How Could Submarines Save SA's Economy From Sinking?

The pressure on the Federal Government to announce new projects for South Australia intensified early in the campaign after relentless campaigning from the State Government, Nick Xenophon, industry and unions. Safe Liberal seats in SA came into electoral play, forcing influential Liberal MPs such as Christopher Pyne to push his party to make an early announcement on the submarine project in favor of SA. And so it was to be. Twelve new submarines would be built in Adelaide said the Prime Minister much to the relief of his South Australian colleagues. While the direct economic benefits of this are pretty well understood, there is much more at stake than this. Maritime defence projects like submarines are among the most complex engineering projects in existence. They require the development and application of advanced technologies by highly skilled workers. A network of sophisticated companies is needed to deliver and maintain a fleet of vessels that must endure incredibly demanding operational conditions for decades. The great Swedish economist, Gunnar Elliason, suggests that complex manufacturing ecosystems like this are potential technical universities, places where high-value knowledge and skills are developed and successfully applied. If you are fortunate enough to host such an ecosystem, you must understand its value and leverage it. With $90 billion worth of Australian maritime shipbuilding projects in the pipeline, and much of this work to be undertaken in South Australia, we are in an enviable position. South Australia needs economic circuit breakers and this is certainly one of them.

Nothing can be taken for granted however. Not all of the work can be undertaken here. The successful implementation of complex projects like these, normally rely upon well-established global maritime defence supply chains, dominated by the United States, France, Spain, Germany, Sweden and Japan. Australian and South Australian-owned defence electronics, systems and manufacturing companies play an important but ancillary role in all of this. While foreign players dominate the Australian maritime defence industry, South Australia has developed foundational expertise and infrastructure to ensure that we are able to play a major role in the delivery of ships for the Australian Navy. Without the Australian Submarine Corporation (ASC) and Techport at Osborne we would have no hope of doing this. The ASC now has decades of experience in shipbuilding, delivering some of the most sophisticated manufactured products that exist. We have a world-class facility at Osborne surrounded by a highly experienced and skilled workforce and competent network of companies. Maritime projects of the scale of the submarine project generate both direct and indirect industry and employment benefits. Local companies can get involved as suppliers to the project or they can benefit from knowledge, skill and technology transfer that enables them to diversify into new areas of production or service provision that would not have been possible without the presence of a major defence project. This won’t happen automatically however. Strategies have to be put in place to capture and leverage opportunities that can flow from projects like the submarine project.

Past experience with the implementation of complex defence projects tells us that substantial economic benefit can be captured by harnessing so called knowledge and technological spillovers – often commercial applications of knowledge and technologies from the defence sector in the civilian sector. New and existing companies have benefited greatly from this, particularly where deliberate strategies have been put in place to identify and capture spillovers. Some of the groundwork is being laid to do this better than we have done in the past. One substantial initiative to flow from the Defence White Paper is the commitment by the Federal Government to establish a $230m Centre for Defence Industry Capability. Fortunately the plan is to headquarter this operation in Adelaide, making it much easier for South Australia to play a central role in its development and operation for the benefit of South Australian companies and researchers. Alongside this will sit a $750m Next Generation technology program which will create enormous research and development opportunities for well placed South Australian based defence companies and universities. Thousands of local defence shipbuilding jobs will flow from the pipeline of maritime shipbuilding projects based in South Australia. Many more could be generated in civilian industries like medical devices, assistive technologies, energy generation and storage, autonomous vehicles and boats if we put in place strategies to capture knowledge, skills and technologies generated in the maritime defence industry for commercial application in the civilian sector. Our ship really will have come in if we do this well. @JohnSpoehr