EDUCATION MINISTER:
Thank you very much for coming this afternoon and it gives me great pleasure and it’s also a privilege as the South Australian Cabinet Minister, the senior South Australian, to welcome to Adelaide the Prime Minister, my senior Cabinet colleagues – Ian Macfarlane and Kevin Andrews – also the Chiefs of the Defence Forces to make what I think will be a day of unalloyed joy to the South Australian public to know that we will be committing to this State, to Australia, a continuous naval ship build that will be transformative for our economy, not just here, but right around Australia. And it gives me great pleasure to ask the Prime Minister to make that announcement now.
PRIME MINISTER:
Thank you very much, Christopher, and thank you very much, ladies and gentlemen, for being here.
Look, this is a historic day and this is a historic announcement. Previous Australian governments have announced that individual ships or classes of ships will be built here in Australia. What we are announcing today is basically a fleet build here in Australia, centred on South Australia, because we have confidence that a restructured domestic surface naval shipbuilding industry can be competitive, can give us the best possible ships, at the best possible price, maximising the local build.
So, this is a very historic announcement, this is a very important day when it comes to the long-term security of our country.
Yes, it's regrettably true that decisions should have been made about some of our shipbuilding programmes years ago. What this Government has been doing has been remedying some of the neglect which has previously taken place.
Nevertheless, this is a message of hope and confidence to the people of our country, to the people of this State. It is a message of hope and confidence to the defence industries of our country. This Government believes in you. This Government will do the right thing by you, and because of the decisions that this Government has taken, we will start the build of the Offshore Patrol Vessels, or Corvettes, in 2018. We will start the build of the Future Frigates in 2020. We are bringing forward both of these major shipbuilding projects for the benefit of our Defence Forces and for the strength of our economy. So this is a very important announcement for our country.
Yes, it means that some $40 billion is going to be spent substantially onshore. Yes, it means that from 2020 onwards, we will have a build-up to about 2,500 workers employed continuously in surface naval shipbuilding here in Australia. Most of them will be in Adelaide because Adelaide is where the major shipbuilding infrastructure is.
So, I think this is a very good announcement for our national security, it's a very good announcement for our economic security, it's a very good announcement for jobs. This is an announcement which is absolutely in keeping with what this Government has been attempting to do every day since we came into office in September 2013.
I want to say before I ask my colleagues to speak, that an enormous amount of work has gone into today's announcement. You do not lightly make decisions of this magnitude. I thank Minister Kevin Andrews for the work he's done. I thank Minister Ian Macfarlane for the back-up work he's done. But I particularly want to thank our Defence planners and our military chiefs led by the Chief of the Defence Force, Air Chief Marshal Mark Binskin and obviously in this instance by the Chief of Navy as well, Vice Admiral Tim Barrett.
An enormous amount of work has gone into today's announcement. An enormous amount of work will flow from today's announcement, but I believe that the people of Australia, the people of South Australia, can be confident that this really is a fundamental new beginning for naval shipbuilding here in Australia.
Kevin.
DEFENCE MINISTER:
Thanks, Prime Minister, ladies and gentlemen.
This is a very, very significant announcement. Never before in the history of federation has a national government announced a continuous ship build in Australia and that's what we are announcing today. And it says that our future naval capability is at the centrepiece of our strategic concerns and will be at the centrepiece of the forthcoming white paper on defence.
What we are doing is restoring a compact to align three things – our national strategic and defence aspiration with the equipment and the personnel required to deliver on that, which of course requires funding by Government, and we are restoring that alignment across those three things.
This will end the boom and bust which has occurred in terms of naval shipbuilding in this country. It will provide that we don’t have a capability gap in the future, which we are facing at the present time in terms of our Navy. It means that over the next 25 or so years, we’ll be effectively rebuilding the naval fleet in Australia.
INDUSTRY MINISTER:
Thanks, PM and thanks Kevin and Christopher.
Today is an extraordinarily important day in terms of industry in South Australia and Australia.
South Australia, in particular, has a long and proud record of skilled manufacturing and this announcement provides the next wave in that history. As we see, one door closed with the car industry. We are seeing a far bigger opportunity open in terms of building ships here in South Australia with opportunities for other parts of Australia as well.
This is an opportunity for skilled workers to upgrade their skills, to build ships, but these days ships are more than metal, they are electronics, they are extraordinarily sophisticated, and I have got every confidence that we will build the best ships in the world here in South Australia.
PRIME MINISTER:
Well said.
Ok, do we have any questions?
QUESTION:
Prime Minister, if the programme has been brought forward by a couple of years, isn't there still – is there not a gap between the current destroyer build and the start of the new programme, so in effect there is a valley of sorts?
