‘Not business as usual’: Can Australia’s $425bn defence investment lift productivity?

Australia needs to become more self-reliant in defence while building the skills, industrial capacity and partnerships needed to sustain that capability for decades, according to Department of Defence Secretary Meghan Quinn.

The urgency is increasing.

“My main message here is we're not in business as usual, in national security terms,” Quinn told a panel discussion on building Australia’s sovereign capability at Commonwealth Bank’s Global Markets Conference. 

Australia was entering a more dangerous and unpredictable period in which the time available to respond to threats had shortened and distance could no longer provide the protection it once did, Quinn said.  

Aa a consequence, we need to think more carefully about the capabilities Australia needs to have available locally, while continuing to work with its international partners to bolster defences, she said.

Quinn said the word “national” in the National Defence Strategy was important because the tasks extends far beyond Defence itself.

“It means the financial system. It means the banking system. It means the industrial system. It means the health system. The industrial relations system,” she said.

A $425 billion opportunity 

The scale of the task also creates a significant economic opportunity.

Commonwealth Bank Group Chief Risk Officer Andrew Hinchliff said Australia’s defence investment plan contemplated $425 billion of capability investment over the next decade.

Building sovereign capability would require technology, infrastructure and factories, along with skilled people, resilient supply chains, long-term demand signals and capital, he said.

The question was whether an investment program of that scale could also help lift productivity and economic resilience alongside national security. 

“I think importantly, it's a national problem. And if we actually get this right ... we will foster improved skills across the country,” he said.

Hinchliff said that was an opportunity to “build an industrial base that will enable both productivity and national economic prosperity, resilience, and ultimately, national security”.

Building the skills Australia will need

Workforce development will be key to developing capability, the panel said. 

Australian Naval Infrastructure Chair Ron Finlay, who oversees construction key to the development of the AUKUS submarines program, said the scale and complexity of infrastructure planned at Osborne in South Australia and Henderson and HMAS Stirling in Western Australia would require capabilities Australia does not currently have at sufficient scale.

“The workforce development is probably their biggest challenge,” he said.

At Osborne, a new skills and training academy is expected to open next year with capacity for 1,000 students a year.

Finlay said developing the workforce was one of the first priorities because new skills would be needed across infrastructure, shipbuilding and submarine construction. 

Some specialised nuclear expertise would initially need to come from overseas while Australia developed its own capability.

Amentum Group Director Nuclear Submarines Neil Thumwood said the opportunity was to use decades of experience from the UK and US programs to help develop Australian expertise.

That meant embedding knowledge in Australian people, supply chains and infrastructure so the capability could eventually be sustained locally.

Productivity beyond defence 

The industrial benefits could also spread beyond the places where submarines are assembled.

Quinn said the combination of a more skilled workforce, new infrastructure and modern technology created an opportunity to lift productivity beyond defence itself.

“The use of technology in such as digital twinning and integrated advanced manufacturing, there's a lot of things we can do that will demonstrate for the broader industrial system in Australia some really good productivity improvements,” she said.

Finlay outlined a “distributed build” approach under which components could be produced in Melbourne, Sydney and Perth before being brought together at Osborne, helping broaden the defence supply chain around the country. 

He pointed to the existing Osborne shipyard, where the Hunter-class frigates are being built, as an example. Built with robotics from the outset, the facility is already showing benefits in shipbuilding throughput.

Thumwood said Australia also had an opportunity to learn from much older overseas shipyards and build infrastructure designed around modern technology from the beginning.

The aim, he said, was to create an industrial ecosystem that could continue developing long after individual construction projects were finished.

“So that resilience in my mind sits in the people. How do we train the people? How do we establish the supply chain, how do we build the infrastructure?” 

Why the private sector needs to be involved

Delivering projects of this scale will also require government to work more closely with private capital and industry.

Quinn said the argument for private-sector involvement was not simply about finding additional funding.

“The government can borrow the money cheaper than almost anyone in this room. So it's not a funding issue per se,” she said. 

Instead, private-sector involvement could bring different expertise and help allocate risk, improve productivity and deliver projects faster and better.

Some risks, including those closely tied to nuclear regulation, would naturally sit with government, Quinn said. Construction and project management were areas where the private sector could potentially be better placed to manage risk.

The challenge is complicated by the unusually long life of defence programs and the speed at which technology can change.

Infrastructure is being developed for submarines that are still being designed, meaning contracts and financing arrangements will need enough flexibility to adapt over time. 

Looking ahead to 2035, Quinn said one measure of success would be having more private-sector capital involved in Australia’s defence ecosystem.

“That is an absolute must,” she said.

Self-reliant does not mean self-sufficient

Greater sovereign capability also does not mean Australia trying to make everything itself. 

“Self-reliance doesn't mean doing everything here,” Quinn said.

Instead, Australia needs to be clear about which capabilities it must be able to maintain and scale locally, while continuing to draw on alliances, international expertise and global supply chains.

Thumwood made a similar distinction, saying sovereignty was not about self-sufficiency but about Australia developing the ability to understand, control, sustain and, where needed, regenerate critical capability.

Quinn said the goal over the coming decade was straightforward. 

“We will be more self-reliant, not self-sufficient.”

The broader opportunity is that the same investment required to achieve that goal could also leave Australia with a deeper pool of skilled workers, more advanced technology, stronger supply chains and a more productive industrial base.