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The Australian Government is manufacturing a new future for our nation. Manufacturing is critical to a modern Australian economy—a key part of almost every supply chain that adds significant value to all sectors. The Modern Manufacturing Strategy (MMS) is led by industry, for industry, to help our manufacturers scale-up, become more competitive and build more resilient supply chains. The Australian Government will be a strategic investor in this, notably through the 6 national manufacturing priority sectors, in order to drive productivity and create jobs for Australians, both now and for generations to come.

On 1 October 2020, the Australian Government announced a $1.5 billion investment in the MMS to help Australian manufacturers be more competitive, resilient and build scale in the global market. The 6 key areas are:

Through the MMS, the Government wants to support projects from industry that will transform manufacturing in Australia. The Defence National Manufacturing Priority road map will help inform investment decisions that both Government and industry make over the next 10 years to support projects that will:

  • harness and grow the sector’s strategic strengths and advantages
  • provide innovative solutions to overcome constraints that limit value creation and that may prevent the sector achieving its full potential
  • transform the defence manufacturing sector by facilitating the growth of a capable and sustainable industry. [1]

The MMS outlines the whole-of-government agenda to help grow Australian manufacturing and ensure our manufacturers can harness global opportunities and achieve scale. It is built on 4 pillars.

Focusing on areas of advantage

The third pillar of the Strategy is to set National Manufacturing Priorities, develop road maps for action, and support projects through the Modern Manufacturing Initiative (MMI) which support the transformation of manufacturing in these sectors.

Road maps have been developed with industry to set out plans for both industry and Government to strengthen Australia’s manufacturing capability. The road maps have been led by industry taskforces to identify and set a future vision for the priority areas with clear goals, opportunities and actions over the next 2, 5 and 10 years.

The road maps are designed to be dynamic. As the MMS is implemented, we will continue to work with industry to ensure the road map evolves over its life. This will take account of emerging opportunities and actions to support the sector to scale-up, become increasingly competitive and for businesses to integrate their commercial solutions with global supply chains and markets. See Road map in context for more details on the road map process.

The MMI aims to support manufacturers to more quickly bring their products to market and invest to scale their manufacturing operations in Australia and it complements other government programs to support the development of a strong and internationally competitive defence manufacturing sector.

Other pillars of the Strategy

The MMS includes 3 other pillars which will also be important to focusing Government investments to support the competitiveness and scale of Australian manufacturing.

Getting the economic conditions right (pillar 1)

The Australian Government is getting the economic conditions right for manufacturers, paving the way for growth and improved competitiveness in all sectors. Manufacturers need a pipeline of skilled workers as they transform and scale. The Government is investing $7 billion this financial year to keep apprentices in jobs, to help jobseekers re-skill and to promote vocational training. Reforms to higher education will boost the number of graduates in areas of employment growth, including in STEM. These policies are creating the jobs of the future and a pipeline of skilled workers to support new and emerging industries, including in manufacturing.

A gas-fired recovery will ensure Australian gas is working for businesses and manufacturers, with a 13-point plan and $49.8 million investment to unlock supply. This complements the Government’s initiatives to reduce electricity prices, boost liquid fuels security and invest in low emissions energy technology through Australia’s Technology Investment Roadmap.

The Government is harnessing opportunities from emerging technologies and building business digital capability, including growing Australian business’ cyber security resilience. Work to implement a Simplified Trade System will support Australia’s exporters and importers to invest and grow local jobs by making it easier for businesses to integrate into global supply chains.

Businesses are more likely to grow and attract investment when there are fewer barriers and they feel supported by a thriving business environment. That’s why the Government is committed to getting the economic conditions right and creating collaborative environments which encourage the domestic and international market to invest; and partner with business, research organisations and state and territory governments.

The Government is focused on making and sustaining jobs through the JobMaker scheme. Our temporary full expensing of eligible depreciable assets and temporary loss carry back refundable tax offset measures will unlock investment and expand the productive capacity of the nation.

Making science and technology work for industry (pillar 2)

Australia’s science, research and innovation capabilities are critical enablers of transformation in manufacturing. There is clearly an opportunity to find ways to improve the uptake of technology, processes and practices, and digital operations by manufacturers. These enablers support business competitiveness and will have positive spill-overs across our economy.

