Marine Log

December 7, 2006

Senate panel says Australia should build own warships

The Foreign Affairs, Defense and Trade References Committee of the Australian Senate has completed an inquiry into the scope and opportunity for naval shipbuilding in Australia .

It reports that "Australia's naval shipbuilding base is well-established, and in recent years has become more efficient, motivated and highly skilled. It has produced a number of outstanding world-class vessels that showcase the capability of Australia's naval industrial base."

Not only does this industrial base have the capacity and potential to contribute to the maintenance of a self sufficient and self reliant naval shipbuilding industry, says the Senate committee, it also contributes in many other ways to Australia's industrial manufacturing base, the broader economy and Australia's national defence interest.

The Senate committee's report, "Blue water ships: consolidating past achievements," says taking account of the broad range of factors that are to be considered when acquiring a naval vessel, the committee believes that it is in Australia's national interest to maintain a viable naval shipbuilding and repair industry in Australia.

This requires a commitment by the government to have Australia's naval vessels constructed in Australia and for the government and Defense to adopt measures that would ensure the industry remans efficient, innovative and competitive. This however, must be measurable and transparent, based on detailed analysis on the best benchmarks available.

This means that government should not allow itself to be captured by overly dependent and uncompetitive suppliers. The trade off between the benefits of self reliance and self sufficiency must be carefully measured against the best possible international benchmarks so as to avoid debilitating subsidization of inefficient practices, but at the same time promoting improved productivity.

In some cases, an Australian build premium may be involved. Such assistance to the local industry would be consistent with overseas practices. The committee has noted on a number of occasions the range of direct and indirect subsidies given by overseas governments to support their domestic shipbuilding industry. Furthermore, a premium should be viewed as an investment that will pay dividends not only to Australia's shipbuilding industry but the economy as a whole as well as safeguarding Australia's national security. The committee believes that the capability in Australia's shipbuilding industry, built up over many years, should not be eroded.

Even so,the committee believes that the costs must be quantified in order to provide a true measure of actual competitive design and construction costs as well as the costs properly attributed to non-economic or political motives.

While the committee supports in country builds for its naval vessels, it does not necessarily believe that premiums should be paid for commercial-type ships such as the oiler Delos, the replacement ship for HMAS Westralia. Delos is a tanker specially equipped and rigged for replenishing other ships at sea. The committee does endorse, however, the decision to have the modifications done in Australia to convert the ship to its military role as an auxiliary oiler.

The committee believes that it is imperative that government develop longer term naval defense strategies from which economies of scale and continuity of demand can be derived, without which industry will continue to suffer.