Tag Archive for: Australian Government

To pay or not to pay? Ransomware attacks are the new kidnapping

From our vantage point in the UK, it’s hard not to be envious of the rigorous public debate taking place in Australia on the future legality of ransomware payments.

Over the past several years, ransomware attacks have become a persistent national security threat. The inability to respond effectively to this challenge has normalised what should be intolerable: organised cybercriminals harboured by hostile states regularly disrupting and extorting businesses and essential services, causing misery in the process.

Following last year’s cyberattacks against Optus and Medibank, the Australian government has signalled its willingness to address one of the thorniest and most contentious questions in cyber policy: whether to ban ransomware payments.

The debate over banning ransom payments has a long history. When it comes to terrorist-related kidnapping for ransom, the legislation—led by the United Nations Security Council—is clear. Payments are illegal.

The argument is that kidnapping works because it because it’s profitable, and so payments fuel the business and perpetuate attacks. The same logic is applied to ransomware. It is also a low-risk, high-reward criminal enterprise, with some experts suggesting that it’s more profitable than cocaine trafficking. As Coveware, a specialist ransomware negotiation firm, notes: ‘The profits ransomware actors generate are too high, and the risks are too low.’ There are almost no barriers to entry and the profit margin can be as high as 98%.

A ban on payments therefore makes logical sense. Stop the payments and the primary motivation for ransomware attacks will evaporate. Those seeking to get rich quick will look elsewhere.

Yet that logic has been applied before, in the kidnapping-for-ransom world, and despite some unilateral national bans against criminal payments and international prohibitions on payments to designated terrorist groups, hostage-taking continues. As Australia considers the possibility of banning ransomware payments, policymakers should consider the historical precedents.

As the so-called Islamic State expanded its self-declared caliphate, it sought to raise significant funds through the ‘sale’ of human life. As well as trading Yazidi slaves, the group kidnapped journalists and civil-society workers, offering their lives in return for tens of millions of dollars. For the hostages, their fate was decided by the nationality of their passports. Whereas the US and UK held fast and remained committed to the international prohibition on making payments to designated terrorist groups, watched their citizens murdered on the internet, and threatened the families with prosecution should they pay, other nations brought their nationals home safely to a presidential welcome in return for eye-watering sums.

Despite the legislative clarity on terrorism-linked kidnapping-for ransom payments, many countries placed the value of the lives of their citizens above compliance with international law and the potential for the payments to reward and encourage more hostage-taking.

For those who watched their family members murdered, the arguments of their governments in favour of non-payment rang hollow. The logic of political leaders and ‘securocrats’ that payment fuels the ambition and activities of the kidnappers, and thus non-payment will adversely affect their appetite for hostage-taking, has not survived contact with reality—a reality that is far more complex than those making policies and laws seem to recognise.

The reality is that when faced with a difficult decision, whether related to the life or death of a loved one or the survival of a business, pressure tells, and payments are often made. By outlawing ransom payments, authorities inadvertently exacerbate their challenge. Payment bans mean negotiations are conducted in secret, often without the knowledge of the authorities. One unintended consequence of the Italian government’s 1991 national ban on kidnapping-for-ransom payments to criminals, for instance, was that victims’ families simply stopped notifying law enforcement. This limits the willingness and ability of those involved to share information that might assist negotiation strategies, track money and identify perpetrators after ransoms are paid.

As with kidnapping, ransomware is mostly an opportunistic crime based on imperfect information about compromised victims. The Australian government shouldn’t assume that ransomware operators will avoid Australian organisations in the event of a ban, just as kidnappers don’t always know the nationality of their victims when they strike. And given the borderless nature of ransomware attacks, unilateral national action may present only a small inconvenience to cybercriminals. For a global threat, a credible global ban is required—but that’s not currently an attainable goal.

Countries that seek to outlaw ransomware payments may therefore end up disadvantaging their businesses and reducing their ability to respond to the threat. They could also lose valuable opportunities to disrupt criminals and collect information that would strengthen them against future attacks.

Of course, there are many differences between the offline and online worlds, and it would be wrong to suggest that the parallels are absolute. Paying a ransomware operator for data is not the same as paying for a human life. Yet the core criminal incentives, the opportunistic nature of the crimes and the inconsistent responses of the victims are similar, and the kidnap-for-ransom experience can be instructive, particularly when it comes to the challenges and unintended consequences of payment bans.

None of this dismisses the need for a rigorous and open-minded review of the policy options for ransomware and ransom payments in Australia and elsewhere. Regardless of whether payments are banned, a much more activist approach is required to disrupt the ransomware business model. The status quo is not acceptable. Policymakers are right that too many organisations pay, and often pay too much, when there are legitimate alternatives available.

Key to the success of the kidnapping-for-ransom response industry has been governance mechanisms established to ensure information sharing, professionalism and best practice to minimise the size of payments and the profitability of the crime. There’s room for greater regulation of the ransomware negotiation and payment services industries. As the kidnapping-for-ransom response industry has shown, governance is critical to ensuring an orderly market.

And finally, just like in kidnapping-for-ransom responses, responses to ransomware attacks must place the victim at the centre of the recovery strategy. This requires empathy, and governments can promote responsible victim behaviour. Usually this means acknowledging that there are sometimes legitimate reasons to pay, and providing more clarity on what constitutes a reasonable ‘last resort’.

What Australian businesses need to know about Canada’s new modern slavery law

Last month, Canada passed modern slavery laws focused specifically on forced labour and child labour. This comes in the context of an emerging global trend of new national modern slavery laws. In Australia, a statutory review of the Modern Slavery Act 2018 has been released and is being considered by the government. Canada’s approach is similar to transparency models used in Australia and the UK, as opposed to stronger due-diligence models adopted by France, Germany and the Netherlands.