This work will focus our industry, science and technology investments, including through the work of the CSIRO, to support our National Manufacturing Priorities. This will help our manufacturers supercharge their operations and harness emerging opportunities.

It will also complement Government actions to harness opportunities from emerging technologies, build business digital capability and grow the cyber security resilience of Australian business.

Building national resilience for a stronger economy (pillar 4)

The Supply Chain Resilience Initiative will strengthen Australia’s ability to access critical necessities, part of positioning Australia to respond to future supply chain disruptions to make us stronger and more resilient. It will build on Government and industry efforts to rapidly address critical supply issues revealed during supply chain disruptions due to COVID-19.

Overview of the defence manufacturing road map

This road map outlines the manufacturing growth opportunities in the defence sector and how Government will work with industry to deliver long-term transformational outcomes for the Australian economy.

This road map aligns with, and complements, the Government’s existing strategic Defence and defence industry policy frameworks, leveraging existing programs to ensure a consolidated approach.

The actions articulated in the defence manufacturing road map can assist in building defence manufacturers’ capabilities so they can better supply and service the ADF and other markets. They complement existing defence industry policies and general business support programs, delivered by the Department of Defence and the  Department of Industry, Science, Energy and Resources including:

The 2020 Defence Strategic Update and 2020 Force Structure Plan outline the strategic challenges Australia faces, and the capabilities the Government will develop to meet those challenges. These key strategic documents outline the importance of increasing our sovereignty and self-reliance, something we cannot achieve without a robust, resilient and internationally competitive defence industrial base in Australia. The 2016 Defence Industry Policy Statement and 2018 Defence Industrial Capability Plan outline the Government’s steadfast commitment to growing this industrial base to achieve these greater levels of sovereignty; reaffirmed in the Defence Strategic Update and Force Structure Plan.

Manufacturing is crucial to delivering some of the Defence capabilities that will enable Australia to meet the challenges of the increasingly contested strategic environment. The Government has recognised the importance of these capabilities and announced $270 billion in funding for new and adjusted Defence capability to 2030, some of which will span manufacturing opportunities in Australia. This unprecedented level of investment represents opportunities for Australian manufacturing firms, and secure, long-term employment for Australian workers.

Defence manufacturing is underpinned by a range of high-end, leading-edge technologies and industrial capabilities. It is important to remember that defence manufacturing is part of the broader industrial base, and the capabilities and technologies that underpin defence manufacturing are in demand across other sectors. Growth in Australia’s defence manufacturing capabilities will have spill-over benefits for the broader economy and will lead to increased capability for other National Manufacturing Priorities, and vice versa. However, these opportunities need to be considered against competition across sectors for sought-after skills and industrial capabilities. This is particularly the case as Defence capability and broader technology evolves and adopts Industry 4.0 technologies.

Australia is not alone in announcing significant investments in Defence capabilities, and this road map highlights export opportunities for companies involved in manufacturing in the defence sector. This includes the ability for businesses to partner with global primes on major projects, such as the F-35 Joint Strike Fighter and Hunter Class (BAE Type 26) Frigate, both of which have been adopted by a number of nations worldwide. By embedding itself in these global supply chains, Australian industry is more likely to access longer-term work, and additional export opportunities.

This road map details our vision for the Defence National Manufacturing Priority, the actions we will take to achieve that vision, and how we will measure our success to ensure we are on track. The road map also details the unique characteristics of the defence manufacturing sector in Australia, including challenges and opportunities and how they can be addressed.

This road map represents an integral element of the Government’s Defence and industry policy agendas. Growing our manufacturing capabilities will be a crucial element for addressing supply chain issues highlighted during the COVID-19 pandemic and will increase our self-reliance and broader sovereignty.

Why defence manufacturing?

Defence manufacturing represents a key priority for the Government, as well as significant opportunities for Australian businesses. This includes:

  • manufacturing the components and capabilities required for Defence acquisition and sustainment projects
  • increasing our sovereignty and self-reliance
  • integrating into global supply chains where businesses can export those components to our strategic allies.

Increased defence manufacturing will also deliver significant benefits for the broader economy. This includes opportunities for innovation, and businesses to generate scale and productivity by adopting Industry 4.0 technologies and to meet international demand and opportunities.