PRIME MINISTER:
As the CDF and the Secretary of the Defence Department made clear a week or so back, if we were to entirely avoid significant reductions in our naval shipbuilding workforce, decisions would have had to have been made quite a few years back, probably by 2011 at the latest.
What the decision today does is saves a very substantial number of jobs. It should mean that at no stage does the total number of jobs in naval ship building in Australia drop below about a thousand, so that when we do start building up again to 2,500 from 2020, it's not the cold start that would otherwise be the case.
So I'm a afraid we cannot entirely make up for the neglect of decision-making between 2008 and 2013 but, nevertheless, we can make a big difference and the fundamental thing that we have done today is ensure that we don't just have a ship build in Australia, we have a fleet build in Australia. We'll have an ongoing build of major fleet units – the frigates and the destroyers – and we'll have an ongoing build of the minor fleet units, the Offshore Patrol Vessels, Corvettes, the mine hunters, and so on.
So, substantially, the Australian surface fleet, as a result of today's announcement, will be built here in Australia because we have confidence with the right structures put in place. We have confidence that we have the workforce, we have the technology, we have the commitment, we have the capacity to do this.
QUESTION:
With the ships, the frigates and patrol boats, will there be a competitive tender process? Will they be able to be built by companies like Austal in Western Australia?
PRIME MINISTER:
There will be a competitive evaluation process for both the Offshore Patrol Vessels, or the Corvettes, and for the Future Frigates. The Competitive Evaluation Process will begin in October, and from then we will make the decisions necessary for the Offshore Patrol Vessels to start construction in 2018 and the frigates to start construction in 2020.
QUESTION:
How worried are you about the Liberal Party in South Australia in the lead-up to the next election?
PRIME MINISTER:
Well, I'm worried about the defence of our country and I'm worried about making sure that Government does not shirk the decisions needed to keep our defences in the best possible order. This is about ensuring we do not have major capability gaps in the 2020s. This is about ensuring that we have a strong surface fleet to deal with whatever naval contingencies we face, indefinitely – forever, in fact. This is about putting our naval defences on the best possible footing for the future.
QUESTION:
If you were confident in building these vessels in Australia – shouldn't it be a no-brainer that the subs could be built here and should be built here?
PRIME MINISTER:
There is a separate process taking place in respect of submarines. There is a separate process and that will be subject to separate announcements. The point I make is that we are closely following here the recommendations of the RAND report. The RAND report said that under the right conditions clearly we can effectively build surface warships here in Australia. We are building right now, thanks to Austal, we’re building – successfully – military vessels for export as well as for use in Australia. Austal, as you know, is actually now a major supplier to the US Navy. So, there is no doubt that under the right conditions we can effectively build surface warships in this country. That's why we have made the announcement that we have today.
In respect of submarines – well, what we have asked the various potential partners to give us is a price for a domestic build, a hybrid build and an offshore build. And based on what comes back to us in the coming months, we'll make a decision. And again I stress, all of our defence decision making is based on these three principles – the best possible equipment, the best possible price, and maximising Australian build. And they’re the principles that will guide us when it comes to future decisions on submarines.
QUESTION:
But if you say we’re going to build the best ships here, the best frigates here – why can't the same be applied to submarines?
PRIME MINISTER:
Well, let's wait and see what the Competitive Evaluation Process gives us, but the point is that the RAND report was unambiguous – under the right conditions, we can effectively build surface warships here. The RAND report was less confident about submarines.
QUESTION:
Prime Minister, can you explain what you meant when you said this morning that we shouldn't assume that Adelaide won't get the submarines?
PRIME MINISTER:
Well, what we have announced today does not preclude any of the options in respect of submarines. That's what I meant this morning.
QUESTION:
Prime Minister, talking about the 2,500 jobs after 2020, that's around Australia, is it not? So how many of those are actually going to be in South Australia?
PRIME MINISTER:
The precise number will obviously depend upon the results of the Competitive Evaluation Process. But the yard for building major surface ships will be here in Adelaide, because the infrastructure's here. Now, the subordinate yard may be in South Australia, it may be somewhere else, it may be at Williamstown, for instance, but the major focus for surface shipbuilding will be here in Adelaide.
QUESTION:
What do you say to people that think that this is perhaps a pork barrelling exercise? People in the western states who think that they haven't been getting enough money from the Federal Government?
