory of trust development in interorganizational relationships’, Strategic Organization, 2013, 11(3):281–303, doi:10.1177/1476127012472096; P Spoonley, P Gluckman, A Bardsley, T McIntosh, R Hunia, S Johal, R Poulton, He oranga hou: Social cohesion in a post-COVID world, Centre for Informed Futures, University of Auckland, 2020. ↩︎
  11. Australian Bureau of Statistics (ABS), ‘Estimates and projections: Aboriginal and Torres Strait Islander Australians’, Australian Government, 2019. ↩︎
  12. Defence has a youth engagement and development strategy but not one that’s specific to Indigenous youth. DoD, ‘The Defence Youth Engagement and Development Strategy’, Australian Government, no date. ↩︎

The Hunter frigate: An assessment

Powerful and survivable large surface combatants, in numbers commensurate with the expected threat and national budgetary limitations, remain central in the order of battle of any navy of a middle-power such as Australia, but they need to be fit for purpose. 

Australia’s government policy has acknowledged deteriorating geostrategic circumstances since 2009, culminating in its 2020 Strategic Update where we are not left in any doubt of the concern over China’s intentions and a stretched United States. The warships Australia acquires should be suitable for the circumstances it finds itself in.

Doctrine describes how the fighting will be done; policy determines which fight to prepare for. This report explores the disconnect between doctrine and policy, which has led Australia to building a warship that is unsuited for its purposes. It offers better alternatives, and suggestions to prevent being in a similar situation in the future, including using AUKUS to form a relationship with the USN to participate in its forthcoming new large destroyer program.

VAMPIRE VAMPIRE VAMPIRE: The PLA’s anti-ship cruise missile threat to Australian and allied naval operations

This report examines anti-ship cruise missiles (ASCM) possessed by the People’s Liberation Army (PLA), which is China’s armed forces, and the serious threat posed to Australian and allied naval forces operating in the Indo-Pacific region.

The PLA has spent over 20 years preparing to fight and win wars against technologically advanced adversaries, such as the United States and its allies. PLA preparations have included long-term investments in various capabilities that would be needed to facilitate and sustain ASCM strike operations, even whilst under heavy attack from technologically advanced powers.

This report has recommended a series of upgrades to Australian Navy capability. In the short term, military-off-the-shelf upgrades might significantly enhance the survivability of existing surface ships. In the medium term, a mix of crewed and uncrewed assets could not only deepen fleet magazines but also underpin offensive naval and air defence operations. In the longer-term, a range of options could be acquired to help break the PLA’s kill-chain – this refers to disrupting the PLA’s ability to find, track and engage naval assets with ASCMs.

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