The new laws have been years in the making, with the first version of the bill presented to parliament in 2018. The law was introduced into the Canadian senate in 2021 and, after receiving final parliamentary approval on 3 May 2023, the Fighting Against Forced Labour and Child Labour in Supply Chains Act—formerly known as Bill S-211—will take effect on 1 January 2024.

So what does this mean for businesses operating in Canada? And is there anything in Canada’s approach that Australian businesses and the government should note?

Canada’s new law imposes a reporting framework focused on forced labour and child labour. It places new reporting obligations on ‘government institutions producing, purchasing or distributing goods in Canada or elsewhere’ and ‘entities producing goods in Canada or elsewhere or in importing goods produced outside Canada’.

An entity is defined broadly as a corporation or a trust, partnership or other unincorporated organisation that is listed on a stock exchange in Canada, has a place of business in Canada, does business in Canada or has assets in Canada.

To be covered by the act, entities must meet at least two of three conditions for at least one of the two most recent financial years: having at least C$20 million in assets, generating at least C$40 million in revenue, and employing an average of at least 250 employees. Alternatively, they can be prescribed as entities by regulation.

Both government institutions and entities meeting these criteria will be required to report annually to Canada’s minister for public safety and emergency preparedness, outlining the steps taken over the previous financial year to ‘prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity’. The first reports are required to be filed by 31 May 2024.

The annual reports must disclose a range of information about the entity, including its structure, activities and supply chains; its policies and its due-diligence processes in relation to forced labour and child labour; and the parts of its business and supply chains that carry a risk of forced labour or child labour. Entities will have to report on what steps they have taken to assess and manage that risk, along with any measures taken to rectify any forced labour or child labour.

They will also have to outline measures taken to remedy loss of income to the most vulnerable families that results from any measures taken to eliminate the use of forced labour or child labour; the training provided to employees on forced labour and child labour; and how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

These reports will be publicly available in an electronic registry, mirroring Australia’s online register for modern slavery statements. A summary report is also required to be tabled in parliament each year by the minister.

Senator Julie Miville-Dechêne, who sponsored Bill S-211, described it as ‘a first step in the right direction’ and ‘a reasonable, pragmatic approach that will raise awareness of modern slavery in corporate boardrooms and can lead to positive change’.

Additional anti-slavery reform efforts are ongoing in Canada. For example, Bill S-224 aims to align trafficking-in-persons offences in Canada’s criminal code with the international definition outlined in the Palermo protocol.

Australia should consider whether and how this new law might impact its own ongoing reforms. Specifically, the statutory review of the Modern Slavery Act led by John McMillan, which was tabled in parliament last month, makes 30 recommendations to strengthen Australia’s legislation that are being considered by the government.

There are three key lessons that the government should draw from Canada’s new legislation as it considers the findings of the statutory review.

The first is the importance of stronger enforcement. The appointment of designated individuals to enforce the new Canadian law and the inclusion of extensive investigative powers will boost compliance and likely drive changes in business behaviour.

The second is the imposition of penalties for non-compliance. The legislation imposes a fine of up to C$250,000 on any person or entity that fails to comply with the law, knowingly makes a false or misleading statement, or provides false or misleading information. Australia’s Modern Slavery Act lacks any substantial method of enforcement for non-compliance and doesn’t impose any financial penalties.

The third is its scope. The Canadian legislation defines covered entities broadly to ensure that a wider range of companies—including offshore entities that otherwise meet the threshold requirements—are subject to reporting obligations. In addition, it places the revenue threshold for reporting at C$40 million, imposing obligations on smaller entities. That’s considerably lower than the threshold of A$100 million that applies under Australia’s law.

Australia’s statutory review recommends reducing reporting thresholds to A$50 million, recognising that ‘human rights abuses must be the concern of all businesses’, and says this change is needed to bring Australia in line with other countries. If Australia were to do this, consistent with the approach taken in Canada, it would expand reporting obligations to a greater range of entities and encourage all organisations to improve their practices with respect to modern slavery risks.

Finally, it’s important to consider the global context of both countries’ reform processes. The weakness of the new Canadian laws is that they’re based on a transparency model rather than the due-diligence models that are considered best practice. When the proposed Canadian legislation was considered by the International Justice and Human Rights Clinic’s Supply Chain Law Scorecard, it received the second lowest ranking of the 12 supply-chain laws assessed.

The only country that received a lower ranking was Australia, since its law contains just one of the six features listed as crucial to a strong supply-chain law—reporting requirements, due diligence requirements, enforcement mechanisms, remedies for victims, independent oversight and broad scope. Supply-chain laws from the Netherlands and the European Union were assessed as being the most robust. The statutory review of Australia’s law recommends the introduction of a due-diligence requirement like these countries, but it remains to be seen whether the government will accept the proposed reform.

Canada’s move to strengthen its modern slavery law is a welcome development, but it also highlights the importance of Australia continuing to improve its own frameworks. The statutory review gives the Australian government an important opportunity to do just that. As Professor McMillan observed in the review’s final report: ‘It will be unfortunate if Australia, having been at the forefront in this field, is seen to be lagging behind.’.

National defence strategy will need to clarify Australia’s approach to deterrence

The defence strategic review marks a pivotal shift in Australia’s approach to defence doctrine and strategy, placing a significant emphasis on deterrence. As the government moves to develop a national defence strategy next year, a more nuanced understanding of deterrence is needed. Clarifying Australia’s deterrence-by-denial approach will be vital in turning the DSR’s deterrence vision into practical and effective measures that enhance national security.

Deterrence is the practice of discouraging an adversary from unwanted actions by threatening to increase costs or deny benefits. The DSR calls for a deterrence-through-denial policy—to militarily deny the potential benefits of aggressive action, the most challenging type of deterrence to operationalise with success.

