AllFOR IMMEDIATE RELEASE 29 OCTOBER 2025
Canberra:
The race for sovereignty: Building Australia’s self-reliant Industrial and Defence base by 2035
Wednesday October 15, 2025
Acknowledgement of Country
I acknowledge the Traditional Owners of Country throughout Australia and their continuing connection to land, waters and community. I pay my respects to the people, the cultures and the Elders past and present.
Thank you for the opportunity to speak with you today.
Australia stands at a crossroads.
The global environment is more uncertain and contested than at any point since the Second World War.
The rise of China, doubts around AUKUS, procurement failures, workforce shortages, and the revolution in warfare driven by Ukraine all remind us that the stakes are high — and the risks are real.
That’s why sovereignty by 2035 isn’t optional — it’s essential to Australia’s security and prosperity.
But sovereignty is not just about defence hardware or military alliances.
It’s about building the foundations of resilience here at home. Manufacturing strength is the backbone of resilience; without it, sovereignty is just rhetoric.
And to achieve that strength, we must face a hard truth: productivity is Australia’s new battleground.
A strong, sovereign defence industry means stronger national security, more high-value Australian jobs, and long-term economic growth.
By investing in our people, our technology, and our industrial base, we can ensure Australia is not only well-prepared for the challenges ahead, but also a nation that drives stability and prosperity in our region.
AIDN is the peak industry body representing nearly 1000 Australian SME’s serving the defence sector. The sector employs around 61,000 people, contributing billions of dollars annually to the economy, through sovereign supply chains, advanced manufacturing, research and innovation. AIDN champions the interests of Australian SME’s within the Defence and national security sector.
So, to hark back to the beginning of my address, why do I say Australia is at a crossroads?
It’s simple.
A lot needs to change if Australia is to lift productivity and achieve a self-reliant defence base in an unpredictable world.
To borrow a phrase from a famous ALP advertising campaign – It’s time.
Australia must prioritise and invest in its own defence industry, making it more self-reliant, innovative and adaptable to future challenges.
A sovereign Defence Industry is vital for any nation that wishes to maintain its independence in military decision making.
Australia’s current reliance on foreign imports for military hardware, maintenance and technology presents risks.
With globally shifting geopolitical tensions, the vulnerability of relying on overseas supply chains becomes evident.
In times of conflict or crisis such supply chains could be disrupted, leaving Australia dependent on the goodwill of other nations for critical Defence resources.
So, achieving Australian sovereignty in Defence is non-negotiable.
Australia must accelerate the development of a self-reliant industrial and Defence base to secure its future in an unpredictable world.
That’s not to say that Australia does not have valuable allies such as the US and the UK or that it should not continue to encourage the involvement of Foreign Defence Primes in Australian industry.
But look at the uncertainty created by the Trump administration. At the moment the Trump administration has imposed a 10 per cent general tariff on all Australian goods plus 50 per cent on aluminium, steel and copper.
Australian Defence SME’s are not alone in being affected but it represents just another cost burden to bear. And at a time when we have negotiated licence free exports between the tri-lateral partners involved in AUKUS.
How does that make any sense…to add costs to what is already a $368 billion enterprise.
Such tariff moves are detrimental to US, UK and Australian Defence industry at a time when unity has never been more important.
The defence industrial sector involves hundreds of companies, ranging from large multi-nationals to small micro-businesses that provide niche services.
A seat at the table for the SME sector is vital or Australian industry could easily become an after-thought for its inclusion in the multitude of projects Australia is undertaking.
Australian industry must be incorporated in the planning of all defence activities.
One of the most fundamental changes needed is to recognise the definition of Australian business laid down in the Defence Industry Development Strategy falls short of securing a sovereign Australian defence industry the Albanese government seeks.
Under the current definition any foreign equipment manufacturer could set up a subsidiary in Australia and employee a local workforce and be considered Australian.
What was missing, and as it applies in most other countries, was any requirement for local ownership or local board control of decisions.
Finance Minister Katy Gallagher is to be commended for making changes to the definition of an Australian business in the Commonwealth procurement rules and this should be extended to cover Defence procurement.
The stark reality for many in the SME sector is that despite increases in Defence spending much of this has gone either to AUKUS or the Global Weapons Explosive Ordnance programs leaving traditional areas of Defence underfunded.
