‘I’m also very confident in terms of the methodologies that have been developed and refined over the course of many of these projects and I’m very confident in the fidelity of the data that we have.’

— Minister for Defence Linda Reynolds, Supplementary budget estimates hearings, 29 November 2019

The October and November 2019 Senate estimates hearings for the Department of Defence followed a familiar pattern: extended discussion about the number of Australian jobs associated with projects for building and sustaining naval vessels and an outcome that did little to clarify many, or even most, of the numbers involved.

To begin with, there was considerable confusion at the hearings about the meaning of key indicators of employment. ‘Direct jobs’ cover the people employed by prime contractors and their subcontractors, working in dockyards or associated facilities. ‘Indirect jobs’, sometimes described as ‘flow-on jobs’, consist of jobs supporting the provision of all other Australian inputs along project supply chains.

But projects also generate jobs in other areas of the economy. One category that wasn’t mentioned at the hearings is ‘consumption-induced jobs’, which are jobs created in businesses that sell consumer goods and services to people working on projects. The skills associated with those jobs can differ markedly from the skills required for naval shipbuilding and sustainment.

Another category is jobs that come from spillovers. A ‘spillover’ is a new technology or skill created by a project that other areas of the economy use to generate employment of their own. Because that employment is extraordinarily difficult to quantify, it’s not covered in Defence’s job figures. At the hearings, that point wasn’t made as clearly as it might have been.

Not surprisingly, direct jobs are often estimated by prime contractors. But neither a prime nor Defence normally has insight into the far reaches of supply chains and beyond, especially during the early phases of projects. Consequently, indirect jobs tend to be estimated initially using economic models and refined later as more project-specific data becomes available. Consumption-induced jobs are estimated solely through economic modelling.

Senators at the hearings were interested primarily in two sets of job numbers covering direct and indirect employment for shipbuilding and sustainment—one for 2025 and the other for all years of Defence’s naval shipbuilding plan expressed as an annual average (see table 1). For both sets, the data provided by Defence falls short of what’s required for adequate coverage and categorisation.

Table 1: Shipbuilding and sustainment jobs by key category

n.a. = not available.
* The precise figures for direct shipbuilding jobs in 2025 are difficult to determine, partly due to confusion about whether the correct year is 2025 or 2026. At the October hearing, a figure of 5,200 was initially provided for 2025 (page 15 of transcript) but later increased to 5,800 (page 16). The latter figure was made up of 5,200 for the future frigates and future submarines and 600 for the Pacific patrol boats and offshore patrol vessels. However, further testimony from Defence (pages 73–74) indicated that in 2025 the future frigate program (1,452) and future submarine program (1,341) would together support 2,793 direct jobs rather than 5,200—suggesting that either the 5,200 figure was incorrect or Defence had defined direct shipbuilding jobs to include additional project-related activity like facilities construction or sustainment.

There are three additional limitations to consider. First, Defence’s figures include a substantial number of jobs carried over from previous projects. That obscures the all-important issue of how aggregate employment numbers will change. Carryover is especially significant for sustainment—a problem that also applies to recent official announcements on job creation for military vehicle assembly.

Second,  the annual averages for shipbuilding are based on the implicit and untested assumption that companies constructing the Pacific patrol boats and the offshore patrol vessels will secure equivalent follow-on work in the medium to long term.

Third, Defence said at the October hearing that its estimates of indirect jobs contain supply chain jobs only. Relevant economic modelling suggests those figures also incorporate a substantial consumption-induced employment effect, at least for larger build projects (see table 2). Consumption-induced jobs add to employment across the economy—but not in naval shipbuilding and sustainment.

Table 2: Ratio of direct to indirect jobs in naval shipbuilding and sustainment

n.a. = not available; n/a = not applicable.
* Weighted average.
Sources:
1. ACIL Tasman, Naval shipbuilding and through life support, report to Australian Industry Group, 2013, 17.
2. BIS Oxford Economics, The economic contribution of BAE Systems in Australia, 2018, 24.
3. Department of Defence, Building submarines in Australia—aspects of economic impact, 2015, 5.
4. Figures based on contribution to Canada’s GDP for all Canadian defence industry, not just shipbuilding. Binyam Soloman and Christopher E. Penny, ‘Canada’s defence industrial base’ in Keith Hartley and Jean Belin (eds), The economics of the global defence industry, Routledge, 2020, 445. Data also available here.

 

If those three limitations hold, I estimate additional or ‘new’ jobs will account for around one-third of the total number of jobs that naval shipbuilding and sustainment are expected to support in the period ahead. That support covers an estimated 15,000 jobs, measured on an annual average basis. The remaining two-thirds consists of numbers for jobs carried over from previous Defence projects, in serious doubt or created in non-defence areas of the economy. All those figures are maxima since they exclude the impact on national employment of the economic costs associated with paying for and resourcing projects.