Domestic manufacturing businesses are already actively involved in supporting Defence. There is a concerted effort to develop enduring Australian Industry Capability, particularly relating to the Sovereign Industrial Capability Priorities. The defence manufacturing sector must continue to evolve and build its capabilities to seize opportunities, meet increased demand, and manage the complexity of the acquisitions requirements.

In the context of individual businesses, capability generally refers to the ability of a business to develop and supply products or services. In a Defence context, it has a broader meaning, referring to the ability to achieve a desired effect in a specific operating environment.

Significant economic contributor

Australia’s defence industry is a significant economic contributor and has relatively high employment across each segment of the value chain. In Australia, it is a strongly growing sector because of increasing Government investment in Defence capability, creating substantial market opportunities. The Australian Government has committed $270 billion in new and adjusted Defence capability to 2030, and renewed its focus on ensuring that Australian industry can take advantage of the significant opportunities throughout the supply chain.

Defence industry is also a large employer of STEM professionals with an upwards growth trajectory in job numbers.[2] To deliver the Government’s $270 billion investment in Defence capabilities over the next decade and beyond, the demand for Australian workers with technical, science and technology skills within Australia’s defence industry will increase.

Preliminary analysis of the sector indicates that Australia’s defence industry is growing, with over 4,000 businesses collectively employing approximately 30,000 staff. An additional 11,000 Australian companies directly benefit from Defence investment, and when further downstream suppliers are included the benefits flow to approximately 70,000 workers in total.[3]

Pathway to growing global markets

Growth in Australian defence spending mirrors global trends. According to the Stockholm International Peace Research Institute, total global military expenditure rose to $1,917 billion in 2019. This represents an increase of 3.6% from 2018 and the largest annual growth in spending since 2010.[4] While defence expenditure globally was expected to further grow between 3% and 4% in 2020, the impact of the COVID-19 pandemic means that it is now expected to remain stable into 2021.[5] [6]

Building on our existing manufacturing strengths, these investments can provide Australian businesses with access to long-term strategic projects and some of the world’s most advanced global supply chains. They are also a signal to industry of the ongoing need to develop, commercialise and merchandise advanced technologies and for the application of agile business and production models.

The defence industry provides Australian companies with opportunities to enter global supply chains either themselves, or facilitated by primes (large multinational companies). The Australian Government has well established Australian Industry Capability requirements, whereby prime contractors wishing to compete for Defence tenders over certain thresholds are required to identify Australian suppliers. In instances where a project aligns with one or more of the Sovereign Industrial Capability Priorities, but where the capability does not exist in Australian industry, tenderers must demonstrate how they will transition this industrial capability to Australia.

The Defence Export Strategy sets out policies and initiatives to provide end-to-end support for defence industry to export; from building export readiness, to identifying export opportunities and ultimately realising export outcomes through to 2028. The Strategy is implemented through the Australian Defence Export Office.

Source of innovation

Defence is a significant player in the Australian publicly funded innovation environment. In 2019-20 the Defence Science & Technology Group Research and Development (R&D) activity accounted for 4.9% of the Australian Government’s investment in R&D ($469 million).[7] Defence Science and Technology Group (DST Group) is Australia's second largest Government-funded science organisation after the CSIRO, and employs approximately 2,300 staff with a presence in nearly every state and territory.[8]

The importance of science and technology in the future of the Australian Defence Force (ADF) was established in the 2016 Defence White Paper and reaffirmed in the 2020 Defence Strategic Update and Force Structure Plan. Defence, Australian defence industry and the Australian research community have a strong track record in collaborating on leading-edge innovations to bolster ADF capabilities as well as maintenance of those capabilities.

Building on this success, the Force Structure Plan outlines $3 billion of investment in science, technology, research and innovation.

More recently, More together: Defence Science and Technology Strategy 2030 introduced 8 large scale science and technology (S&T) missions, ‘STaR Shots’, to set the direction for strategic R&D.[9] They are:

  • Resilient multi-mission space
  • Information warfare
  • Agile command and control
  • Quantum assured position, navigation and timing (PNT)
  • Disruptive weapon effects
  • Operating in chemical, biological, radiological and nuclear (CBRN) environments
  • Battle-ready platforms
  • Remote undersea surveillance.