This has seen orders slow down or be cancelled altogether, while Primes have held on to their work to ensure there is sufficient work for their own employees in-house.
But Defence SME’s are not asking for a hand-out, they are asking for a hand-up.
Defence Spending
So of course, AIDN supports an increase in the Defence budget to support SME’s work and the provision of adequate capabilities to the war fighter, in keeping with a more dangerous world.
But I can hear the sceptics in this audience saying, “well AIDN would say it wants a defence budget increase wouldn’t it’’.
But AIDN is not supporting an increase in Defence spending for any self-serving reason.
Whether we go to 3 per cent or 3.5 per cent it must be accompanied by serious Defence procurement and industry policy reform.
Despite lofty goals and frameworks, analysis point to a reduction in domestic Defence industry funding in real terms.
Although nominal budgets have increased – reaching A$55 billion in 2024-25 and projected to rise to nearly A$67 billion by 2027-28, Defence spending remains stuck around 2 per cent of GDP, with real growth only 0.8 per cent in 2025-26.
AIDN has called for an increase in defence spending for some time adding its voice to the coterie of analysts, former Ministers, the Opposition and thinktanks like the Australian Strategic Policy Institute and the Institute for Public Affairs.
It seems an open and shut case.
While frameworks and rhetoric around sovereignty grow stronger, the reduction in domestic Defence industry funding, in real and tangible terms, risks undermining Australia’s sovereignty and security.
Australia is investing heavily in future oriented platforms like nuclear submarines and long-range weapons, but much of that investment falls to the later 2020s and into the 2030s.
Meanwhile, small to medium enterprises that drive innovation, munitions production, sustainment, and other technologies are squeezed for short term support.
Genuine sovereign capability requires building robust supply chains, local manufacturing and munitions output, maintenance and upgrade facilities, and domestically developed autonomous systems.
This needs consistent funding and procurement policies aligned with a commitment to local content – including grant schemes, procurement quotas, and early-stage capital access.
Reform defence procurement in Australia and this will lead to an improvement in productivity and cut the waste in Defence spending.
Australia should increase Defence spending because the circumstances require it. We need to have the capabilities to defend ourselves. That should be the underlying determinant of the required Defence budget.
The importance of a self-sustained, sovereign Defence capability is especially evident when you consider the ongoing tensions in the South China Sea, plus the rise of global terrorism and the increasingly assertive military postures of other countries.
For Australia to safeguard its own interests we must have the capacity to produce, maintain and upgrade Defence systems without undue reliance on foreign nations.
This would give Australia greater autonomy in Defence Strategy and decision-making, ensuring its security interests are not compromised by external pressures or delays.
So, what’s the solution?
Well Australia has made progress in recent years, let’s grant government that.
The Defence Industry Development Strategy spells out areas where government believes Australian SME’s can be competitive.
The seven sovereign Defence Industrial Priorities include the:
- maintenance repair, overhaul and upgrade of ADF aircraft
- continuous naval shipbuilding and sustainment.
- sustainment and enhancement of the combined arms land system.
- Domestic manufacture of guided weapons, explosive ordinance and munitions.
- Development and integration of autonomous systems.
- Integration and enhancement of battlespace awareness and management systems.
- Test and evaluation, certification and systems assurance.
AIDN welcomes the commitment by Defence Industry Minister Pat Conroy to boost investment in local industry.
A case in point is Drone and Counter drone technology where the government is investing $10 billion over the decade.
Emerging sovereign drone innovators like DroneShield, SYPAQ Systems and Electro Optic Systems are also entering global markets, indicating growing technological maturity.
The Ukraine war and the change in character that war is bringing about through the use of drones has seen capable and innovative Australian SME’s flourish.
But there is more to be done.
As I said the first step towards the goal of a sovereign defence industry is ensuring Australia develops and maintains the capability to manufacture and maintain critical Defence equipment within its borders.
This includes not only combat platforms like submarines and armoured vehicles but also the technologies that support them, such as advanced radar systems, communications equipment and cyber-Defence capabilities.
A key enabler for achieving this vision is a strong public-private partnership.
Australia’s Defence industry is relatively small when compared to global powers like the United States or China.
