ABC’s The Business last night aired a segment on the Defence discussion paper, released earlier this week, which questioned whether Australia should build defence hardware locally or instead purchase it off-the-shelf at lower cost offshore.
It’s an interesting issue, particularly in light of the Government’s commitment to increase the nation’s defence budget to $50 billion within a decade, with defence spending’s share of GDP also targeted to increase to 2% of GDP from 1.6% currently.
Included in this planned spending is the procurement of armoured vehicles, submarines, warships, and joint strike fighters, with the Government weighing-up whether to build all but the strike fighter locally.
If the hardware is procured from offshore, Australian taxpayers stand to save billions of dollars in procurement costs. The military could also purchase more/better hardware for the same money, potentially improving their effectiveness in the battlefield.
On the flipside, the loss of domestic military building capability would cost thousands of jobs – many of which are in South Australia – and would come on top of the loss of tens-of-thousands of manufacturing jobs as the local car assembly industry shutters by 2017. With its closure, Australia would become even more de-industrialised, with a competitive mining sector and services, but not much else.
My general view is that spending billions of dollars extra on locally-built military hardware, when Australia could instead purchase proven, fit-for-purpose, hardware from abroad at a fraction of the cost, does not appear to be a good use of taxpayer money. That said, I am certainly not a military expert, and cannot comment on whether building submarines locally offers material strategic advantages.
I also acknowledge that shuttering local defence manufacturing at the same time as the mining investment boom unwinds and the car industry closes could create intense transitional pain for the economy – particularly in South Australia- which would need to be managed.
I am interested in readers views, particularly those familiar with Australian defence issues. Specifically, is there a strong enough case to justify supporting local defence manufacturing? And is raising Australia’s military spend appropriate, in light of other pressures on the Budget?
