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Defence Investment In The Australian Economy

Press Release Department of Defence (Australia) Canberra

DEFENCE INVESTMENT IN THE AUSTRALIAN ECONOMY

The Government was dedicating more time and effort into understanding Australian security needs than any Government since World War II, so that fundamental decisions could be made later this year about the future role and shape of the Australian Defence Force, the Chief of the Defence Force, Admiral Chris Barrie said today.

Addressing the Committee for Economic Development of Australia (CEDA) in Melbourne, Admiral Barrie outlined the effect that the Government's investment in Defence had on the economy, and the need for broader understanding and involvement from the Australian community in Defence issues.

"Defence is not just a consumer of taxpayers dollars. We are a very large contributor to a better and more prosperous nation, not only in our explicit role of fighting and winning when called on by our Government, but also as an important national resource in peacetime," Admiral Barrie said.

"In stark economic terms Defence is no minnow. We have a land and property portfolio larger than AMP and compare in size as far as assets, people and budgets to Australia's largest company, Coles/Myer.

"Defence is the largest Commonwealth purchaser, spending some $5 billion in Australia each year. Studies of the impact of our procurement have shown that our multiplier effect on the South Australian economy, for example, was 1.145. By comparison the multipliers for tourism were 1.192 and 1.126 for the motor vehicle industry.

He added that the substantial investment in Defence research and development, as well as education and training were other areas that were important contributors to Australia's skill and technology base, thereby improving the overall competitiveness of Australian industry.

"What is really significant, though, is the economic contribution Defence makes in regional Australia. On average, for each Defence job in regional Australia, a further job is created and for each Defence dollar spent a further 40 cents is added to the local economy."

Admiral Barrie said that other incidental benefits also flow from the critical mass effect of the regional Defence presence, such as increased educational opportunities, improved medical facilities and greater access to cultural facilities.

ends

Canberra, ACT, 2600 Media releases are available by email if you register at the Media Centre at www.defence.gov.au

ADDRESS Thursday 16 March 2000

ADDRESS BY THE CHIEF OF THE DEFENCE FORCE. ADMIRAL CHRIS BARRIE TO THE COMMITTEE FOR ECONOMIC DEVELOPMENT (CEDA), MELBOURNE, THURSDAY MARCH 16, 2000

Introduction Thank you for inviting me to join you today. I welcome the opportunity and very much regret that other commitments late last year forced me to postpone my earlier presentation.

Defence and security issues generally have certainly had a kick along in recent months. Since I became CDF nearly two years ago I have sought to encourage a broader involvement from the Australian community in this very important debate.

East Timor has been a lightening rod for energising the debate. But I think there is a danger that we can be a little simplistic in our view of defence and as a consequence the decisions we make about the future will be flawed.

Our Military Heritage Australia's military forces, be they colonial forces prior to Federation, or the Australian Imperial Forces in the two world wars, the militia, the citizen forces or more recently the all volunteer force composing regular forces and reserves, have contributed uniquely and significantly to Australia's traditions and our values.

These traditions and values have shaped our approach to domestic and international issues. The Navy, Army and Air Force have earned their place as national institutions within Australian Society. This is both an honour and a challenge. It certainly cannot be taken for granted.

East Timor has been a catalyst for modernising this historical truth. It has reinforced with another generation the place of Defence in Australian Society.

Expectation Creep In recent years, in many ways out of the spot light, the ADF's activity rate has been steadily increasing in pace. As an indicator, the operational tempo set in 1999 surpassed that set in any year since 1972.

Put simply, the Government's expectation of Defence and indeed the people of Australia's expectation have steadily increased. What I have called 'expectation creep'. The Federal Government has been well aware of these changing demands. Indeed, since Minister Moore took over the reins after the last election, he has demanded the highest levels of management performance and accountability from the department, and rightly so.

This pressure has been driven by the realisation that because of our increased tempo, the Government must make some very serious decisions about the level of investment we make in the current force, as well as the level of investment we make in the force of tomorrow.