There was also some confusion at the October hearing about a total job figure for the future frigate build of 6,300 attributed to former minister Christopher Pyne. That figure is substantially higher than Defence’s current figure of 4,000. The department claims that the difference between the two figures is attributable to the Pyne figure including consumption-induced employment.

An alternative, and perhaps more likely, explanation is that the 6,300 jobs relate to 2028—the project’s first year at peak production—and that Defence’s figure of 4,000 is an annual average ‘smoothed’ across peak and non-peak levels of project activity. The problem of Defence juxtaposing annual average data and peak annual data extends to the department’s testimony in October that direct jobs for the future frigates of 1,500 (an annual average figure) will approach 2,500 (a peak annual figure) by 2028.

Finally, taken at face value, Defence’s estimates paint a picture of job creation that’s counterintuitive: the future frigate build generating many more jobs than the much larger future submarine build (see table 3).

Unfortunately, that’s difficult to assess without additional data including an indication of each project’s Australian content. The assumed levels of domestic content underpinning Defence’s job estimates for most build projects weren’t presented at the hearings and haven’t been disclosed elsewhere.

Table 3: Comparison of job creation for future frigates and future submarines

n.a. = not available.
1. Estimates vary of the Australian content associated with this project, from a 50% minimum, to 58% contracted, to 65–70% predicted by the contractor (see Senate estimates, 5 April 2019, answer to question on notice 43).
2. The spend period of 2018–2048 was used by BIS Oxford Economics, The economic contribution of BAE Systems in Australia, 2018, 22, to estimate employment for the future frigates.

To provide context for the recent frigate announcement, we asked the Naval Studies Group at the Australian Centre for the Study of Armed Conflict and Society at UNSW Canberra to provide an overview of the roles the vessels will undertake. The following piece is excerpted from a longer paper, available here.

When the future frigate program is finished, its nine Hunter-class vessels will be Australia’s largest fleet of big warships. So they’re likely to be involved in every type of maritime activity the Royal Australian Navy undertakes, from warfighting in an Australian or coalition task group, to independent maritime security operations and diplomatic visits.

The chosen design is focused on the core task of anti-submarine warfare, but it has capability across warfare disciplines and the full spectrum of operations that Australia requires its navy to undertake.

The most demanding role is likely to be warfighting as part of an Australian task group, operating in a contested environment against a capable opponent and engaging in multiple concurrent activities, such as theatre anti-submarine warfare, information warfare, integrated air defence and amphibious operations.

The future frigate will be expected to be able to contribute to the air surveillance task (it will have a version of the Australian CEA radar), to defend itself against attack by aircraft and missiles, and to act as a goalkeeper or close-in escort for high-value units such as the RAN’s amphibious assault ships and auxiliary oil replenishment ships against such threats from the air. And it will also be expected to be able to play a similar role as part of a combined task group when operating with American or other coalition forces.

Fortunately, Australia’s frigates have been called on to conduct or prepare for only a few warfighting operations in recent decades: the 1991 and 2003 Gulf Wars and East Timor in 1999. But there’s a constant demand for constabulary and diplomatic operations, ranging from counter-narcotics operations in the Caribbean and arresting illegal foreign fishing vessels in Australia’s Southern Ocean exclusive economic zones off Heard and MacDonald Islands, to search-and-rescue operations throughout Australia’s area of responsibility.

In a diplomatic role, Australia’s frigates have visited allies, neighbours and partners in Asia, the Middle East and occasionally Europe, Africa and the Americas. The consistent theme is that a frigate is (and must be) effective in situations where the circumstances are difficult enough that no other arm of government can operate.

Australia’s most enduring maritime security commitment has been patrols in the Red Sea, Arabian Gulf, Gulf of Aden and Northeast Indian Ocean. Since 1990, Australia’s frigates have been part of United Nations efforts to enforce sanctions against Iraq, anti-piracy operations to protect international maritime trade and, more recently, counter-narcotic operations targeting terrorist funding networks. The deployments have routinely been for six months or more.

For most of the past two decades, sustaining the Australian commitment to have a frigate on station has required three or four frigates at various stages of maintenance, training and deployment. To maximise the time available for operational output, the future frigate will need to be as efficiently maintained and upgraded as possible. Keeping the future frigate combat-ready will also require enduring integration with the national naval enterprise to enable rapid incorporation of technological improvements.

The current frigates have also been involved in security operations around Australia’s maritime approaches. While patrol boats and, in future, the offshore patrol vessels, will remain the mainstay of this work, a future frigate will still need to be able to conduct such operations, particularly when they need to be sustained over long periods of time. That means the future frigate will need to have a high level of endurance, which will be achieved by designing in and providing for a combination of steaming range, consumable stores such as food, and sufficient crew to operate effectively in demanding circumstances over extended periods.