STaR Shots will be supported though additional investments including in modelling and simulation, prototyping and trials.

These strategic investments also represent significant R&D opportunities for establishing advanced manufacturing products and processes within Defence. For example, the ‘disruptive weapon effects’ priority is seeking to develop new, intelligent weapons, smart missiles and advanced warheads. The ‘remote undersea surveillance’ priority seeks to develop integrated sensor systems, and apply autonomous systems to underwater and marine operations.

The Next Generation Technologies Fund engages Australian industry, universities and research organisations to research emerging and future technologies with the potential to deliver new capabilities for Defence. It will invest in R&D in emerging and future technologies in 9 priority areas, including space capabilities, medical countermeasures and quantum technologies.

Besides anticipating and preparing for the future, Defence science and technology helps the ADF and broader Defence community to respond to current and emerging issues. For example, DST Group is part of Australia’s response to COVID-19, and together with an Australian manufacturing company, rapidly developed, prototyped and produced face shields for Australian medical personnel.[10]

This strong public investment in defence innovation and R&D represents a significant opportunity for establishing a strong, capable and sustainable manufacturing sector to support the defence industry.

Industry structure: understanding the current landscape

The Australian defence industry is unique, with specific challenges and opportunities. Its size, structure, composition and capacity is largely shaped by Government demand. The primary objective of the industry is to deliver and sustain Defence capability to advance Australia’s national interests, security and prosperity. Australian industry was formally recognised as a fundamental input to capability in the 2016 Defence Industry Policy Statement, which emphasises the importance of the defence-industry partnership.

Defence industries involve both specialised technical and cross-sector transferable capabilities. It is defined not by a skillset, capability or type of work, but by the end customer. Defence supply chains comprise a diverse number and types of businesses. For many of these businesses, Defence is not the primary customer and they may not identify as being part of the supply chain.

The Australian defence industry is currently made up of a large number of small businesses, relatively few medium-sized businesses, and a few primes. Australian industry representatives, including the Defence manufacturing road map taskforce have noted the ‘relatively low number’ of medium-sized defence businesses as an ongoing challenge for building sovereign defence industrial capability.

State and territory governments, as well as defence industry associations are also important parts of the broader defence industry ecosystem with jurisdiction-specific strategies to create a thriving local defence industry. Research organisations such as CSIRO and Australian universities conduct R&D that contributes to Defence capabilities.

Defence manufacturing is a subsector of the broader defence industry. For the purpose of this road map, the sector is defined as:

Companies or organisations that manufacture capabilities or supply related services to the ADF, defence industries or international clients and their supply chains.

The unique characteristics of Australia’s defence manufacturing sector are:

  • The Australian Government is the key end customer and investor into the sector and sets overarching strategic polices that inform the domestic demand.
  • A small number of large international companies known as primes lead in delivering the majority of contracts, subcontracting small and medium enterprises (SMEs).
  • Strict quality assurance frameworks and high security requirements.
  • Businesses need a proven capability to deliver.
  • Exports are subject to Australia’s export control legislation.

Areas of existing strength in Australian defence manufacturing

Australia has world-class capabilities in several defence manufacturing subsectors:

  • Armoured vehicles and components such as fiberglass, blast protection and rugged suspension.
  • Aircraft components such as sensors, vertical tails, cable/wiring production and ground support equipment
  • Naval vessels including patrol boats and high-speed vessels, their components and onboard systems
  • Special military equipment such as night vision goggle and combat protection products
  • Sustainment of gas turbines, jet engines and tank engines including componentry manufacture and replacement

Armoured vehicles

Based on the strong skills base from the local auto industry, Australia currently designs and manufactures several types of military vehicles, their bracketry and components, including for export, utilising capabilities to fabricate and weld specialised metal components to military standard. Australian suppliers are recognised for innovations such as high-speed welding technology and robotic welding that enable the use of ultra-hard steel plates in the vehicle construction.

Aircraft manufacturing and sustainment

Australia’s geographical isolation and sparse population were the initial drivers of the establishment of the aerospace sector, which has since built a strong international reputation. Defence is one of its main subsectors utilising capabilities in metal and composite component manufacture and assembly.

