Peter Reith, Minister for Defence

A lawyer by profession, Peter Reith was elected to the Federal Parliament after a lengthy political apprenticeship in the Young Liberals and in local politics. He has been a prominent member of the House of Representatives since 1985.

He was elevated to the Coalition's Shadow ministry after only two years as a back-bencher and held several senior Shadow portfolios including Defence and Foreign Affairs. From 1990 to 1993 he was Deputy Leader of the Opposition and Shadow Treasurer.

When the Coalition won government in 1996, Peter Reith was appointed Minister for the sensitive and politically high-profile portfolios of Industrial Relations and Public Service, as well as Leader of the House of Representatives. In these portfolios he was the champion of core Liberal values regarding community, individual and workplace rights, responsibilities and obligations. In this pivotal role Reith steered through Parliament a new industrial relations policy, wide-ranging reform of the Federal Public Service and the "New Deal, Fair Deal" workplace agreements package.

In 1997 his responsibilities expanded to include maritime reform, ranging from the privatisation of the Australian National Line to waterfront reform; in the latter case a bruising political and industrial battle resulted in large-scale reform of waterfront workplace practices and a significant increase in the stevedoring industry's productivity.

The Coalition's second term of office, which began in 1998, saw Reith assume the Employment portfolio before, in January this year, succeeding John Moore as Minister for Defence with a mandate to continue the Coalition's program of defence reform and implement the measures announced in the White Paper last December.

Peter Reith spoke to ADM's Editor, Gregor Ferguson.
ADM: How is the implementation of the Defence White Paper going?

Reith: We are reasonably pleased with progress to date. We've got Air 87 under way, we've signed up on the AEW&C contract with Boeing, we've got the M-113 study under way and we've got our remuneration review under way. So progress is being made.

ADM: The White Paper and your recent discussion paper together suggest that a more regionally-focused defence policy requires greater emphasis on the Army than hitherto - what are the implications of this and what's the reasoning behind it?

Reith: The paper that I've put out attempts to answer some of those questions in a more considered and intellectually disciplined way. There is a long history in the [defence] debate in Australia about strategic policy and I've attempted in that paper to place some of those arguments in a contemporary context. If you go back in history it is fair to say that in various periods there was a heavy emphasis on naval and then air superiority in times of peace, but the practical demands of various conflicts have also required a land force capability.

It's wrong to see what I've said as a particular emphasis on land forces. Rather, there should be a balance between air, sea and land forces and it's that lack of balance which I'm keen to see addressed, and which is addressed in the White Paper.

What the White Paper does is allow us to correct the imbalance by providing additional resources. And that's why the White Paper is itself a rounded document because it sets out a strategic approach and them meets those strategic requirements with a capability enhancement.

ADM: The 10-year Defence Capability Plan is intended to be a work in progress - when do you expect it to come up for its first review?

Reith: Well, I don't expect it to be thrown out holus bolus, which is what Mr Beazley has got at the back of his mind. He's talking about acquiring another couple of submarines - he's talking about spending the entire capability enhancement [budget] for the Navy for a 10-year period. He's got as a possibility the ditching of entire force structure proposals in the White Paper. That's not an incremental change.

The ALP is now saying it can't make decisions about force structure until it's had the benefit of the views of the senior military people. But the government did seek, and by and large did take, the advice of our military advisers in putting the White Paper together. So to say they can't tell you about force structure until they've heard the views of the chiefs and others, until after the next election, is a pretty hollow excuse for not fully supporting the White Paper.

ADM: Is there a danger, do you think, that changes of government could from now on result in a complete review of defence policy? That wouldn't contribute to long-term stability in defence and security policy.

Reith: In terms of the essential elements of the defence of Australia, there's a lot of common ground. That's obviously determined by our geographical, physical and other attributes. There are certain elements which aren't going to be subject to change and which are sometimes referred to as a bipartisan approach. The argument that I'm making is that we've established a very detailed, comprehensive and forward-looking strategic analysis, specified the capabilities required and the dollars to make it happen. We relied upon our military advisers, who are the very same source of advice the ALP say they want when they come into government.

ADM: So you're calling on the opposition to endorse a White Paper that's already the product of impartial advice from the defence organisation.