The larger hull planned for the future frigate by comparison with its predecessors will make it possible to have a wider operational envelope, particularly for air operations, which will also confer improved warfighting capabilities. The generally improved seakeeping of a larger vessel will also allow it to operate in the Southern Ocean if required.

The search-and-rescue operations in the Southern Ocean (HMAS Darwin in 1994–95, HMAS Adelaide in 1997, HMA Ships Perth and Toowoomba in 2014) and the patrols for illegal foreign fishing vessels  (HMAS Anzac in 1997 and HMAS Canberra in 2002) are further examples of the operations Australia’s frigates have undertaken. At the time, the frigate was the only option available to the Australian government that combined the availability, endurance, speed, capacity to use calibrated levels of force, and seakeeping ability to operate in some of the roughest oceans in the world.

While large civil patrol vessels are now available in the Australian Border Force, they lack significant warfighting capabilities, so a future frigate will still be required to have the ability to be safe and effective in rough conditions to provide the full range of surface response options.

Frigates have also been used when diplomatic initiatives needed to be conducted in a safe, neutral environment. In that context, HMA Ships Sydney and Newcastle contributed to the peace negotiations in Solomon Islands in 2000, providing a sovereign Australian venue (and an imposing physical presence) proximate to another country.

Innovative and imaginative use of spaces (flight decks, hangars and cafeterias) allows a frigate to be an effective agent of the Australian government’s diplomatic engagement. It also enables a frigate to contribute to humanitarian and disaster relief, as HMAS Darwin did in 2016 after New Zealand’s Kaikoura earthquake and HMAS Swan in the Philippines in 1991.

The government is weighing up its options when it comes to the anti-submarine warfare (ASW) capability requirements for the forthcoming decision on Project SEA 5000—the multi-billion dollar future frigate project.

The proliferation of submarines in the Indo-Pacific certainly warrants close attention being paid to this decision. For starters, we need a clear understanding that ASW is about much more than just what can be expected from one ship, no matter how sophisticated the fit-out. But who understands this esoteric field?

For many of us, the Cold War thriller starring Sean Connery, The Hunt for Red October, and the German-language movie set in World War II, Das Boot, conjure up the classic image of how submarines are hunted. The hunt is as much about human acumen—the ship captain versus the submarine captain—as it is about technological capability.

The image, often enough, is one of ships with sonars and depth charges chasing submarines while the submarines maintain their stealth until they fire a torpedo (or missile).

Necessity is the mother of invention, we’re told, and wartime necessity drove a spiral of development in detection technology and countermeasures in a ‘hider–finder’ competition. The development of surface electromagnetic detection was followed by sonar and other acoustic and magnetic-anomaly detection systems that, when combined, limited the effectiveness of submarine attacks.

But times have changed. The one-on-one hunter–killer scenario we sometimes think of from World War II or early in the Cold War is no longer what can be expected.

Now, submarines are even harder to detect and, as a result, the World War II concept of a single ship hunting a submarine is of limited utility. That’s because—in the case of a one-on-one situation, with only on-board sensors available to conduct detection work—the submarine would always have an advantage.

Building on evolved capabilities, ASW today involves coordinating a suite of networked sonar and electromagnetic sensors aloft, on the surface and underwater to detect, track, deter and potentially attack hostile submarines.

Active sonar is important to detect submarine threats within range, but also to degrade the submarine’s effectiveness since it will wish to stay out of detection range. Passive sonar has some merits, but a modern submarine will almost always have a detection range advantage over a ship.

Modern-day ASW harnesses a disparate array of complementary technologies installed on a variety of underwater, surface and aerial platforms that, when combined, provide a form of corroboration—or triangulation—to identify what’s otherwise an increasingly stealthy platform.

This means that ASW today isn’t the purview of a single ship performing blue-ocean searches for the wayward submarine. Anti-submarine warfare is based on coordinating sonar and electromagnetic sensors from aircraft, helicopters and ships, as well as a range of semi-autonomous, unattended systems, to detect and track their targets.

This networking of capabilities is known as sensor netting and cooperative engagement. The key role of an ASW ship is to protect the other surface vessels working as part of a team. Its greatest value in that regard is its presence, in particular its optimised sensors and multi-mission capability.

The variety of assets available not only helps to provide complementarity, but also allows for a degree of redundancy of sensors. In an age of emergent swarms of platforms, networked weapon systems and the rise of artificial intelligence, there’s added urgency for plans to be developed that take this complexity into account.

What this means is that cutting-edge ASW is basically moving from being largely platform-intensive to being based around a wide range of orchestrated assets operating as a networked array of systems working with a common purpose.

