DAVID BEVAN, PRESENTER: Now we were promised by Christopher Pyne when he was Defence Minister before he retired and went off to have a very successful career as a lobbyist, endorsed by the South Australian Premier Steven Marshall at the opening of his office in Canberra by the way earlier this week. But we were promised by Christopher Pyne that there would be a very large component of Australian content. And then this week, after a lot of argy bargy, we were told ‘yep, it's all in the contract’.
Well, what emerged from Senate Estimates yesterday? Pat Conroy is a Shadow Minister regarding Defence. He joins us now. Good morning Pat Conroy.
PAT CONROY, SHADOW MINISTER ASSISTING FOR DEFENCE: Good morning David, how are you?
BEVAN: As I understand it, what Penny Wong, your colleague, and others were after was evidence that somebody in the Government has actually seen the contract locking in this local content? Is that correct?
CONROY: Yes, that's right. And your history, the timeline you’ve provided is absolutely accurate. Christopher Pyne promised 90 per cent local content when he was the Minister. The Government immediately walked away from that, and now they had to be dragged back kicking and screaming, and they've now said that they’ll achieve 60 per cent local content. But Senator Wong has revealed, has got some very damning evidence out of Defence Estimates yesterday that really calls into question whether that 60 per cent figure is actually there, and whether it will deliver the jobs particularly for places like Adelaide that so desperately needed.
BEVAN: The gist of the questioning was ‘have you, Minister, seen the contract? And if you haven't, well who has?’
CONROY: That's correct. So Minister Payne - who is the acting Defence Minister while Linda Reynolds is on leave - hasn't read the contract. Linda Reynolds hasn't read the contract. The Prime Minister hasn't read the contract. So they haven't read the contract that now supposedly guarantees that there will be 60 per cent local content in these submarines.
And as importantly, Department of Defence officials and Senator Payne refused to tell the Parliament of Australia yesterday, refused the table the contract details, the language, and they refused to actually detail what penalties would be in place for the company, for Naval Group from France if they didn't deliver the 60 per cent.
So that's very worrying, because obviously if the Minister hasn't read it, and the Parliament of Australia and MPs and Senators can't read the contract, how do we know exactly what's in there?
BEVAN: One of the suggestions a few weeks ago, was that perhaps Naval Group would argue ‘look, let us build the first one pretty much as we like, and we'll make sure that we deliver 60 per cent local content over the life of the submarines’, which is going to take decades to build all of these things. Would that be acceptable, or is there a problem with that?
CONROY: Well, that's what Defence has agreed to it appears. So the evidence yesterday said that they won't even know whether Australia is getting close to 60 per cent local content until submarine number two or three. So that means that we won't know until 2037 or 2038 whether we're even on track to hit the 60 per cent.
And as importantly, the Department of Defence officials have said that there is an opening for Naval Group to welch on the 60 per cent if, for example, we decide we want different technology than what we've originally specified which is understandable given these submarines will be built over the next 30 years. If we say we want a different technology or technology changes, then there's an option for Naval Group to get out of the 60 per cent local content.
So we won't know whether we're close to 60 per cent until 17 or 18 years’ time, and if we need a new technology to help our sailors, then Naval Group could get out of the 60 per cent and that means fewer jobs for places like Adelaide.
BEVAN: Can you understand how our listeners who have been hearing this debate for years now can be fatigued by the whole thing? And at that point - and that would play to the advantage of a company that doesn't particularly want to maybe be bound by content arrangements?
CONROY: Oh, absolutely. And this company is clearly playing a game of ‘we’re all going to take advantage of the rotating door of Ministers’. We seem to have a new Defence Minister every five minutes in this Government, and that means that the company is just going to wait it out. And we've seen saga after saga where we're not getting active ministerial supervision which is driving these problems.
These submarines are running 10 years late already, and the cost of them has blown out from $50 billion to $90 billion. Just think about that for a second. The cost of this project has almost doubled, and we haven't even started cutting steel on this project.
BEVAN: But to be fair Pat Conroy, wasn't that explained as ‘look, that's just the inflation rate and if you look at the dollar cost in the original – at the time that the contract was first mooted, it hasn't actually gone up by anything like that’?
CONROY: That's what Defence tried to say but that's wrong, and we established that in Estimates last year. So Kevin Andrews, when he was Defence Minister, and Tony Abbott got up at Port Adelaide, at Osborne in 2015 and announced that we will be building 12 submarines at a cost of $50 billion in outturned dollars. Not to get too technical, but outturned dollars means they've adjusted for inflation. So they are the dollars that will be there in 2030, 2040, 2050. So they’ve said the cost in inflation adjusted outturned dollars is $50 billion.
We now have established that the cost in outturned dollars is $90 billion. So they've tried to be mean and tricky and turned outturned dollars to constant dollars, but the facts remain that the cost of these submarines in the dollars of when they’re built has increased from $50 billion to $90 billion, and they've been delayed by 10 years under this Government. This is a project that is in crisis.
(Interview with Senator Rex Patrick)
BEVAN: Pat Conroy, Shadow Minister Assisting for Defence, is that your understanding again after this evidence was produced that we've got aluminium rust for our patrol boats?
CONROY: Yeah, it sounds incredible when you say it, but the Admiral in charge of the program admitted yesterday that the problem with this aluminium is that it rusts which is incredible when you think about it. So we've got a problem with using aluminium imported from China full stop, but secondly to get inadequate, deficient aluminium that has delayed this project is a massive problem because this now means that we have to run the obsolete Armidale Class patrol boats for longer. They have their own problems. We have to pay more for the sustainment maintenance of those Armidale Class patrol boats, and this is just another example of this Government's drift in Defence.
To be frank, we've got the top 25 Defence projects running cumulatively 42 years late. Just think about that for a second. Our 25 most important projects are running 42 years late under this Government, and that means that –
BEVAN: Well, of course, we've got texts here saying Pat Conroy if Labor had actually got on and ordered some of these things when you were in office, I know that's going back more than seven years, but they maintain you didn't order anything and that's why they've had to and we always have problems with Defence projects.
CONROY: Well that's incorrect, we did order ships. That's just wrong from whoever listener texted that in. But my job is to hold this Government to account. We've got a revolving door of Ministers who are presiding over a submarine project that's blown out by $40 billion, patrol boats that can't hit the water because they use Chinese aluminium that rusts, and as I said, the 25 top projects are running 42 years late. This cannot be allowed to happen for longer. It affects the Defence of this country, and it cost jobs in places like Adelaide.
BEVAN: Pat Conroy, thanks for your time.
CONROY: Thanks.