Techport Australia

The Hon. M.L.J. HAMILTON-SMITH (Waite—Minister for Investment and Trade, Minister for Small Business, Minister for Defence Industries, Minister for Veterans' Affairs) (14:04): I seek leave to make a ministerial statement.

Leave granted.

The Hon. M.L.J. HAMILTON-SMITH: Today, I signed a memorandum of understanding on behalf of the government for the sale of Techport to the commonwealth, along with certain undertakings by the South Australian government for access and associated infrastructure. The state government has cooperated with the federal government and sold Techport and associated parcels of land for $230 million. Techport was built by the South Australian taxpayers, using their money, and is the key reason why South Australia is now the national centre of naval shipbuilding.

The commonwealth government this week released its long-awaited Naval Shipbuilding Plan. This plan comes after almost three years of continued advocacy by the state government, local defence industries and unions for ships to be built in Australia by Australians. The plan, however, has a number of failings. It is silent on whether the builder of the Future Submarines and/or frigates will be the selected designer or whether an Australian builder, such as the ASC or Austal, or a partnership of those interests will be used.

We have a shipbuilding plan that does not tell us who will build the ships. This is an important decision for local industry and local workers. The plan is also silent on the definition of Australian industry content. We know that last year the federal defence industry minister, Christopher Pyne, repeatedly supported a benchmark of 90 per cent local industry content. That was mentioned by DCNS; he was happy to own that figure. In recent statements and interviews, however, the level has slipped to 60 per cent, with a refusal to make it a written benchmark in plans or contracts.

To put that into context, page 80 of the Naval Shipbuilding Plan confirms our own estimate that the shipbuilding program is split into two parts: 30 per cent construction and 70 per cent sustainment. As the document shows, no decision has been made yet on where sustainment of submarines and frigates will take place. Whether it will be South Australia, New South Wales, Western Australia or the Northern Territory, they all have a stake in that game.

With the current Collins class submarines, sustainment up to and including mid-cycle dockings is done at ASC's Henderson shipyard in Western Australia. Full-cycle dockings are done at Osborne. Andrew Davies, the defence and strategy program director for the Australian Strategic Policy Institute, wrote recently that all the future sustainment work could go to Western Australia. So, what does South Australia actually have?

By the definitions of this plan, South Australia has been promised around 60 per cent of 30 per cent of the construction and sustainment program. That is 18 per cent of the pie, and even that is dependent on the 60 per cent local content levels being reached and secured. That is why Australian industry content is our next challenge.

Firstly, we need the federal government to recommit to its pre-election promise of the 90 per cent local build of the submarines. It was first committed to by designer DCNS and supported by the federal defence industry minister, Mr Pyne. Secondly, we will lobby for those benchmarks to be enshrined in contractual agreements with designers and builders. Thirdly, we will push for a commitment to the total transfer of technology and capability within a set time frame.

This is a very important point: the benchmark for this is Australian company Austal, which has been building naval vessels for the United States in the United States for years. Their contract with the United States government stated that, within three to five years, 100 per cent—100 per cent—of the workforce on US sites had to be citizens of the United States. This strategy must be considered by the commonwealth government. It is crucial to ensuring that we maintain local jobs for South Australians and that we own intellectual property.

Fourthly, we will argue for an increase in the number of offshore patrol vessels to be built at Osborne. The current commitment to two vessels may not be enough to maintain a skilled workforce that can transfer to frigate construction. The promise at the time that was made by the federal government said we would build OPVs until the frigate work came online. That must occur. This productivity problem was first flagged in 2015 by the commonwealth-commissioned RAND report into Australia's naval shipbuilding enterprise.

The South Australian government will continue to stand up to the federal government and fight for local jobs and local industry. We want to ensure Australia has the best defence capability backed by the best defence industry. The Australian government must back Australian industry and mandate 90 per cent local industry content, beginning with the 2018 offshore patrol vessel program, to stabilise the naval shipbuilding supply chain and increase industrial capacity.

As promised in the memorandum of understanding, South Australia stands ready to work with the Australian government to ensure an efficient build of the required infrastructure at Osborne and to ensure the creation of the highly skilled workforce required for future programs in the state. Yes, our advocacy of the last three years has been successful and, yes, we have reason to celebrate, but the job is not yet done.