What is more, nowadays the requirement isn’t so much to be able to detect and possibly defeat a potentially adversarial submarine. Rather, particularly in scenarios short of declared war—as has been the case in many post–World War II conflicts to date—the ASW force must be able to constrain the freedom of action available to adversary submarines and, in effect, to scare them away and thus render them ineffective.

The Royal Australian Navy (RAN) and the Australian Defence Force (ADF) should be mindful of the complex and complementary array of sensors and related skills required for effective ASW operations. And when picking an appropriate ASW platform, decision-makers should be mindful of the suite of complementary elements that constitute a modern ASW capability.

There are implications arising from these observations for the future frigate decision. The chosen vessel needs to be seen not just as a stand-alone platform, but as part of a networked suite of capabilities, including those found in other naval platforms and in other armed services, coalition forces and other national technical collection means. It must not be only interoperable with the wider RAN and ADF, but also able to operate with various new and emerging systems such as aerial and underwater drones in future years.

In ‘The expanding of the shrew’ Andrew Davies offered up an interesting view of warship nomenclature and why the future frigate should be classified as a cruiser because the displacement for the vessel could be around 6,000 tonnes. That view is mistaken; the future frigates are accurately described as such and to do anything else would be misleading.

Why? Simply because the terms used to classify warships are a description of function more than form.

The modern usage of the term ‘frigate’ dates from WWI, when it was used to describe a warship primarily used for convoy escort—a task which required general maritime warfare functions and anti-submarine warfare capabilities in particular. Leaving to one side the USN’s excursion with the term up to the 1970s, the function of a frigate has been consistent for the last 100 years.

(If you want some truly elastic uses of warship nomenclature, have a look at the Japanese Maritime Self-Defence Force’s most recent helicopter destroyers. Or for those with a more historical bent, try the Royal Navy’s through deck cruisers in the 1970s. If only deception were such a simple activity!)

There are two other common contemporary terms used to describe large surface warships; cruisers and destroyers. The destroyer dates from just prior to the First World War and is a shortened version of a torpedo-boat destroyer. A destroyer also has general maritime warfare capabilities, weighted toward surface and air warfare. A cruiser is similar, but with the addition of command and control capabilities that enable effective command of other warships in at least one warfare discipline. It isn’t that frigates and destroyers are incapable of command and control functions—all warships possess them in varying degrees—but a cruiser would be expected to be able to perform the command function in a large carrier or amphibious task force. Yes, a destroyer or frigate could do it, but they would be much less likely to have the equipment (communications in particular) and the people to be as effective as a cruiser.

The terms cruiser, destroyer and frigate thus describe the functions of the warships. While some general assumptions can be made about the form required for such functions, there’s no prescriptive relationship. Certainly displacement or any other physical measurement isn’t a definitive guide to the way a warship is classified.

The form a warship takes to achieve its function is a much more dynamic subject. Warships do indeed evolve over time as technology, threats and opportunities change. It would be strange if a frigate today was the same as one from 50 or 100 years ago. Such evolution isn’t constrained to warships: infantry, tanks, aircraft, industrial equipment, missiles, computers, cars, phones and innumerable other organisations and devices have also evolved in their form, while their function has been more stable.

A significant question for the future frigate is how they’ll incorporate some of the more likely evolutions in warfare over the next decades, such as expanded uses of unmanned vehicles and directed‑energy and cyber weapons. It’s here some of the most significant benefits of Australia’s continuous ship-building program will be found because it involves a continuous design effort. The first batch of future frigates will likely be similar to warships already in service, but future batches will incorporate more advanced weapons and systems as they become available.

Warship and submarine design are complex activities, with numerous constraints ranging from financial to practical and technological. There’s an unhappy history in Australia of focussing on warship displacement as a proxy for cost. It would be a shame if Australia’s future frigate design was constrained by a dogmatic view of what the displacement of a frigate should be. Aircraft aren’t classified by their wingspan, nor should ships be classified by displacement.

Understanding the difference between form and function enables us to understand why a frigate designed to operate for one navy in the North Sea may well be different to one designed to operate for another navy in the Indian or Pacific Oceans. So two warships of quite different size and capability might still be classified as frigates. But then, I’m sure Andrew isn’t calling for a one size fits all approach.

In one sense the warship nomenclature is an arcane subject, not likely to be of interest to many ASPI Strategist readers. But I’m guessing that Andrew’s enduring concern over the value for money might be at the heart of the matter. Cost is absolutely an issue worthy of close attention, because money is never unlimited and choices within and between capabilities must be made. Costs must be understood in terms of the value of the capabilities being purchased; we should have a value-driven approach to acquisition and force structure. I think Australia will need and derive great value from its surface warships, from its submarines, from its F-35s and from its future land forces.