The Government is dedicating probably more time and effort into understanding these issues than any Government since John Curtin's during World War II.

Defence and the Economy Today I do not want to enter into Budget or resource issues - that is a subject for the Government and Ministers.

Rather I would like to shed some light on an implicit dimension of Defence in Australia - our impact on the economy. In stark terms Defence is no minnow -

* Defence assets have a total net value of some $40 Bn. * We have a work force of some 97,000 people, which is a reduction of some 40,000 over the last 15 years. * In less than 10 years, over 11,000 people and over 100 functions have been market tested with an average saving of some 30%. * Our total funding in accrual terms is some $18.7 Bn * Our appropriation is about $11.1 Bn and we hold an inventory of some $2.6 Bn.

How does this compare in Australian industry? Well you might be surprised: * Our land and property portfolio is larger than AMP. * Coles/Myer as a comparison in 1998/99 held net total assets of $2.7 Bn with 1,225 stores and staff of 75,000 and a total revenue of $23 Bn. * Telstra net total assets were $10.2 Bn, 52,000 staff and a revenue of $18.2 Bn.

Defence's Impact Defence is the single largest Commonwealth purchaser. For example, of the approximately $7 billion spent by Defence on goods and services in 98/99, the following was spent in Australia:

* $3.1 billion, or 86%, of logistics and administrative spending; * $1.4 billion, or 47%, of capital equipment expenditure; and * $490 million, or 99%, of capital facilities expenditure.

Defence operates under the same policies and controls in relation to 'Buying Australian' as other arms of Government. In Defence we have placed even greater requirements for the involvement of Australian industry in projects than do the general Commonwealth guidelines.

This allows us to develop and sustain industry capabilities that are strategically important for the defence of Australia, but also has the effect of allowing Australian industry greater involvement in Defence activities, with positive results for the economy as a whole.

And I see these positive results increasing in future with opportunities for exports and overseas collaboration.

Defence procurement has been the subject of a number of studies to determine its impact on the Australian economy. A somewhat dated South Australian study on the effects of Defence showed that the multiplier effect on the South Australian economy was 1.145. By comparison the multipliers for tourism were 1.192 and 1.126 for the motor vehicle industry.

What is really significant, though, is the economic contribution Defence makes in regional Australia.

The strategic circumstances facing Australia means that a large proportion of Defence combat units are located at bases in Australia's north - most notably Darwin, Katherine and Townsville.

Two studies were conducted in the early 1990s, using Input-Output analysis, that examined the impact of Defence spending on the regional economies of Townsville and the Northern Territory. These found, for example, that Defence is the third largest source of revenue in the Northern Territory.

In both studies Defence accounted for about 10% of the local economy's GDP, a sharp contrast with Defence's overall 1.8% share of GDP.

On average for each Defence job in regional Australia a further job is created and for each Defence dollar spent a further 40 cents is added to the local economy.

Less tangible are the incidental benefits that flow from a Defence presence. Communities like Katherine, and to a lesser extent Townsville, benefit from increased critical mass.

Increased educational opportunities, improved medical facilities and greater access to cultural activities are among the many benefits that accrue to regional communities when their populations are increased by a significant Defence presence. A fact recognised in the Government's recently announced regional Australia initiative.

Defence R&D Defence is also a significant contributor to Research and Development, spending some $230 million per year on defence related R&D. Putting that into context this represents the fifth largest allocation of Commonwealth funded R&D. The spin offs of this investment accrue not only to Defence but also to industry.

Australian innovations such as the Black Box Flight Recorder, the Laser Airborne Depth Sounder and the Nulka decoy are among the success stories that were a direct result of Defence funded R&D.

In other areas we have by necessity of our unique geographical circumstances become world leaders in specialised fields such as warm and shallow water sonar technology. In the case of sonar development Defence Acquisition, DSTO and industry are all involved in a collaborative partnership.

The Australian division of Thomson Marconi Sonar Pty Ltd is now the world's largest producer of towed sonar arrays with some 65% of the company's turnover derived from exports.