For deterrence by denial to be effective, it must cause an adversary to refrain from taking aggressive action because it believes that it will be militarily denied from achieving the potential benefits. This contrasts with deterrence by punishment, which threatens an adversary with severe penalties, such as conventional strike or sanctions. This strategy relies on imposing costs on an adversary that outweigh the benefits of initiating an action, even if the adversary thinks it could achieve its military goals.

The choice between deterrence by denial and deterrence by punishment has significant implications for force design and structure, operational planning and alliance management.

To maintain credibility in the region and on the world stage, Australia needs to say what it means and mean what it says. What the DSR is saying about deterrence is far from clear.

A deterrence-by-denial approach against an invasion of mainland Australia would likely necessitate an increase in the Australian Defence Force’s capability, beyond what is outlined in the public version of the DSR. For example, it could involve fortifying coastal defences, laying more sea mines, acquiring more anti-ship missiles, and deploying advanced surveillance systems to monitor, detect and deter incursion attempts.

To demonstrate a credible deterrence-by-denial strategy, any time there’s an incursion or testing of defences by an adversary, it must be met with forces that promise denial. But is this the type of strategic approach the DSR is really seeking to achieve? If this deterrence-by-denial strategy has ambitions further afield than deterring mainland incursions, then it presents significant challenges for Australia.

Today’s ADF probably lacks the force structure and posture required to deny most high-level political-military scenarios. Beyond its feasibility, implementing this approach could lead to regional instability if building and demonstrating credible denial capabilities appear threatening to regional neighbours.

It’s important to be candid about the potential unintended consequences of a deterrence-by-denial strategy—but there are a few actions Defence can take now to mitigate risks and strengthen Australia’s deterrence policy and strategy for the future.

First, Defence should reconsider its narrow focus on a singular deterrence-by-denial strategy and explore a more comprehensive and coordinated approach that allows Australia to tap into different deterrence strategies that can be tailored to specific adversaries and situations. Deterrence by denial doesn’t need to be abandoned—and indeed cannot be abandoned given its prominence in the DSR—but it should be seen as just one aspect of a holistic, integrated deterrence approach. Integrated deterrence provides a more flexible framework across services, domains, theatres, the spectrum of conflict, all instruments of national power, and Australia’s network of alliances and partnerships. It would provide a collective toolkit that Australia could use to deter a wider range of potential threats.

Second, a senior government official should be appointed with responsibility for deterrence policy and strategy, along with an appropriate military counterpart, to consolidate Defence’s use of deterrence. A common understanding of Australian deterrence strategy and policy is critical for Defence, the government as a whole and the US alliance. This role must assess who Australia seeks to deter from doing what, how it will do that and in what timeframes. Tabletop exercises, wargaming and red-teaming should be used across the ADF, including intelligence and policy organisations and across domains, to test scenarios to inform capability requirements and decision on force structure and posture.

Third, Australia’s deterrence approach will require proactive escalation management at the whole-of-government level. Defence can start by addressing any misperceptions of Australian capabilities and strategic intentions that could lead to miscalculation. Preparedness activities should involve relevant departments, allies and partners to enhance coordination, communication and decision-making. Effective deterrence requires all the players to efficiently harness the necessary tools of national power for maximum effect. It should also foster communication channels that provide the ability to de-escalate conflict when necessary.

Australia’s security hinges on seeing deterrence not as a one-off strategy, but as a persistent, adaptive process—one that confronts potential threats with a robust, credible and integrated response that makes the cost of aggression untenable.

Getting Australia’s war powers right

The definitive choice for a nation is sending its troops to war, so the surprise in the parliamentary review of Australia’s war powers is the questioning of the legal process used to go to war in Afghanistan and Iraq.

Setting the executive right on that big point of process is a vivid illustration of the need for a clearer view of the Australian way of war.

The report on international armed conflict decision-making by the parliament’s Joint Committee on Foreign Affairs, Defence and Trade finds that the war powers are not broken but could work better. It cites ‘a clear need to improve the transparency and accountability of government decision-making’.

The committee judges that much of the complexity in the war powers debate is due to an absence of documentation detailing decisions:

This is a significant gap in transparency and accountability of the Executive and hence in the nation’s collective understanding of how Australia took its path to war, particularly in reference to Iraq and Afghanistan. Shining a light on this issue is critical to both understanding the legal basis for Australia’s actions in war, but also in understanding our history.

In deciding to go to Afghanistan and Iraq, cabinet relied on the minister’s power to direct the Australian Defence Force under the Defence Act 1903. Using the Defence Act departed from the way it was done in World War II, when war was declared using the governor-general’s constitutional power as commander in chief of the military. Of course, that was a different era with different views on Australia’s relationship with the United Kingdom and the role of the governor-general, so questioning ongoing relevance and practicality is vital.

With a focus on the need for certainty—for the political class and the public—the committee recommends that, in decisions to deploy troops, cabinet rely on the constitution rather than the Defence Act.

Specifically, the review recommends that the government amend the cabinet handbook to ‘restore the primacy of the Governor-General under Section 68 of the Australian Constitution’ in decision-making on ‘war or warlike operations, particularly in relation to conflicts that are not supported by resolution by the United Nations Security Council, or an invitation of a sovereign nation’.

Using the constitutional power would provide ‘greater clarity and transparency’ and give ‘greater legitimacy’ to members of the ADF doing their duty under the constitution. A governor-general’s decisions are ‘not justiciable, unlike a minister’s direction’ under the Defence Act, which can be challenged in the courts.

While recommending reliance on the constitution, the report acknowledged the prime minister’s most profound prerogative: the executive’s exclusive power to decide whether and how to deploy the ADF.

The first recommendation reaffirms that decisions on war are ‘fundamentally a prerogative of the Executive, while acknowledging the key role of parliament in considering such decisions, and the value of improving the transparency and accountability of such decision-making and the conduct of operations’. Therefore, the key outcome is that the prime minister has the power to send troops to war through the legal mechanism and protection of the constitution.