PRIME MINISTER:
Every Australian, regardless of whether he or she is living in Cape York or in the Pilbara, is interested in the defence of Australia. Everyone is interested in national security and we are making today what is the very best decision for the long-term national security of our country. Now, we obviously want to best utilise our existing strengths and we have a long history of shipbuilding here in South Australia. We have a considerable history of naval shipbuilding here in South Australia, and thanks to intelligent investments by state governments here in South Australia, we have a lot of defence industry infrastructure. That's why this is a decision which certainly makes sense for South Australia, but it makes sense for the whole country as well.
QUESTION:
Prime Minister, why is your Government so unpopular, though, here in South Australia? Some of your federal colleagues are genuinely worried about losing seats at the 2016 election.
PRIME MINISTER:
If you don't mind, I am trying to focus on the actual decision that we’ve made rather than get dragged down into sort of day-to-day political considerations. But I think you'll find that this is a decision which will be pretty generally welcomed. I was able to have a discussion with Premier Weatherill flagging this decision yesterday. He was very, very enthusiastic about it. Obviously, I have been talking today with my South Australian colleagues. They’re very enthusiastic about it. My understanding is that even the Federal Opposition have supported the decision, although inevitably will have found things to criticise. But nevertheless, this really should be, as my distinguished South Australian colleague, Christopher Pyne, has said, this should be a day of unalloyed joy, not just for South Australia, but for Australia, because decisions that should have been made a long time ago have finally been made and a decision has been made that will secure this industry and our national security forever.
QUESTION:
Do you believe, though, that uncertainty over shipbuilding in South Australia has damaged the Liberal Party in South Australia?
PRIME MINISTER:
I'm just not going to, if you like, take the premise of that question, because the whole point of today's decision is to resolve the uncertainty that was created when previous governments failed to make these decisions.
QUESTION:
Prime Minister, perhaps an easier question, then, but on a slightly different topic: do you back the proposed changes to penalty rates from the Productivity Commission and, more importantly, are you up for a fight with the unions?
PRIME MINISTER:
Let’s finish dealing with shipbuilding issues and then we might come back to one or two other subjects.
QUESTION:
You’re going down to ASC afterwards. Do you have confidence in the workforce there given some of the slippages on the Air Warfare Destroyer?
PRIME MINISTER:
That's a very good question, Paul. Again, let me refer you to the RAND report. RAND's conclusion – and this was a conclusion that was very much backed up by people like Don Winter and John White – was that it's a good workforce, it's a highly talented, highly capable workforce that at times has been a little bit let down by, dare I say it, the nationalised industry culture, dare I say it, some of the practices which have grown up over the years. We do have to get a maximally productive operation here in Adelaide, but I'm very confident that that's exactly what we will get, particularly now that we have made the decisions that ought to secure 2,500 ongoing highly skilled, highly relevant jobs.
QUESTION:
If a company like Austal in Western Australia won this contract, could the work be done in WA or are you adamant that it has to be done predominantly here?
PRIME MINISTER:
The vast bulk of the work will be done here in Adelaide because this is where the infrastructure is. We’ve got major shipbuilding facilities here in Adelaide; we don't have major shipbuilding facilities in Perth. This is where the facilities are. This is where the bulk of the work will be done.
QUESTION:
Prime Minister, I’m not sure if this is one for yourself or the Defence Minister, but could we just get some clarity over the value and timeframe of this work?
PRIME MINISTER:
Kevin, if you’d like to answer that question?
DEFENCE MINISTER:
The total acquisition costs for naval vessels is in the order of $89 billion. Can I say that the exact details will be in the white paper, so these are broadly the amounts that we are talking about at the present time. That includes something in the order of about $40 billion in terms of the frigates, but again, in the white paper we'll be setting out the costs and for the first time in the white paper, not only will we be setting out the acquisition plan for the next 20 years looking out to 2035, we will be costing that and independently verifying that for the next 10 years. So, the final details in terms of the costs and how we go back to two per cent of GDP and what the force structure will look like in terms of naval vessels that we’re talking about today or reconnaissance vehicles for the Army or any future aircraft we need and other capability enablers such as communication systems, et cetera, et cetera, all that's going to be set out in detail in the white paper, as I said, costed for the first 10 years and independently verified as well and at that stage all the detail will be there.
QUESTION:
Prime Minister, that's a very big number that you've committed to today. Are you confident that this is the cheapest that it could have been done? Could an overseas build have been cheaper?
PRIME MINISTER:
Well, all decisions inevitably involve trade-offs, all decisions involve matters for judgment, but as far as this Government is concerned, all defence procurement decisions will be made with these three principles in mind: best possible equipment, best possible price, maximising the Australian build. Now, they’re the principles that have guided this decision.
QUESTION:
So has there been a trade-off perhaps for a local build at a premium, then?