Innovation is not only a consequence of Defence R&D. Many of Defence's acquisition projects bring to Australia new skills and processes.

The Collins Submarine project for example resulted in new welding techniques being introduced into Australia, and the manufacture of world class steel. These add to Australia's skill and technology base, thereby improving the overall competitiveness of Australian Industry.

Furthermore, the Defence R&D base with its industry alliances generates close practical linkages and potential in our region and beyond.

Defence Education and Training The final area I would like to highlight is Defence education and training. The Defence Efficiency Review identified that in 1997 individual education and training consumed about 15% of Defence outlays and that there were some 14,000 personnel under training at any given time.

Additional to the many in-house training programs we have, at this point in time, in place education and training contracts with private enterprise valued at over $200 million. These contracts are training not just for the ADF, but invariably for the wider Australian community - professionals and skilled tradesmen who are keenly sought for their skills when they retire from the services.

Conclusion To conclude - Defence is not just a consumer of taxpayers dollars. It is a very large contributor to a better and more prosperous nation. Not only in our explicit role of fighting and winning when called on by our Government, but also as an important national resource in peacetime.

Our focus over the last few years of strengthening our links with our community is starting to bear fruit. The emerging long term partnership between Defence, industry and our community - ranging from traditional defence acquisition, research and development, maintenance, education to the provision of goods and services across a wide spectrum of Defence activity - cannot be underestimated.

Especially to enable what I see as the critical whole of government approach to policy formulation and contribution to solving the challenges that confront us as a nation.

Security must be seen as a whole-of-nation concept, where Defence not only plays an important role domestically, as I have outlined above, but also adds a military/diplomatic dimension to our international relations - be that on a people to people basis, military options for peace operations or entrée for economic development.

So I believe that as we enter the new millennium, Australian security and an understanding of Defence's role in the fabric of our nation, must stand at the centre of our new conceptual approach if we are to go on enjoying the freedom we have taken for granted over the last 100 years.


Press Release Department of Defence (Australia) Canberra

DEFENCE INVESTMENT IN THE AUSTRALIAN ECONOMY

The Government was dedicating more time and effort into understanding Australian security needs than any Government since World War II, so that fundamental decisions could be made later this year about the future role and shape of the Australian Defence Force, the Chief of the Defence Force, Admiral Chris Barrie said today.

Addressing the Committee for Economic Development of Australia (CEDA) in Melbourne, Admiral Barrie outlined the effect that the Government's investment in Defence had on the economy, and the need for broader understanding and involvement from the Australian community in Defence issues.

"Defence is not just a consumer of taxpayers dollars. We are a very large contributor to a better and more prosperous nation, not only in our explicit role of fighting and winning when called on by our Government, but also as an important national resource in peacetime," Admiral Barrie said.

"In stark economic terms Defence is no minnow. We have a land and property portfolio larger than AMP and compare in size as far as assets, people and budgets to Australia's largest company, Coles/Myer.

"Defence is the largest Commonwealth purchaser, spending some $5 billion in Australia each year. Studies of the impact of our procurement have shown that our multiplier effect on the South Australian economy, for example, was 1.145. By comparison the multipliers for tourism were 1.192 and 1.126 for the motor vehicle industry.

He added that the substantial investment in Defence research and development, as well as education and training were other areas that were important contributors to Australia's skill and technology base, thereby improving the overall competitiveness of Australian industry.

"What is really significant, though, is the economic contribution Defence makes in regional Australia. On average, for each Defence job in regional Australia, a further job is created and for each Defence dollar spent a further 40 cents is added to the local economy."