The report is a bipartisan effort by Labor and the Coalition—a coming together of the parties of government on their use of the war powers when in office. The counterview is a dissenting report by the Australian Greens, arguing that the deployments to Afghanistan and Iraq showed a ‘vague and unaccountable system’ that makes Australia an ‘international outlier on transparency’.

In finding against a greater role for parliament in cabinet’s war prerogative, the review cites several aspects of the submission by ASPI’s Justin Bassi, Bec Shrimpton and Alex Bristow. The committee noted their ‘significant concerns’ about proposals requiring parliamentary authority for decisions on armed conflict or warlike operations.

On calls for the public release of defence intelligence, the committee quoted their view that the executive ‘must retain discretion about whether and how to report certain types of deployment, even retrospectively. Such discretion is, for example, likely to be appropriate around the deployment of special forces, submarines, or surveillance aircraft, where secrecy may be paramount even after a mission is complete.’

The Bassi, Shrimpton and Bristow submission pointed to the finding of previous inquiries that parliamentary processes already provided a multitude of ways to scrutinise the deployment of ADF troops via question time, motions, Senate estimates and committee inquiries. These tools, the committee noted, were said to form ‘part and parcel of Government accountability to Parliament and the Australian people’.

The big step for parliamentary oversight is that the Joint Committee on Foreign Affairs, Defence and Trade recommends stripping out its own defence function to create a new joint statutory committee on defence.

The new committee would have six government members and five non-government members. It would consider ‘white papers, strategy, planning and contingencies’; inquire into matters referred by the defence minister or either house of parliament; and have general parliamentary oversight of military operations.

The report outlines the kinds of information the committee would have available to it:

The proposed committee should be explicitly permitted to request and receive classified information and general intelligence briefings while also being subject to clear legislative constraints to its mandate, including restrictions on access to:

– individual domestic intelligence reports

– intelligence sourced from foreign intelligence bodies where such provision would breach international agreements

– detail regarding operational matters or information regarding highly sensitive capabilities or protected identities, except where specifically authorised by the Minister for Defence.

The defence minister would retain ‘an overarching power to veto the provision of any classified information to the committee’.

To help parliament do a better job, the report makes three recommendations drawing on another ASPI submission, from me. I argued for greater use of parliamentary conventions, not law, to strengthen the parliament’s role in the Australian way of war:

Codify existing precedents to make them conventions: the John Howard precedent—a motion of the House of Representatives to send the Australian Defence Force to war; the Tony Abbott and Julia Gillard precedents— set out the mission and its aims. Then give parliament, and Australia, regular formal reports on the conflict. Revive the convention that major government statements on Australia strategy and defence should be presented and tabled in parliament.

The review recommends a new section in the cabinet handbook requiring a debate in both houses of parliament either prior to deployment of the ADF or within 30 days of its deployment: ‘Debate should occur after a formal ministerial statement is made which explains the reasons for the operation, based on the 2010 Gillard model, as well as a statement of compliance with international law and advice as to the legality of the operation.’

The next recommendation is for standing resolutions in the House of Representatives and Senate (replicated in the cabinet handbook) providing for an annual statement on war or warlike operations from the prime minister, plus updates at least twice a year from the defence minister.

A further recommendation is for the government to ‘revert to a traditional approach whereby defence white papers and national security or strategy updates should be tabled in both Houses of Parliament within 30 days of their presentation to the Minister’.

In the 20th century, defence white papers and updates were presented in parliament. In this century, however, a tendency to follow presidential practice means that parliament is bypassed in order to serve the TV cameras; to unveil defence reports, prime ministers have had backdrops of military aircraft, ships and uniforms.

The committee concludes that its inquiry into how Australia goes to war is ‘timely and even somewhat belated’, stating in its final paragraph: ‘The evidence to the Committee sustains a conclusion that the transparency and parliamentary consideration of such decision making has become less clear and less substantial in recent decades.’

The biggest choice a nation faces is being right about war. And this frame for getting the war powers right will make the choices clearer.

Australian funding for the Pacific brings together all tools of statecraft

In a budget speech that focused on domestic priorities, Treasurer Jim Chalmers’s only international announcement was of a package allocating $1.9 billion to strengthening Australia’s relationships in the Pacific.

It wasn’t a surprise that the Pacific region was a focus of the budget. The priority placed on the region has been demonstrated by Minister for Foreign Affairs Penny Wong visiting every Pacific Islands Forum country during the government’s first 12 months in office.

What is notable, though, is the way the package is being delivered. It will involve 13 agencies across government, and most of it won’t be given as development assistance.

It’s clear that a whole-of-government approach is gaining traction when departments and agencies as diverse as Treasury, Services Australia and the Fair Work Ombudsman are all seen as able to contribute to enhancing engagement with Australia’s Pacific neighbours.

Some parts of the package focus on issues of internal security. For example, the Attorney-General’s Department will receive $12 million over four years to work with the Australian Federal Police to strengthen Pacific law enforcement and criminal justice cooperation.

The AFP’s international engagement is another big winner, with a substantial boost of $71.9 million per year over the next four years. And more than $30 million has been earmarked for the Department of Home Affairs.

But there’s also a strong economic focus on Pacific workers coming to Australia.

Funding of $370.8 million over four years has been committed to expand and improve the Pacific Australia Labour Mobility scheme, to support sustainable growth and improve support for workers in line with Australian and Pacific aspirations. Of this, the Department of Employment and Workplace Relations is set to receive almost $170 million over four years to maximise its economic contribution to supporting Pacific economies and addressing the workforce shortage in Australia.

People-to-people connections are also a focus of the package, with funding of $89.5 million over four years to deepen ties with the region and promote shared values. The Department of Infrastructure, Transport, Regional Development, Communications and the Arts will receive $5.8 million a year for the next four years to contribute to strengthening cultural and people-to-people ties with the region.