However, Australia has a rich history of innovation and technical expertise in Defence and aerospace technologies.
By fostering collaboration between Defence manufacturers, universities, research institutions, and government agencies, Australia can develop homegrown expertise and enhance its technological capabilities.
Programs such as the Advanced Strategic Capabilities Accelerator (ASCA) are a good start, which was set up to ensure innovative technologies could be quickly translated into practical defence capabilities.
But further investment in these areas is necessary to ensure that Australia remains at the cutting edge of Defence technology.
Manufacturing is the backbone of resilience.
Advanced manufacturing and supply chain self-sufficiency are critical to reducing import dependency and fuelling national innovation.
A vital part of building a sustainable and sovereign Defence industry is ensuring that the workforce is skilled and equipped to meet future challenges.
The Defence sector requires a diverse range of highly skilled workers, including engineers, technicians, cybersecurity experts, and project managers.
Investment in education and training programs, particularly in STEM (science, technology, engineering, and mathematics) fields, is crucial to ensure the workforce is prepared for the demands of an advanced and modern Defence industry.
In addition to formal education, fostering a culture of innovation and problem-solving within the workforce will be key to driving continuous improvement in Defence technologies.
The Australian government must collaborate with educational institutions to create pathways for students to enter the Defence industry, while also supporting initiatives that promote lifelong learning and skill development within the existing workforce.
This approach will help create a talent pool that is not only capable of developing cutting-edge Defence technologies but is also prepared to deal with the complex and rapidly evolving security challenges facing Australia.
We all know that productivity is the new battleground or perhaps it’s more that it has slumped so badly in recent decades that we must do something active to lift it and restore Australia’s formerly world leading position.
I was able to meet with Defence Industry Minister Pat Conroy ahead of the Treasurer’s Economic Reform Productivity Roundtable, along with other industry groups to put a series of suggested reforms on the table.
Productivity leading reform in Defence will involve smarter processes, more efficient procurement and greater upskilling for the workforce.
These elements are essential if we are to make Australia globally competitive.
Let’s for example have a look at just one aspect of productivity, the impact of artificial intelligence.
Artificial intelligence enhances operational efficiency, improves decision-making and enables advanced military capabilities.
It almost goes without saying that AI advances in logistics and supply chain alone will lead to improvements in efficiency and productivity that will drive the Defence dollar further and lead to less waste.
With training and simulation AI enhances military training programs by creating realistic simulations based on user behaviour and preparing personnel for unpredictable battlefield conditions.
These are just some of the applications of the new frontier.
Productivity gains are one element, but a strong, sovereign Defence industry also offers numerous economic and strategic benefits.
For one, it creates jobs and stimulates local economies, particularly in regional areas where manufacturing and Defence related industries can serve as important economic pillars.
By investing in local industries, Australia can reduce its reliance on imports, which can save the government and taxpayers money over time.
Furthermore, a thriving Defence industry can drive innovation in other sectors, such as manufacturing, IT, and cybersecurity, thereby strengthening Australia’s overall economy.
From a strategic perspective, building a robust Defence industry would enhance Australia’s global influence.
By producing advanced military technology and systems, Australia could become a leading exporter of Defence products to other nations, particularly in the Indo-Pacific region, where there is an increasing demand for military equipment.
One only has to look to Sweden to see how a smaller country can develop an indigenous export defence industry.
Defence exports would not only generate revenue but also strengthen Australia’s diplomatic ties with its regional allies, cementing its role as a key player in regional security.
So, there’s the vision of what we can achieve as a Defence enterprise if we are committed to it.
So, what are the opportunities for improvement?
For most SME’s there are simply too many barriers to entry to do business with Defence.
AIDN does not want to detract from the hardworking people in CASG, Defence or in the ADF who work towards standards of excellence.
But they are hamstrung by Defence policies and processes that belong to a bygone era.
We need a Defence enterprise that it is agile and can pivot to provide whatever capabilities are required.
But we are falling way short of that goal at the moment.
Some SME’s offer their wares to overseas allies first, because it is often easier than doing business with Defence in Australia.
The attitude by Australian Defence seems to be a “go and prove your product overseas and then we can talk’’ type of mentality.