Admiral Barrie said that other incidental benefits also flow from the critical mass effect of the regional Defence presence, such as increased educational opportunities, improved medical facilities and greater access to cultural facilities.

ends

Canberra, ACT, 2600 Media releases are available by email if you register at the Media Centre at www.defence.gov.au

ADDRESS Thursday 16 March 2000

ADDRESS BY THE CHIEF OF THE DEFENCE FORCE. ADMIRAL CHRIS BARRIE TO THE COMMITTEE FOR ECONOMIC DEVELOPMENT (CEDA), MELBOURNE, THURSDAY MARCH 16, 2000

Introduction Thank you for inviting me to join you today. I welcome the opportunity and very much regret that other commitments late last year forced me to postpone my earlier presentation.

Defence and security issues generally have certainly had a kick along in recent months. Since I became CDF nearly two years ago I have sought to encourage a broader involvement from the Australian community in this very important debate.

East Timor has been a lightening rod for energising the debate. But I think there is a danger that we can be a little simplistic in our view of defence and as a consequence the decisions we make about the future will be flawed.

Our Military Heritage Australia's military forces, be they colonial forces prior to Federation, or the Australian Imperial Forces in the two world wars, the militia, the citizen forces or more recently the all volunteer force composing regular forces and reserves, have contributed uniquely and significantly to Australia's traditions and our values.

These traditions and values have shaped our approach to domestic and international issues. The Navy, Army and Air Force have earned their place as national institutions within Australian Society. This is both an honour and a challenge. It certainly cannot be taken for granted.

East Timor has been a catalyst for modernising this historical truth. It has reinforced with another generation the place of Defence in Australian Society.

Expectation Creep In recent years, in many ways out of the spot light, the ADF's activity rate has been steadily increasing in pace. As an indicator, the operational tempo set in 1999 surpassed that set in any year since 1972.

Put simply, the Government's expectation of Defence and indeed the people of Australia's expectation have steadily increased. What I have called 'expectation creep'. The Federal Government has been well aware of these changing demands. Indeed, since Minister Moore took over the reins after the last election, he has demanded the highest levels of management performance and accountability from the department, and rightly so.

This pressure has been driven by the realisation that because of our increased tempo, the Government must make some very serious decisions about the level of investment we make in the current force, as well as the level of investment we make in the force of tomorrow.

The Government is dedicating probably more time and effort into understanding these issues than any Government since John Curtin's during World War II.

Defence and the Economy Today I do not want to enter into Budget or resource issues - that is a subject for the Government and Ministers.

Rather I would like to shed some light on an implicit dimension of Defence in Australia - our impact on the economy. In stark terms Defence is no minnow -

* Defence assets have a total net value of some $40 Bn. * We have a work force of some 97,000 people, which is a reduction of some 40,000 over the last 15 years. * In less than 10 years, over 11,000 people and over 100 functions have been market tested with an average saving of some 30%. * Our total funding in accrual terms is some $18.7 Bn * Our appropriation is about $11.1 Bn and we hold an inventory of some $2.6 Bn.

How does this compare in Australian industry? Well you might be surprised: * Our land and property portfolio is larger than AMP. * Coles/Myer as a comparison in 1998/99 held net total assets of $2.7 Bn with 1,225 stores and staff of 75,000 and a total revenue of $23 Bn. * Telstra net total assets were $10.2 Bn, 52,000 staff and a revenue of $18.2 Bn.

Defence's Impact Defence is the single largest Commonwealth purchaser. For example, of the approximately $7 billion spent by Defence on goods and services in 98/99, the following was spent in Australia:

* $3.1 billion, or 86%, of logistics and administrative spending; * $1.4 billion, or 47%, of capital equipment expenditure; and * $490 million, or 99%, of capital facilities expenditure.

Defence operates under the same policies and controls in relation to 'Buying Australian' as other arms of Government. In Defence we have placed even greater requirements for the involvement of Australian industry in projects than do the general Commonwealth guidelines.

This allows us to develop and sustain industry capabilities that are strategically important for the defence of Australia, but also has the effect of allowing Australian industry greater involvement in Defence activities, with positive results for the economy as a whole.

And I see these positive results increasing in future with opportunities for exports and overseas collaboration.