Naval shipbuilding

Similarly, shipbuilding has a long tradition in Australia. Australian marine equipment and accessory manufacturers are globally recognised for a diverse range of marine hardware, components and accessories, including winches, radars, buoyancy aids, autopilots and dock flotation systems.[11] This subsector has been significantly strengthened by the Government’s long‐term commitment to continuous build and sustainment of major warships and minor naval vessels in Australia.

Other sectors

Beyond the above broader subsectors, Australian defence manufacturers have capabilities in specific high-tech niche areas. These include specialist military equipment such as munitions and small arms which integrate traditional manufacturing with cutting-edge digital technologies, such as 3D printing, and utilise capabilities such as explosive ordnance and energetic materials manufacturing.

Government investment and policy settings

Unprecedented investment

The Australian Government has provided Defence with long-term funding certainty. The Defence budget has met its target of 2% of GDP. It will be de-coupled from GDP forecasts to avoid the need for adjusting Defence’s plans in response to future GDP fluctuations, and providing long term funding stability for both Defence and Defence industry. Defence is forecast to spend $270 billion over the coming decade on new and adjusted Defence capability.

The large increase in investment creates potential for a substantial increase in demand for Australian defence manufacturing. This could occur in:

  • acquisition: constructing new capability, such as land vehicles or maritime vessels
  • sustainment: maintaining, repairing, overhauling and upgrading existing equipment including the manufacture of spare/replacement components.

Historically, Australian Government has spent a larger portion of its sustainment locally in Australia, compared to acquisition.

The higher local spend on sustainment reflects that:

  • Australia has traditionally acquired mature and proven Defence capabilities
  • sustainment activity provides long-term opportunities for industry to support Defence capability in Australia in close partnership with operational units
  • the Government’s commitment to providing opportunities for Australian industry.

Participation in sustainment activities also enables effective management of operational requirements.

An example of a significant sustainment project is the Collins Class submarines ongoing support contract. A team of scientists and engineers are developing and implementing upgrades to the submarines to ensure their operational readiness. An example of how advanced manufacturing contributes to sustainment is the use of additive manufacturing for in-situ repairs of submarines.[12]

A schematic defence manufacturing value chain[13]

The diagram illustrates the defence manufacturing value chain and what is required for different steps in the process. From left to right, the diagram is broken down into market opportunity, design and development, production and through life support.

Market opportunity: Defence sets a demand of there is an export or cross-sector opportunity. Export controls may be applicable.

Design and development: Headings in the section, from left to right, R&D and then design/integrate. Activities underneath the headings are intellectual property and system level design. R&D and design/integration activities are not applicable for all defence projects.

Production: Headings in the section, from left to right, Manufacture product or component and assemble/integrate. Underneath the heading Manufacture product or component the following activities are listed:

  • Skills and workforce
  • Quality assurance
  • Operational security

Underneath the heading assemble/integrate, the following activities are listed:

  • Platform/systems integration
  • Test and evaluation
  • Supplier collaboration

Through life support: Headings in the section, from left to right, sustain, modify/upgrade and dispose. Operation of the defence project occurs during sustain and modify/upgrade.

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Focus on ADF capabilities

The Australian Government has identified its priorities for the defence industry through a set of foundational documents. They identify the critical capabilities for the ADF—not specific technologies or businesses—and communicate to the business community, including Australian manufacturers, the future demand for industry. This increase in transparency, clarity, and early engagement enables Australian defence industry to consider Defence’s capability requirements. They can then structure their business and undertakings to be in position for future procurement opportunities.

This road map complements Defence’s industry policy settings. These aim to develop a strong, sustainable and secure Australian defence industry to ensure Australia is able to act with greater independence in an increasingly contested strategic environment. There are a number of Defence and broader Government policies and programs relevant to the Defence National Manufacturing Priority.

Defence industry policies are supported by a number of programs that target the local innovation and commercialisation pipeline, and help to link Australian businesses to the Defence ecosystem. See Road map in context for further information on defence policies and programs.