But Defence exporting faces its own challenges with many permits required, and they can take too long to attain.
There are also many challenges in the domestic procurement process itself, which sees bids and contracts taking too long to approve, by which time many firms opt to give up or leave the Defence sector altogether.
In some cases, slow decision-making means defence businesses are forced to sell or close down.
Contracting templates are simply too complicated, particularly if you are an SME supplying a simple item to the ADF.
As CEO I spend a lot of time talking to the AIDN members and I can tell you many of these concerns are raised with me time and time again.
And I am not arguing here that we can relax our guard on Defence security or cyber security standards to accommodate SME’s.
Cyber security particularly is essential for the modern Defence business, but we can improve process.
AIDN acknowledges reforms to the ASDEFCON suite of contracts are underway but still more reform is needed.
You read about delays and cost over-runs with major projects in the media all the time.
But there is a fundamental underlying procurement challenge here…Defence needs to take on more of the risk in procurement.
Until it does, I fear we will not get to the promised land of increased productivity and driving the Defence dollar further.
And this is something we need to do. We need to restore public confidence that the Defence enterprise can produce its weaponry on time and on budget.
Industry will play its part.
We need to get the message out that this is happening, because it does…but sadly, the bad projects attract all the attention while those that are travelling well seem to be unworthy of attention.
That is a paradigm that needs to change.
So, what would make for a better operating environment which would make the SME sector expand and flourish and build Australia’s resilience and self-reliance?
I want to emphasise that genuine sovereign capability requires building robust supply chains, local manufacturing and munitions output, maintenance and upgrade facilities, and drone systems all developed domestically.
We need to elevate Australian SMEs in the Defence industrial ecosystem, not just as subcontractors but as full agents of sovereign capability.
AIDN’s advocacy emphasises that only through a stronger, connected, and well-funded network of SMEs, can Australia deliver on its vision amid one of its most precarious strategic landscapes since WWII.
To deliver real sovereign capability – not just declared goals – Australia must move beyond words to sustained investment at scale, embracing AIDN’s vision for a networked, capable, resilient domestic Defence industry.
To spell these elements out in more detail: The first requirement is to mandate a minimum percentage of Defence procurement contracts for Australian SME’s.
This would be separate from the current Australian Industry Capability Plans that the Primes or overseas based defence companies have to fulfil in involving SME’s in their projects.
This would ensure genuine sovereign participation.
We need to ensure there is a greater release of open tenders to expand direct access opportunities for Australian SME’s across the Defence supply chain.
We need to secure binding commitments for Sovereign SME content in every Defence program with transparent reporting and accountability measures.
We need a revamp of the Defence Industry Development Strategy that is due in 2026, and that document should explicitly seek to prioritise SME led contributions to sovereign capability.
A government body should also be established to perform an annual independent audit of Australian Industry Capability Plan compliance and SME involvement, with publicly reported findings, to ensure accountability and measurable outcomes.
The Australian Industry Capability construct is intended to encourage primes to use Australian sub-contractors, but many factors undermine program effectiveness, which is why AIDN recommends enforceable mandates.
Let’s also have a look at the Global Supply Chain program which the government hails as a success.
More than $2.2 billion of work has benefitted almost 300 Australian suppliers over many years and that is to be applauded.
But commercial factors continue to constrain the nature of Australian businesses in supplying commodity and manufacturing type work.
AIDN believes Defence needs to use other mechanisms beyond the GSC scheme to gain export markets for Australian SME’s offering IP rich technology or advanced manufacturing supplies.
To that end AIDN has been very active in this space, seeking to bring foreign governments and their overseas suppliers together to enhance the global supply chain for all countries concerned.
For example, AIDN engages directly with UK, US, Defence and Teaming Agreement stakeholders to generate SME opportunities in the AUKUS program.
AIDN is also involved in negotiation MOU’s and strategic agreements with international customers to secure sustained, high value contracts for Australian SME’s.
AIDN’s advocacy has increasingly extended beyond Australia’s borders. During the federal election campaign earlier this year, I was in the United States, building international relationships, to position AIDN as the lead industry body supporting AUKUS Pillars 1 and 2.