Defence procurement has been the subject of a number of studies to determine its impact on the Australian economy. A somewhat dated South Australian study on the effects of Defence showed that the multiplier effect on the South Australian economy was 1.145. By comparison the multipliers for tourism were 1.192 and 1.126 for the motor vehicle industry.

What is really significant, though, is the economic contribution Defence makes in regional Australia.

The strategic circumstances facing Australia means that a large proportion of Defence combat units are located at bases in Australia's north - most notably Darwin, Katherine and Townsville.

Two studies were conducted in the early 1990s, using Input-Output analysis, that examined the impact of Defence spending on the regional economies of Townsville and the Northern Territory. These found, for example, that Defence is the third largest source of revenue in the Northern Territory.

In both studies Defence accounted for about 10% of the local economy's GDP, a sharp contrast with Defence's overall 1.8% share of GDP.

On average for each Defence job in regional Australia a further job is created and for each Defence dollar spent a further 40 cents is added to the local economy.

Less tangible are the incidental benefits that flow from a Defence presence. Communities like Katherine, and to a lesser extent Townsville, benefit from increased critical mass.

Increased educational opportunities, improved medical facilities and greater access to cultural activities are among the many benefits that accrue to regional communities when their populations are increased by a significant Defence presence. A fact recognised in the Government's recently announced regional Australia initiative.

Defence R&D Defence is also a significant contributor to Research and Development, spending some $230 million per year on defence related R&D. Putting that into context this represents the fifth largest allocation of Commonwealth funded R&D. The spin offs of this investment accrue not only to Defence but also to industry.

Australian innovations such as the Black Box Flight Recorder, the Laser Airborne Depth Sounder and the Nulka decoy are among the success stories that were a direct result of Defence funded R&D.

In other areas we have by necessity of our unique geographical circumstances become world leaders in specialised fields such as warm and shallow water sonar technology. In the case of sonar development Defence Acquisition, DSTO and industry are all involved in a collaborative partnership.

The Australian division of Thomson Marconi Sonar Pty Ltd is now the world's largest producer of towed sonar arrays with some 65% of the company's turnover derived from exports.

Innovation is not only a consequence of Defence R&D. Many of Defence's acquisition projects bring to Australia new skills and processes.

The Collins Submarine project for example resulted in new welding techniques being introduced into Australia, and the manufacture of world class steel. These add to Australia's skill and technology base, thereby improving the overall competitiveness of Australian Industry.

Furthermore, the Defence R&D base with its industry alliances generates close practical linkages and potential in our region and beyond.

Defence Education and Training The final area I would like to highlight is Defence education and training. The Defence Efficiency Review identified that in 1997 individual education and training consumed about 15% of Defence outlays and that there were some 14,000 personnel under training at any given time.

Additional to the many in-house training programs we have, at this point in time, in place education and training contracts with private enterprise valued at over $200 million. These contracts are training not just for the ADF, but invariably for the wider Australian community - professionals and skilled tradesmen who are keenly sought for their skills when they retire from the services.

Conclusion To conclude - Defence is not just a consumer of taxpayers dollars. It is a very large contributor to a better and more prosperous nation. Not only in our explicit role of fighting and winning when called on by our Government, but also as an important national resource in peacetime.

Our focus over the last few years of strengthening our links with our community is starting to bear fruit. The emerging long term partnership between Defence, industry and our community - ranging from traditional defence acquisition, research and development, maintenance, education to the provision of goods and services across a wide spectrum of Defence activity - cannot be underestimated.

Especially to enable what I see as the critical whole of government approach to policy formulation and contribution to solving the challenges that confront us as a nation.

Security must be seen as a whole-of-nation concept, where Defence not only plays an important role domestically, as I have outlined above, but also adds a military/diplomatic dimension to our international relations - be that on a people to people basis, military options for peace operations or entrée for economic development.

So I believe that as we enter the new millennium, Australian security and an understanding of Defence's role in the fabric of our nation, must stand at the centre of our new conceptual approach if we are to go on enjoying the freedom we have taken for granted over the last 100 years.


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