US in pre-election warning on defence spending

US Treasury Secretary Scott Bessent has made it clear allies will be expected to increase defence spending ahead of a fiercely contested Australian election. The comments came as Labor Treasurer Jim Chalmers was visiting Washington to lobby the US against imposing tariffs on Australia. The Trump administration has threatened to impose tariffs of up to 25 per cent on Australia steel and aluminium from March. Secretary Bessent suggested countries who did not improve their trade imbalance with the US and increase spending on their collective security risked losing access to US security guarantees. The Albanese Government, following the release of the Defence Strategic Review pledged to increase defence spending to 2.3 percent of GDP by 2033-34 or an extra A$50.3 billion. Treasurer Chalmers said this week the Albanese government was already increasing defence spending, though he did not anticipate Australia would get to 3 per cent of GDP. Following the Bessent speech Opposition Leader Peter Dutton told the ABC that a Coalition government would increase defence spending, and he would have more to say about the “quantum in due course’’. Election speculation is still focussed on the Prime Minister calling the election in March (most likely just after the WA election) for an April 12 poll. An Australian Financial Review/Freshwater Strategy poll taken post the Reserve Bank rate cut, found the Coalition had extended its lead over Labor. The 52-48 result represents a 4.1 percent swing against the Albanese Government since the May 2022 election. The poll of 1038 voters was taken from 19-23 February. The poll found that on a uniform swing the Coalition would win government in its own right with 76 seats, but a more exhaustive electoral analysis found Labor would most likely win 70 seats and the Coalition 67, sparking a furious scramble for crossbench support and minority government.

Defence quizzed on plight of SME sector

The Defence Department has faced questioning over why it does so little direct contracting with Defence SME’s, and many quit the sector finding it too challenging. The questioning was led by Liberal-National MP Andrew Wallace before parliament’s Joint Standing Committee on Foreign Affairs, Defence and Trade. Capability and Sustainment Group Deputy Secretary, Chris Deeble who conceded some of the challenges faced by SME’s and said the department through the Defence Industry Development Strategy was attempting to lift the involvement of Australia’s sovereign defence industry including the SME sector. Mr Deeble said the first element involved improving defence knowledge of industry through a myriad of data collection agencies. He said another challenge was lifting the cyber and physical security systems of what were still mainly entry level SME’s and getting a better knowledge of Prime’s engagement of SME’s (given 70 per cent of defence work was subcontracted to SME’s via Primes). Mr Deeble said Defence was actively seeking the support of peak industry groups like AIDN to improve the situation for SME’s in the defence sector. AIDN has made a submission to the inquiry, calling for an overhaul of defence procurement and industry support for the SME sector.

ACT Senator questions Australian business definition

Independent ACT Senator David Pocock has raised concerns Defence allows multinationals to compete for defence work on the same basis as sovereign Australian SME’s. Senator Pocock told a Senate Defence Estimates Committee on Wednesday that defining Australian businesses on the basis of whether they had an ABN allowed foreign businesses to pass off their subsidiaries as Australian. But Capability and Sustainment Group (CASG) Head and Deputy Secretary Chris Deeble said the situation was complex and Defence was undertaking reforms to do more direct contracting with SME’s. Mr Deeble said the definition of an Australian business reflected the current broad canvas of defence industry in Australia. He said the definition also involved having a capability resident in Australia, representing Primes, Mid-Tier businesses and SME’s.

China tensions worsen

Tensions between Australia and China have worsened with a Chinese naval battle group lingering in the Tasman Sea between Australia and New Zealand for days. Deputy Prime Minister Richard Marles accused China of giving Australia insufficient notice of a live fire exercise after Qantas and Virgin aircraft travelling between Australia and New Zealand had to be diverted around the zone. China responded that Australia had overreacted, and its exercises were in line with international law. The new scrap came after Australia protested what it termed “unsafe and unprofessional actions’’ by a PLA Air Force J-16 fighter which dropped flares close to a RAAF Poseidon P-8A reconnaissance aircraft. Beijing accused Australia of violating its airspace, but Australia rejected Beijing’s accusations insisting its actions were fully in line with international law.

ASCA supports SME sector

A body set up to ensure more rapid development and delivery of equipment to the war fighter maintains the bulk of its contracts over the first 18 months have involved the SME sector. First Assistant Secretary, Advanced Strategic Capabilities Accelerator (ASCA), Professor Emily Hilder was speaking to a parliamentary inquiry into the 2023-24 Defence Annual Report. Professor Hilder said in its first 18 months of operation the accelerator had executed contracts worth over $232 million. Professor Hilder said so far 67 organisations had received funding from ASCA. Fifty-three of those were from industry and only three of those were Prime contractors. She said the majority of the funding was going to SME’s and start-ups because that was where ASCA was seeing the greatest innovation. Professor Hilder said it was important for ASCA to support the SME sector. ASCA was established in July 2023. The Albanese Government moved earlier in February to shake-up ASCA in a bid to ensure the more rapid development and delivery of equipment for the war fighter. The government announced it had appointed Brigadier Hugh Meggitt as the next head of the organisation. Defence Industry and Capability Delivery Minister Pat Conroy, said ASCA would also transition into the Vice Chief of the Defence Force Group led by Air Marshal Robert Chipman, ensuring investments were directly informed by operational needs and delivering an integrated, focused force as required under the National Defence Strategy.