The ABC will receive $8.5 million over four years to expand the Indo-Pacific broadcasting strategy, boosting media connections and enabling more Pacific island peoples to access Australian content. Even the Department of Health and Ageing is receiving $3.5 million over the next four years to enhance Pacific sports diplomacy, bringing people closer through a shared love of sport. Overall, these measures are presented as leveraging Australia’s strengths in media and sport.

The largest element of the package is for defence cooperation, to be met from within existing resources. The Department of Defence will have to find $920 million in savings over four years to fund Pacific peace and security initiatives.

This will include expansion of defence engagement with Pacific island countries through the provision of infrastructure and maritime security capability. Media reports have focused on key Pacific wharves and the joint redevelopment of the Lombrum Naval Base in Papua New Guinea as infrastructure projects.

While official development assistance through the Department of Foreign Affairs and Trade comprises only $114 million of the package, that needs to be put in the context of the $900 million in new funding that was committed to the Pacific in the supplementary budget in October 2022. This month’s budget shows implementation of these commitments and where they will start to flow.

New DFAT funding is earmarked to support ‘a stronger, more united Pacific region’, including supporting the Pacific Islands Forum, strengthening humanitarian relief and disaster preparedness, and improving diplomatic capability and cyber resilience. Some of the increased funding is for bringing an Indigenous perspective to Pacific engagement in line with Australia’s First Nations foreign policy.

Looking at the whole package, it shows that the Australian government is thinking about engagement broadly—across multiple parts of government and through a range of tools. This is line with an increasing commitment to using all the elements of statecraft among Australian policymakers.

Interestingly, the details of the package were announced jointly by Wong, Deputy Prime Minister and Minister for Defence Richard Marles, Attorney-General Mark Dreyfus and Minister for International Development and the Pacific and Minister for Defence Industry Pat Conroy.

The ministers noted that the package is designed to ‘respond to Pacific priorities and ensure our shared interests in a peaceful, prosperous and resilient region’. In similar terms, the budget statement said it will ‘support Pacific family priorities and commitments under the 2050 Strategy for the Blue Pacific Continent’.

It can thus be seen as a direct response to the ministers’ listening tour to Pacific island states. This suggests that what the Pacific wants from Australia includes engagement from across Australian government and society in line with Pacific priorities for national development.

The challenge for Australia will be to implement this vision of whole-of-government engagement through effective coordination across the many government partners delivering the package.

Focusing on the future of Australia’s critical minerals

Australia’s critical minerals are becoming increasingly important as the world looks to these resources to build the technology needed to reach net-zero emissions.

Critical minerals and rare-earth elements are the building blocks of the modern economy. They are crucial to increasing our global importance, and central to supporting the shared geostrategic aims of Australia’s allies and partners throughout the region.

Demand across the world for these minerals is rapidly increasing, driven by decarbonisation and exponential growth in electronic, communication and military technologies. With this expected growth, Australia finds itself in an enviable position.

Barely a week passes in which I am not contacted by an ambassador of a partner nation seeking to discuss access to Australian critical minerals and rare-earth elements.

Australia boasts some of the richest deposits of critical minerals reserves in the world. We have the world’s second largest deposits of lithium and cobalt, and the sixth largest deposits of rare earths.

The International Energy Agency says that the world is on track to double its overall mineral requirements for clean-energy technologies by 2040. Australia has an opportunity to seize the moment—to leverage our critical minerals endowment to fuel the global clean-energy transition.

Unlocking the potential of our critical minerals endowments is a core part of realising our ambition to be a clean-energy superpower.

Contrary to popular belief, reaching net-zero emissions by 2050 means we will need more mining, not less. That’s because, to build batteries, semiconductors and wind farms, the world will need more of our minerals.

The road to net zero runs through Australia’s resources sector. That is why we are doing everything we can to ensure we grasp this opportunity with both hands.

We are looking at adding more value to what we mine and produce.

New mines are being planned and existing mines expanded, and exploration spending is continuing to rise, spurred on by the work of Geoscience Australia.

The critical minerals boom is going to help ensure our future by adding even more value to our world-class mining sector and by creating exciting new industries here as we move into downstream processing.

Looking at rare earths, for example, Australia is currently only involved in the mining and beneficiation stages of what is a lengthy and complex supply chain. It starts with mining and ends with the production of permanent magnets used in electric vehicle motors and wind turbines.

The government is supporting the development of a number of rare-earths projects that will help us to move further along the value chain. For example, Lynas and Arafura have been awarded federal grants to support the development of Lynas’s Kalgoorlie cracking and leaching facility.

Hastings Technology Metals has received approval for a $220 million loan through the Northern Australia Infrastructure Facility to support the development of its Yangibana project, which includes cracking and leaching at its Onslow Hydrometallurgical facility. The Perth-based company also recently received a conditional letter of support from Export Finance Australia.

And Iluka Resource’s Eneabba rare-earths refinery has been approved for a $1.25 billion loan through the Critical Minerals Facility. Once operational, the Iluka facility will be Australia’s first fully integrated rare-earth-oxide refinery and will be crucial in diversifying downstream components of the rare-earths supply chain and establishing a processing base from which we can further grow.

Consistent with the government’s manufacturing policy and ambitions, including our battery strategy, it is our ambition to have more of our own rare earths and other critical minerals processed here. We want to capture more of the regional economic benefits and, most importantly, we want to help ensure reliable and affordable supplies of these materials to underpin the global net-zero transition by diversifying supply chains.

In recent years, we’ve seen first-hand the significant vulnerabilities that arise from concentrated supply chains, regardless of where the concentration points lie. Diversity of supply is an intrinsic good in these markets—and by establishing new sources of supply for critical minerals, we can help make these markets stronger, more efficient, more resilient and more transparent.

At the same time, we can move up the value chain by linking our projects with like-minded countries and strategic partners such as the US, the UK, India, Japan, Korea and EU member states, and establishing robust end-to-end supply chains.