PRIME MINISTER:
Look, it's possible that if we said to the range of shipbuilders out there, ‘you can build it anywhere’, that we might get a modestly lower price, but there are benefits to be had from a domestic build. Now, those benefits don't overcome all costs differential, but nevertheless, there are significant benefits that flow from a domestic build. The RAND report tells us that under the right conditions we can build surface naval ships here in Australia efficiently and effectively and that's why we’ve gone down this path.
QUESTION:
Does the $40 billion figure on the frigates then, does that factor in any overrun factors? Is that pro forma?
PRIME MINISTER:
Looking forward as best we can at this time, we think that $40 billion will secure the Future Frigates, the Offshore Patrol Vessels and so on. So, can we rule out any delays or any cost overruns? Of course we can't. Not many projects have had as much difficulty in this department as our most recent project, but nevertheless, we are confident that by establishing a continuous build, we will minimise the cost overruns and the delays which have bedevilled some of the boutique projects that we've done in the past. If you look back at the ANZAC frigates, yes, the first couple were more expensive and slower, but as that particular build matured, prices came down and the speed of delivery increased.
QUESTION:
Vice Admiral, because you haven’t commented, can we just get a comment, not on the Productivity Commission, but we haven’t heard from the Navy what this is going to do for the Navy.
PRIME MINISTER:
Vice Admiral, over to you?
VICE ADMIRAL TIM BARRETT:
Thank you. You haven't asked a specific question, but let me say...
QUESTION:
Ok, sorry, the specific question is, is this as good a news as the Prime Minister is making out?
VICE ADMIRAL TIM BARRETT:
Clearly it is. This provides certainty for not just the naval shipbuilding side of things but it also provides certainty for planning, not just within Navy, but within the Australian Defence Force. Principally, the frigates will be used as the workhorses of Navy over the next couple of decades. They will be used as escorts for new amphibious ships. Those ships will be carrying precious cargo, including Army and Air Force personnel as well as our own Navy personnel. So, whilst this is good for the Navy, this is also very good for the ADF capability as a whole.
QUESTION:
Is the retirement of the ANZAC frigate going to be moving forward then?
VICE ADMIRAL TIM BARRETT:
There will be a Competitive Evaluation Process that will look at the delivery of these ships and it would be imprudent to make a decision before that CEP – that Competitive Evaluation Process – is complete. Let me say, this timing is planned such that we can manage the retirement of the ANZAC class with the delivery of a new frigate.
QUESTION:
So there won't be a capability gap for the Navy?
VICE ADMIRAL TIM BARRETT:
We will always manage to provide the capability that is necessary. The difference is the degree and the cost of providing that, but as I have just said, at the moment the way this programme looks, it's designed for us to retire the ANZACs at a time when we are introducing the new frigate.
PRIME MINISTER:
Ok. Look, you wanted to ask a question about the Productivity Commission?
QUESTION:
Do you back the proposed changes to penalty rates and are you up for a fight with the unions over that?
PRIME MINISTER:
Let's go back to first principles. We want to maximise jobs, we want to maximise well-paid jobs in our country and to do that, we commissioned the Productivity Commission to have a long, hard look at our workplace arrangements to give us some advice on how things might be done differently and better.
I want to absolutely stress that this is a draft report. It is a report to Government, not a report from Government. The Productivity Commission itself has said that people shouldn't start ruling things in and ruling things out. The Productivity Commission has pleaded with us to be able to have a sensible debate about this for the long-term benefit of our country and that’s certainly what I’d like to see happen now. The one thing I do want to make crystal clear is that this Government will make no changes to workplace relations in this term of Parliament that are inconsistent with the commitments that we took to the election.
QUESTION:
So no worker will be worse off if this proposal is rubber stamped by Government? To penalty rates, can you guarantee workers won't be worse off in the future?
PRIME MINISTER:
The interesting thing is that what the draft Productivity Commission report recommends is that penalty rates continue to be absolutely the preserve of the Fair Work Commission and that's been this Government's position from the beginning: that penalty rates should be decided by the Fair Work Commission, that's the independent, impartial umpire.
QUESTION:
Bronwyn Bishop has indicated she is going to stand again. Should the Liberal Party disendorse her?
PRIME MINISTER:
I'm just not going to get into the detail of any particular Member of Parliament. Bronwyn did the wrong thing in respect of some of those travel claims. She did the right thing by resigning on the weekend. We've now got a root and branch reform of parliamentarians' expenses underway. I am absolutely determined that at the end of this process we will have a situation where the public can be very confident – very, very confident – that the system is independent, it's transparent, it's accountable, it's workable and it's fair and I want this particular travel expenses issue to be the last travel expenses scandal involving politicians that we ever have in this country.
Thank you.
[ends]