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Defending Australia`s manufacturing industry

By Henry Thornton - posted Wednesday, 14 September 2011


The final thing that a responsible government could do would be to remove impediments to non-mining activity. Cutting useless government activity will do this across all industrial sectors, but for strategic manufacturing I have far more targeted actions in mind. Australia's current defence establishment is notoriously focused on 'inter-operability' with allies, especially our great American allies. The cost is the demise of the 'inter-operability' with Australian industry that was so helpful in WWII.

While free trade is the modern economists' mantra, the USA, Europe and Japan all protect their agricultural industries. Furthermore, in other strategic areas, including defence, their rules of engagement clearly favour local industry, and why not, one is forced to ask? While-ever the possibility of serious global conflict exists, no sensible nation should rely entirely on global free trade, trade that will immediately be disrupted in any serious conflict.

I present three examples of what I regard as inappropriate treatment of Australia's strategic manufacturing sector. The first concerns the Joint Strike Fighter (JSF) project. This wonderful flying machine will supposedly provide Australia with regional leadership in air warfare, at least until our relatively limited number of these expensive machines are destroyed or made inoperable. The Australian air force famously kept its F111s flying for a decade after any other air force, but the rules for the JSF require maintenance or repair of these airplanes by our American allies. Should we be involved in a global conflict involving America, one assumes Australia's JSFs will receive a low priority for repair or replacement. The outcome if Australia is involved in a regional conflict with another American ally does not bear thinking about.

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A second example concerns the Australian-made Bushmaster. This Australian developed transport vehicle includes a different type of underbody, one that makes it a far safer vehicle for use in hostile territory. Its safety record makes an iconic contribution to the conflict in Afghanistan, a contribution recognized widely by allied warfighters also serving beside Australians. The Australian Army decided it would like a lighter version of the Bushmaster. The obvious thing to do would be to ask Thales, the Bushmaster's developer and manufacturer. (Thales is a French multinational, and some parts of the Bushmaster are imported. Hardened Australian steel is used for the body, and assembly and testing is carried out by skilled Australians workers at the Thales plant in Bendigo.)

But, possibly in the name of 'inter-operability', or hoping for a cheaper product, the Australian Defence Force (ADF) decided to ask the Americans to provide us with a large number of Joint Light Tactical Vehicles (JLTV) then under development. This news got out and there was a minor political storm. An embarrassed ADF invited Thales and a second American company to quote. A very short time was allowed, and Thales managed to meet that deadline, in the process spending $30 million producing a prototype. Then the USA suspended development of its JLTV, reportedly for 5 years. The Australian alternative, and the time and money invested in its development is 'in limbo'. This is no way to treat a strategic Australian defence business. It amounts to anti-protection (= give advantage to foreigners). It is also no way to treat our warfighters, whose strategic need is also in limbo.

A third example is the breakthrough defence technology developed by Queensland company Metal Storm Ltd. The company has proved its technology for American military clients but remains zealously ignored by the ADF. As in the solar energy space, Australia Inc has managed to turn its back on a fine Australian invention.I could present many other examples, but space is limited.

Australia's approach to strategic manufacturing for the defence sector is plainly inadequate, even peverse. How can Glenn Stevens and the Reserve Bank help solve this problem? The answer is obvious. Keeping interest rates lower than needed to contain inflation will do nothing to help Australian industry, and inflation will damage all industries.

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Article edited by Kali Goldstone.
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This article was first published in The Australian on Tuesday September 6, 2011



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About the Author

Henry Thornton (1760-1815) was a banker, M.P., Philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His column is provided by the writers at www.henrythornton.com.

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