Positive developments are already taking place in this area, and we want to capitalise on that momentum.

Our National Reconstruction Fund is a $15-billion financing vehicle that will diversify and transform Australia’s industry to drive sustainable economic growth. A billion dollars of that funding has been earmarked for value-add in resources.

This injection of funds, alongside existing government finance mechanisms such as the new Critical Minerals Facility, Clean Energy Finance Corporation and Northern Australia Infrastructure Facility, will help unlock finance for critical minerals projects.

To help ensure we have the right policy settings in place, the government is also developing a new critical minerals strategy. It will focus on key priorities such as creating economic opportunities—including for regional Australia and First Nations peoples. It also looks at developing new sovereign capabilities and industries, and building reliable, competitive and diverse supply chains. It will help grow our sector and reflect the important role our critical minerals can play here and abroad.

Importantly, we continue to build meaningful international partnerships that encourage investment in critical minerals.

ASPI’s upcoming Darwin Dialogue represents a timely opportunity to firm up collaboration between our important strategic partners on rare earths and critical minerals. I look forward to taking part in the dialogue and exploring the challenges facing the sector and the opportunities that lie ahead, both nationally and regionally.

After all, developing Australia’s critical minerals industries will benefit our economic, strategic, technology and climate interests—and will be instrumental in our future as a renewable energy superpower.

On 12–14 April, ASPI, with the Northern Territory government’s ‘Investment Territory’ program, will host the inaugural Darwin Dialogue. The 1.5 track dialogue will bring together government, industry and academia representatives, including delegations from Japan and the United States, to discuss establishing secure supply and value chains for mining, processing and refining critical minerals outside China.

AUKUS has a people problem

Unless Australia can develop its skilled workforce, it will struggle to acquire the advanced defence capabilities outlined in the AUKUS agreement. The limited pool of skilled workers is a problem affecting many industries and technology fields across Australia. More than that, it’s a problem common to countries that are natural partners to Australia, including the United States and United Kingdom in AUKUS. It’s something we need to address together to ensure AUKUS achieves its potential.

As US Senate Armed Services Committee chair Jack Reed acknowledged in a discussion with a Washington defence writers’ group this year, ‘We need skilled workers here in the United States and we also want to develop skilled workers in Australia, too … That requires training and in this labor market … it’s very difficult to get workers for any type of activity.’

Last month’s AUKUS ‘optimal pathway’ announcement outlined the beginnings of a solution with Australian investment in US and UK submarine construction and the training of Australian submariners, but the challenge is enormous. The workforce shortage was identified as a ‘key vulnerability’ in a 2020 report to Congress from the US Navy, with material engineers, marine electricians and tech-specific specialists in short supply. Despite increased funding and recruitment drives, the talent deficit is proving difficult to rectify because of the extensive training required for individuals to qualify in these fields.

For Australia and its partners, the skill shortage is particularly evident in advanced technology sectors, including areas of priority for AUKUS Pillar 2—the non-submarine component of the agreement that focuses on technology sharing in eight critical sectors, including artificial intelligence and quantum computing.

To support AUKUS and to maintain its strengths in advanced technologies, Australia will need to create an environment that discourages highly skilled homegrown talent from being drawn away by the global thirst for skills.

A key part of the answer lies in greater collaboration involving the Department of Defence, educational institutions and the private sector. Public–private partnerships are an avenue to nurture talent and begin addressing the skilled workforce challenges. They provide streamlined avenues for funding and education, while encouraging local and foreign commercial investment. Canberra needs to recognise its responsibility to provide sufficient government funding to facilitate the formation of public–private partnerships that benefit national security.

Australia already has public–private partnerships in the advanced technology sector that have demonstrated their viability and can serve as a scalable model for pursing similar arrangements under the multilateral framework of AUKUS.

Sydney-based startup Silicon Quantum Computing was established in 2017 out of the University of New South Wales, with $83 million in capital funding from a combination of public and private entities, including the federal government, the Commonwealth Bank, Telstra and the NSW government. The company is now a leader in quantum computing innovation largely because talented and visionary individuals were provided with a favorable innovation ecosystem facilitated through government-led and industry-supported investment.

Australia and its AUKUS partners should foster similar initiatives in a multilateral context and identify strengths in each other’s industries across the technology areas of Pillar 2. In the US, an example of a cross-border public–private partnership is the microelectronics program partnership between Arizona State University and the Taiwan Semiconductor Manufacturing Company that is aided by the US CHIPS and Science Act. This is a successful model that in part addresses the skills gap and develops the semiconductor workforce in specific areas of deficiency. It demonstrates the importance of government-driven stimulus.

The AUKUS partners will need to address additional policy considerations to more easily facilitate this, including reviewing the notoriously restrictive export controls under the US International Traffic in Arms Regulations, creating skilled AUKUS visas and education pathways, and providing tax incentives for private companies to invest in AUKUS partners’ industries where it might be more expensive than in other parts of the world.

Domestically, Australia has taken some positive steps to facilitate public–private partnerships and address the underlying education challenge. In June 2022, the government pledged to create an advanced strategic research agency, modeled on the US Defense Advanced Research Agency, to support AUKUS’s and Australia’s sovereign technology goals. The new agency’s role in linking Australian industry and universities with AUKUS allies will be a practical step towards collectively addressing the limited talent pool available to execute collective security requirements.

But greater effort is required. The 13 March AUKUS optimal pathway announcement didn’t touch on how Pillar 2 will be tackled by the partners. Nevertheless, Canberra can take proactive actions to champion public–private partnerships domestically and address domestic workforce challenges ahead of greater multilateral coordination under the AUKUS framework.

The AUKUS debate Australia needs to have

The government confirmed last week that selected Royal Australian Navy surface ships and submarines will in the foreseeable future be equipped with US long-range Tomahawk cruise missiles. This is a spectacular development in Australia’s military posture but one rendered almost ho-hum by the AUKUS package on nuclear-powered submarines announced just days earlier.