Back home these efforts include engagement with key partners such as Babcock (UK), Huntington Ingalls (US and Australia), and several Australian state governments, including Tasmania, the Northern Territory, and South Australia, as well as regional defence bodies like DTC and Hunter Net.
To sum up a strong industry means a strong nation.
A sovereign, innovative, and productive Defence industry not only safeguards national security but drives economic growth and creates high value jobs.
Let’s briefly look at AUKUS, given the Indo-Pac trade show is a few weeks away and it will be a topic on everyone’s lips.
AIDN embraces the tri-lateral partnership which forms a foundation for Australia’s security including the effort to acquire Virginia class submarines from the US and then the build of the fleet of SSN AUKUS nuclear powered submarines in Adelaide.
For example, many AIDN members have entered technical assessment and validation processes being run by H&B out of Perth to ensure Australian companies get a shot at submarine supply chains in all three countries.
But there is one aspect which consistently raises the ire of SME’s.
While they struggle with limited funding at home, they view the large sums of money being provided to prop up US submarine production and the production of the nuclear submarine reactors in the UK somewhat dimly.
They understand the rationale but don’t understand why Australian industry and SME’s don’t come first.
I mean if Government can afford to spend almost A$10 billion on US and UK industry then surely it can find the dollars to adequately fund Australian defence industry and the capabilities defence needs.
This is felt acutely by the Australian owned and operated SME sector, who sees spending cuts to domestic maintenance budgets and non-AUKUS programs.
With AUKUS Pillar Two, there has been frustration among SME’s with accessing the opportunities available. AIDN thanks our fellow industry lobbying group AI Group for their very comprehensive report on AUKUS Pillar 2 which found it was “drifting’’ recommending it be refocussed on a lesser number of more effective capabilities.
So, we hope to see improvement in AUKUS Pillar 2 and the opportunities flowing to Australian SME’s and note that is still very much a work in progress.
Perhaps one other element I should mention is the need for an industrialisation strategy which ensures there are sufficient skilled workers.
The AUKUS effort alone will require the creation of 20,000 Australian jobs over thirty years and this is not to mention the thousands of other jobs required to fulfil ADF capabilities.
But that’s just a brief appraise of some SME concerns about AUKUS we now return to the larger picture.
At the risk of repetition there are many reasons why Australia must develop a strong indigenous sovereign Defence capability, and I have outlined many of them to you today.
Clearly there is an economic benefit to Australia and a return on investment for the taxpayer and we have discussed reforms that can drive that Defence dollar further than it goes today.
But the most compelling argument remains the need for national resilience and the ability to resupply and provide maintenance to the ADF.
In this increasingly volatile and dangerous world such elements must be considered strategic requirements.
Australian industry needs to be incorporated into the planning and execution of all Defence activities.
To do otherwise is to cede Australia’s sovereignty to others – reliable allies though they may be.
AIDN believes Australia’s sovereign defence priorities can only be achieved if the procurement framework within the Department of Defence undergoes a transformative shift.
That shift must guarantee genuinely local, Australian-owned small and medium-sized businesses are not merely benefitting, but truly thriving, by obtaining substantial work opportunities.
For Australia’s defence industry to be self-sufficient and highly capable, it is imperative to build a robust local supply chain that can support the defence force in the event Australia must rely solely on local resources.
It is crucial that the Department of Defence’s procurement framework is tailored to favour and support local small to medium-sized enterprises.
Australia is at a crossroads
Australia has a choice to make
We can continue down a path of dependency – hoping that global supply chains and alliances will always deliver what we need, when we need it. Or we can take control of our future.
Sovereignty by 2035 is not a slogan. It’s a national imperative. It means a stronger manufacturing base, smarter and more productive industry, and the ability to innovate at speed. It means creating jobs, driving economic growth, and building an industrial foundation that can withstand the uncertainties of tomorrow.
This is not just about defence — it’s about who we are as a nation.
Manufacturing strength is the backbone of resilience. Productivity is the engine of competitiveness. And a strong sovereign industry is the shield that protects our security and prosperity.
No one wants conflict. But prudence demands preparation. If we seize this moment, invest in our capabilities, and back our own people, then by 2035 Australia will not only be secure — it will be stronger, more confident, and a true leader in the region.
The race for sovereignty has already begun. The question is: will we finish it in time?
Thank you.