Overview of defence industry policies[14]
  • Defence Capability Cycle: Ensures Australian industry contribute more directly, earli8er and throughout decision-making about Defence capability.
  • Australian Industry Capability Program: Frames and guides Australian industry participation in major projects.
  • Office of Defence Industry Support: Supports small and medium-sized businesses entering or working in the defence industry.
  • Defence Innovation Hub: Funds the development of innovative technologies with the potential to enhance Defence capabilities.
  • Next Generation Technology Fund: Focuses on research and investment related to leading-edge-technologies.
  • Australian Defence Export Office: Provides tailored assistance and targeted level support across all stages of a company’s export journey.
  • Defence Industry Security Program: Certifies Australian businesses in relation to Defence security requirements for consideration in Defence projects.
  • Defence Policy Industry Participation: Maximises opportunities for Australian and local industry involvement across Defence material and non-material procurement.
  • Sovereign Industrial Capability Priority Plans: Provides guidance to industry for corporate planning and investment related to Defence’s industrial capability priorities.
  • National Defence Industry Skills Office: Acts as the single point of contact for industry skilling and STEM-related engagement and leadership.

The MMS will build on these existing policies and initiatives with a focus on opportunities for defence manufacturing in priority areas which have been identified by Defence. These priority areas include Sovereign Industrial Capability Priorities; see Road map in context for details.

The MMS will assist Australian manufacturers to develop the capabilities required to take advantage of relevant defence market opportunities, domestically and globally. It will also help Australian manufacturing to achieve scale, especially as it delivers through projects related to Defence’s Sovereign Industrial Capability Priorities.

Barriers to scale

The specific characteristics and sensitivities of Australia’s defence industry place particular demands and specific requirements on manufacturers. Consultations with the taskforce and other industry and Government stakeholders as part of the road map development identified some of the following barriers to achieving competitiveness and scale in the defence manufacturing sector:

  • It is challenging for non-defence and small businesses to enter the defence manufacturing sector, access supply chains, and navigate the broader defence industry.
    • Many initiatives helping businesses to enter the defence industry are delivered and coordinated through the Office of Defence Industry Support. This road map also notes that work is required across all levels of governments to help businesses to navigate the defence environment.
  • Defence procurement is cyclical and may be low volume and drawn out at times. This can make future planning and forecasting for manufacturing businesses uncertain.
    • Diversifying into exports or cross-sectoral markets can provide business continuity. These aspects are discussed further in this road map.
  • Breaking into exports is a challenge for Australian businesses, especially for those who have not provided services or products to the ADF. Many countries support their own industries via offset requirements, and exports of sensitive technology may be subject to export controls.[15]
    • The Department of Defence and Austrade assist aspiring and active defence exporters to access overseas markets, and navigate the relevant regulations.
  • The ADF has high quality and technology maturity expectations for delivery of Defence capability. The products for Defence often require adherence to specific standards which are hard, especially for small businesses, to implement (for example, accreditations requirements, such as quality management system ISO 9001).[16]
  • High security requirements for Defence projects can include physical security of people, information and assets. Cyber security particularly is a challenging issue for businesses in the defence industry supply chain, with an increased risk of cyber attacks due to the sensitivity of their projects.
    • The Defence Industry Security Office manages programs that support businesses to meet their security obligations for defence projects, including cyber security. This road map provides opportunities for businesses to address related infrastructure barriers.
  • Improving R&D and commercialisation activities to be more targeted to achieve greater scale.
  • Commercialising specialised defence products and technologies is resource intensive, with opportunities to better align R&D funding to support new initiatives.
  • The sector is predominantly made up of small firms that may not have the necessary resources to invest in commercialising their ideas or upgrade their facilities or processes. Growing the number of Australian larger, medium-sized defence manufacturing businesses is a key objective for this road map.

Additional barriers to scale for defence manufacturing are discussed in Road map in context.

Challenges for defence exports

Breaking into exports is a challenge for Australian businesses, especially for those who have not provided services or products for the ADF before, since overseas buyers often want to acquire tested products that are already used by military. The Government acknowledges this and has established the Defence Export Strategy to help businesses access potential international defence markets.[17] Many countries also implement offset programs that mandate local content when awarding large contracts.