The RAN’s first Virginia-class SSN is expected to be in the water by the mid-2030s and the first boat with a significant ‘made in Australia’ character nearly a decade after that. That is a very long time to sustain the attitudes that drove the trilateral decision to go down this path. It will seem even longer because all sorts of commentators coming from every imaginable direction will be giving the issue a real workout. Some will be seeking to defend and protect the program, others to see it discredited and abandoned, and still others to simply try to explain and understand it.

Australia has, of course, looked at nuclear-powered submarines in the past and elected not to try to acquire them. In the past, the primary question was framed in terms of what Australia would need to do to make the construction of such vessels a practical next step. The option was deemed unattractive for several reasons. First, it would take a long time, decades, for Australia to acquire the necessary competencies, not least the nuclear skills associated with the propulsion units. Second, the nuclear skills needed would almost certainly see Australia put on a proliferation watch list—that is, a state moving significantly closer to the capability to support a nuclear-weapon program. A third consideration would have been the daunting cost.

The AUKUS submarine package allows Australia to credibly deny an interest in acquiring nuclear weapons, but it doesn’t soften the other two negatives—the long acquisition timeframe and the cost.

The principal themes of the commentary alluded to above, certain to be a sustained deluge, can be readily anticipated. One major theme will be misjudgement—that one side overreacted to events and developments or foolishly seized on a military response to changes better dealt with in other ways. Other likely variations on this theme include that the misjudgement stemmed from a single or small number of major events, resulted from a perceived relentless accumulation of events, or ultimately arose from an excessive rigidity and an unwillingness to consider adapting the region to geopolitical changes.

The flip side of the misjudgement theme is likely to be the contention that authoritarian states have a new and still growing weight in the international system that amplifies the significance of the stark imbalance in natural flows of information and knowledge between these states and the community of democratic states. Moreover, that asymmetry involves those authoritarian states having, at best, limited internal checks and balances, as well as a range of options on policy and practices that democracies cannot match and have great difficulty countering.

Is Australia ready for this deluge of commentary, assessment and judgement? I don’t think so. My feeling is that many Australians still sense a significant disconnect between what has happened, predominantly but not exclusively in the Indo-Pacific, over the past decade or so and Australia’s commitment to acquire a fleet of nuclear-powered submarines, a capability completely out of our reach at the present moment.

To take us through this storm of judgement, Australians need a compelling and stable narrative that accounts for the course the government has elected to take. This narrative must be honest—any untruths or convenient exaggerations are sure to be exposed by the passage of time. It also needs to be edgy in the sense of clearly being informed by what the intelligence agencies were telling the government along the way. That will involve thoughtful judgements weighing up protecting intelligence sources and methods and imparting the narrative with the gravitas it will need to accomplish its objectives. I have touched on some of these aspects of the AUKUS decision in earlier Strategist posts.

Equipped with its AUKUS narrative, and neither emboldened by nor apologetic about it, Australia should aspire to be a robust participant in the many dialogues that lie ahead on the security architecture needed in the Indo-Pacific to ensure that we can collectively navigate the turbulence ahead without major conflict. We may well discover, as an Indo-Pacific community, that no one has a monopoly on misjudging the reactions to and therefore the consequences of particular policy settings. As time passes, it will get harder to alter the primary components of the SSN AUKUS project. But it’s not that hard to imagine developments that would incline a future Australian government to see merit in making some adjustments to facilitate or respond to regional developments.

Australia has had some Pacific wins, but there’s no cause for complacency

China’s growing influence in the Pacific islands region hasn’t ended, but there are signs that it’s slowed, especially on security issues. There’s been progress on the ground to withstand Chinese political warfare.

Like-minded countries such as Australia, the US, Japan and France are working better together to create a climate for island state resilience at the macro level. South Korea will soon hold its first-ever Pacific Islands Summit. Fiji has acknowledged Israel for its Pacific islands work in climate change, agriculture, health, education and disaster rehabilitation. India’s Narendra Modi will make the first visit by an Indian prime minister to Papua New Guinea later this year. Indian engagement with the Pacific has enormous potential to transform local economies.

One area to watch in the near term is what happens in the island states that have a compact of free association with the US. There are elections coming up this year in Marshall Islands and the Federated States of Micronesia. Palau goes to the polls next year. If the US and its allies were to lose one of the COFA states to a pro-China government, the regional outlook would change for the worse.

But for now the regional picture, while still fragile, is looking brighter. A year ago Vanuatu looked like it would fall under significant Chinese influence. A new government in Vanuatu has changed that, as evidenced by the successful visit by the new prime minister, Ishmael Kalsakau, to Canberra. A security agreement was signed as well as a commitment to build stronger trade and investment links. That’s not to argue for complacency: last month Vanuatu failed to issue timely clearance for a US Coast Guard vessel to commence planned ship-rider arrangements in the fight against illegal, unreported and unregulated fishing in the region.

In recent years there’s been a concern that Fiji was embracing much stronger ties with China at the expense of traditional partners Australia and New Zealand. But a general election and a change of government have shifted the outlook significantly. The new prime minister, Sitiveni Rabuka, campaigned openly against closer engagement with China. He has now begun implementing his commitment. A visit to Canberra and a possible security agreement are on the cards. More Australians are holidaying in Fiji following the worst of the pandemic. Greater Australian investment is likely.

China has made some serious diplomatic blunders that highlighted its relative inexperience in the Pacific. An attempt to play ‘divide and rule’ in the Pacific Islands Forum backfired spectacularly. China had wanted a majority of island nations to sign up to a security agreement with it. Initially Kiribati fell into line and broke away from the forum. But some skilful regional diplomacy, including by Australia’s Foreign Minister Penny Wong, has seen Kiribati come back to the regional body.

