A new economic analysis of how Australia’s defence industry spending flows through the national economy has found significant benefits to Australian SMEs and a strong economic benefit from so-called Sovereign Industry Capabilities. Economic analysts AlphaBeta Advisers were given access to data on hundreds of thousands of payments by Thales Australia to its Australian suppliers over a three-year period.
The study showed that Thales spent A$1.3 billion with Australian suppliers between 2017 and 2019, with more than 60 percent going to Small and Medium sized enterprises (SMEs). The study said in 2019 Thales Australia spent A$522 million with 1,362 Australian firms and also showed Thales spending supported 1,765 direct jobs along the Australian supply chain in 2019.
AlphaBeta lead researcher Dr Andrew Charlton said greater understanding of the value and impact of defence spending in the Australian economy was critical as the government ramped up major acquisition programs under its Integrated Investment Programme (IIP).
“Prime defence contractors such as Thales are key to translating IIP spend into effective supply chain and investment programmes because they provide a link between the Department of Defence’s investment and the many other Australian businesses in the supply chain, many of which may not be defence specialists,” Charlton said.
Minister for Defence Industry Melissa Price said the government’s commitment to supporting small businesses in the defence supply chain was having a clear impact. “It has always been this government’s intention that the A$200 billion we’re investing in a record build-up of defence capability flows through to the thousands of small businesses that make up our defence industry,” Price said.
“This analysis by Thales demonstrates how our investments are creating local jobs, and also building the critical defence capability we need to deliver a capable, agile defence force. We’ve been upfront with the prime contractors about their obligations to partner with Australian businesses and Thales is leading by example.”
Thales Australia CEO Chris Jenkins said the data-driven approach demonstrated there was a triple-dividend for Australia from increasing spending on Australia’s advanced industrial capabilities. “First and foremost, Australia’s sovereign defence industry capabilities are vital to delivering a capability advantage to the Australian Defence Force. Secondly, these sovereign industry capabilities build Australia’s self-reliance and the capability of the broader Australian advanced manufacturing sector. Thirdly, as this data clearly shows, there is a substantial jobs and economic activity benefit from spending more of the defence dollar in Australia. It delivers thousands of jobs spread through hundreds of business across the nation.
“For more than 30 years we’ve been building a whole industrial ecosystem in Australia to support the ADF and exports, and it shows in this data in the broad range of industry sectors that are part of our Australian supply chain – from metal fabrication and engineering to professional and scientific services. This analysis provides strong evidence in support of the government’s policy of requiring high levels of Australian Industry Capability (AIC) in its acquisition and sustainment programmes. There is a strong correlation between Sovereign Industry Capability and the greatest benefit flowing to Australian suppliers. In our case, the areas where we deliver Sovereign Industry Capability – notably munitions and small arms, protected vehicles and maritime support – are where the greatest benefit accrues to our Australian supply chain.”
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