In addition, those intending to participate in defence-related manufacturing need to comply with Australian and foreign export controls. Australia’s export control laws are in place to enable responsible export, supply, publication and brokering of military and cross-sector goods and technologies. A permit is required for the export of controlled military and dual-use items and technology. Exporters also need to take into consideration conditions attached to any foreign technology they have access to. Equipment, data or services procured from another country, such as the United States, may be subject to specific access, re-export and retransfer obligations.

The Government recently strengthened its foreign investment framework through reforms to the Foreign Acquisitions and Takeovers Act 1975. These reforms introduced or amended measures to assess foreign investment proposals into sensitive national security businesses, particularly those that provided goods and services to Defence. Businesses in, or seeking to enter, the defence industry need to consider these reforms where foreign investment is sought or proposals are received.

To help businesses navigate the export regulations and foreign markets, the Defence Export Controls and Austrade provide relevant information. The Defence Export Controls within Defence is Australia’s military and dual-use goods and technology export regulator and raises awareness about export control law and its applications.[18] Austrade and the Australian Defence Exports Office within the Department of Defence assist businesses by identifying partners for Australian businesses, identifying customers, providing support for in-country visits, and helping businesses establish an overseas presence.


This road map seeks to address defence manufacturers’ challenges by highlighting opportunities for Australian manufacturers to build scale and capability. It outlines actions to support businesses to collaborate and commercialise and enhance their ability to integrate into domestic and global supply chains.

Rather than identifying specific subsectors for growth, this road map identifies opportunities for defence manufacturers in 3 key areas:

  • Defence: Leveraging Defence investments and long term commitments to integrate emerging technologies and scale manufacturing.
  • International: Expanding capabilities to service new and existing export markets with strategic partners.
  • Cross-sector applications: Diversifying to cross-sector applications—both spin-off and spin-in.

These opportunities also create the conditions for small businesses to scale, and in particular, to grow the medium-sized defence businesses that will bolster the sector’s capabilities as a whole. Medium-sized businesses have a central role in defence supply chains and enable the sector as a whole to achieve scale, as they are in a position to:

  • more likely develop and/or own their intellectual property (IP) and scale
  • take some bigger subcontracts from the primes
  • engage directly with Defence
  • incorporate small businesses in their supply chains.

Funding available

The Modern Manufacturing Initiative is now open for defence manufacturing projects that meet eligibility under its Translation and Integration streams.


1 Note that ‘Defence manufacturing sector’ in this road map refers to an industry that manufacture capabilities or supply related services to the ADF, defence industries or international clients and their supply chains.

2 Defence Industry, The Workforce Behind the Defence Force, accessed 12 February 2021.

3 Department of Defence, 2020 Defence Strategic Update, July 2020, p. 46.

4 Stockholm International Peace Research Institute, Global military expenditure, 27 April 2020, accessed 11 February 2021.

5 Deloitte, 2020 Global aerospace and defence industry outlook, 2019.

6 Deloitte, 2021 aerospace and defence industry outlook, 2021.

7 Department of Industry, Science, Energy and Resources, 2019-2020, Science, Research and Innovation (SRI) Budget Tables, accessed 1 February 2021.

8 Department of Defence, Discover DST, accessed 22 December 2020.

9 Department of Defence, Defence Science and Technology Strategy 2030, 2020.

10 Australian Defence Business Review, Feature: STaR SHOTS, July 12, 2020, accessed 24 February 2021.

11 Austrade, Australian industry capabilities, accessed 4 March 2021.

12 ASC News: ASC and partners to pioneer additive manufacturing for submarines, 1 June 2020, accessed 1 March 2021.

13 Adapted from the SICP Implementation Plan / Land combat and protected vehicles and technology upgrades, p.24.

14 Department of Defence, Review of the Centre for Defence Industry Capability, July 2020, p. 15 for diagram.

15 Offsets requirements are where a company may be required to reinvest a portion of the contracted amount into the purchasing country. Transparency International Defence & Security, Defence Offsets: Addressing the risks of corruption and raising transparency, April 2010, p.6.

16 See Protective Security Policy Framework, Defence Security Principles Framework and the Australian Government Security Manual.

17 Department of Defence, Defence Export Strategy, 2018.

18 Department of Defence, Defence Export Controls, accessed 9 March 2021.

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