Last week’s visit by Wong to Kiribati and her attendance at the Pacific Islands Forum’s leaders’ retreat in Fiji further strengthened our relations and support for the forum. On her Kiribati visit, her first to the nation as foreign minister, Wong signed a memorandum of understanding on joint priorities and committed to a new comprehensive bilateral strategic partnership.

Perhaps the biggest setback for China came when Papua New Guinea committed to a comprehensive defence and security agreement with Australia. A highly successful visit to PNG in January by Prime Minister Anthony Albanese, backed up by Wong, achieved a good outcome for Australia. The PNG foreign minister has played a key role in bringing Australia and PNG as close as they have been for a generation. This month both countries committed to increasing PNG’s participation in the Pacific Australia Labour Mobility scheme and expanding opportunities under the scheme for PNG workers in Australia. They agreed to establish a joint ministerial working group on the sensitive topic of internal security.

The only island country where China continues to have real and growing success is Solomon Islands. The ouster last month of the anti-China premier of Malaita, Daniel Suidani, and his replacement with a pro-China figure removed one of Beijing’s biggest obstacles. One of the first acts of the new Malaita executive government was to kill the communiqué that had put in place a moratorium on business licences to new investors connected directly or indirectly with the Chinese Communist Party.

What’s also of continuing concern about China’s influence is its trade and economic dominance in key areas in a number of island countries, most notably Papua New Guinea. China has an absolute stranglehold over log exports from PNG. It dominates when it comes to seafood imports and a growing share of the import of PNG’s agricultural exports. Indeed, China now dominates seafood imports from many island nations with limited downstream processing.

Australia’s regional diplomacy in recent months has delivered some good outcomes. But China hasn’t dropped the ball on its campaign to ramp up its influence in the region. Last week it announced the first special envoy of the Chinese government to the Pacific islands, former Chinese ambassador to Fiji Qian Bo. It has also opened a new centre for managing natural disasters in the Pacific.

Moving forward, Australia should adopt Indo-Pacific security expert Rory Medcalf’s advice to take up the role of ‘informal coordinator for other international contributors encouraging them to invest efficiently, for the long haul and in line with what Pacific communities want’. Canberra’s focus should also be on economic links and business engagement. A window of opportunity has opened. Australia must strengthen business and investment links as its build on its success across the region to counter the influence of malign actors.

How Australia can use all its tools of statecraft

Australian policymakers have increasingly spoken of the need to use all the tools of statecraft in international engagement. This includes statements by the prime minister, defence minister, foreign ministers (current, former and shadow), minister for development, chief of the defence force and others.

So, what does ‘all the tools of statecraft’ mean?

At its core, the phrase captures a straightforward and uncontroversial notion: in a difficult and contested time, we need all the different elements that connect Australia to the world to be pushing in the same direction. No one doubts the scale of international challenges. Australia is only one country among many, and it has finite resources. But the multiplying effects of having its different instruments working in concert means Australia can do more with relatively less.

To see why this idea has taken hold as a bipartisan ideal, imagine the opposite. Would someone really suggest that Australia’s different tools of influence should work at cross-purposes and undermine each other? We want defence, foreign affairs, development, trade, immigration, education, energy and other policy areas all contributing to Australia’s capacity to influence the world around it.

But given the siloed nature of institutions—and the sheer number of ways that Australia interacts internationally—the challenge is how to implement it.

A new report from the Asia-Pacific Development, Diplomacy & Defence Dialogue examines what it looks like to use all the tools of statecraft in practice. It focuses on four levels: strategy, structure, staff and wider society.

First, Australia needs a coherent strategy and narrative for its international engagement.

This means having clear, overarching strategic guidance that outlines Australia’s worldview, high-level objectives and priorities. Options for developing this include a whole-of-government, integrated review like the United Kingdom has done; a strategy document that comprehensively assesses challenges and provides detailed guidance; or a regular policy statement outlining Australia’s outlook, priorities and resourcing to achieve objectives. The prime minister and senior cabinet ministers should make clear statements about valuing and using all the tools of Australian statecraft.

Second, Australia needs effective structures and mechanisms to enable a coordinated approach.

This effort needs to start at the top, with how ministers make decisions and work together through the cabinet and its committees. The ministers for climate change and international development are members of the National Security Committee and it could be further expanded to include the trade minister. The powerful Expenditure Review Committee could permanently include the foreign and defence ministers. It’s important that decision-makers interrogate the relative value and importance attributed to different tools—and that, in particular, defence capabilities are not always regarded as tools of first resort in most situations.

Australia needs an organising bureaucratic entity with a clear mandate to conduct long-term planning and coordinate how the tools of statecraft are used across government to avoid conflicts and generate greater coherence. The Department of Foreign Affairs and Trade would be best positioned to take on this role as an extension of its current functions. An alternative model would be to boost the central coordination function of the Department of the Prime Minister and Cabinet.

Third, staff need to be able to work across silos.

This means providing structured engagement and learning opportunities, such as secondments, encouragement to move between agencies and perhaps an international-policy graduate program across government. Australia should encourage and resource creative collaboration between agencies at working levels and administer whole-of-government futures exercises and simulations that draw in representatives across and from outside government to build networks and understand how an array of tools of statecraft can be brought to bear on complex problems.

Finally, there needs to be a concerted effort to achieve whole-of-nation engagement to support international objectives.

This will require a long-term effort to build understanding and support for Australia’s international objectives across society. The government needs to consistently engage with a broad range of people and groups—such as the business, science and tertiary education sectors; non-government organisations; community and diaspora groups; media and sports groups; and cultural organisations—to increase its capacity to coordinate with external expertise. This will help ensure that tools beyond the government’s immediate control can be harnessed more effectively.

Getting all parts of Australia’s international engagement working together will always be a challenge. Strategic coherence is like a holy grail—we may always fall short of perfection. But the scale of the international challenges facing Australia means that we have a duty to try.