Reith: Exactly! Now to answer your question - are they entitled to review policy if they are in office after the next election? Well of course, any government is entitled to review policy, but the ALP clearly has in mind some quite significant changes. It is pretty arrogant in saying they won't tell you about force structure until after the election. Whatever their view is they should be expressing that point of view now. Kim Beazley runs the policy, has been the defence minister and has quite strongly developed view about defence, so much so that he was telling people like the Adelaide Advertiser last year that there should be additional Collins-class submarines. I don't deny his right to have a point of view - I'm only saying he should defend his point of view and spell it out. The best thing that Steve Martin and Kim Beazley could do is write a 30-page reply to what I've put out in my discussion paper. That would be a very healthy thing for the public debate about strategic policy.

ADM: With Australia and the region facing the threat of a recession, can the Government still honour the defence budget pledges in the White Paper? Have you done any contingency planning in the light of recession fears and exchange rate fluctuations?

Reith: My answer to that is: We will implement the White Paper as we said we would. In a ten-year plan you'll have exchange rates going both ways. The Reserve Bank has seen a very significant improvement in the value of its overseas holdings - it cuts both ways.

ADM: Does the NSC's close involvement in the development of the White Paper necessarily mean an ongoing, day to day interest at Cabinet level in defence affairs?

Reith: There's no doubt the Howard government as a whole has a greater interest in and involvement in defence issues than any government in living memory. I think that's very good for Defence - it also improves accountability for Defence, which is a good idea. It also coincides with the strong public support for the defence effort, so it's been overwhelmingly a positive thing for Defence.

ADM: What changes, if any, do you expect in our relationship with the United States now that President Bush has his hands on the controls?

Reith: We expect a continuing strong relationship. I think we're certainly expecting a firm focus on Asian affairs from the Bush administration and given our overall strategic interest in the US involvement in the region that is positive.

ADM: The current tension between the US and China over the downed US spy plane has been resolved, but it highlights a dilemma for Australia: how do we balance our alliance obligations to our major source of defence technology and intelligence, the US, on the one hand, with our need to play an independent hand in pursuit of our own long-term regional interests on the other? Do you see a conflict between these?

Reith: Australia is an independent country; we make our own decisions in our own national interests, and we as a country do have a record of being able to maintain good relations with both our alliance partners and with China. I recently held top-level discussions with General Zhang of the Central Military Commission, the most senior uniformed officer in the PLA. Those strategic level talks were of great interest, continuing the links that I'd forged for the first time in China just a few weeks earlier, while I was in Beijing. The Chinese have strategic-level discussions with Russia, the US and Australia - and that's it. That demonstrates the value that China sees in discussions with Australia and it demonstrates the ability of Australia to be a valuable dialogue partner of the Chinese while maintaining an alliance with the US. So I don't see this as choosing one against the other - these are not mutually exclusive arrangements. Obviously, where there are issues to be resolved we want to encourage both sides to ensure that they know exactly where they stand to ensure there are no miscalculations.

ADM: Have changes to the governance of the Department had the effect you and your predecessor, Mr Moore, hoped?

Reith: I think the establishment of the DMO is well under way - that's a very big structural change. The appointment of the Chief Financial Officer was a good move, it's paying a dividend in the efficiency of the organisation as a whole. But I'm sure John Moore would agree with me that it's a work in progress.

ADM: Do you intend to revisit the 1998 Defence Industry Policy Statement? If so, which areas do you intend to address?

Reith: I'm not going to go back over it other than to say we do need to ask ourselves the question how it relates to the chapter on industry policy in the White Paper. I've put that question to the DIAC, I've put it to AIDN and I've put it to the department to give me what they think are the answers. So it's not so much a matter of going back over old ground - all the reports I've had say that the industry policy was well received at the time and is seen as a substantial document. I think the questions go really towards implementation and I think, given that we've got the White Paper out there, it's fair to ask what else if anything needs to be done to ensure that we meet the objectives we set for ourselves in our industry policy.

ADM: Is this something you'll be addressing explicitly in that case during the Defence procurement conference?

Reith: Subject to any developments, probably.

ADM: Defence, through its capital acquisition budget, has a significant impact on Australian R&D and on Australia's high-technology industry sectors, many of whose members are SMEs. Do you see a need to integrate defence industry policy with, for example, the Dept of Industry Science & Resource's wider national industry policy framework?

Reith: At the last DIAC meeting at the end of January DISR made a presentation on the innovation statement and there was interest generally within the defence industry to ensure a better understanding of, and therefore integration with, wider developments in industry policy. As in other areas it's one thing for the government to provide a lead and provide opportunities - in some of these areas it's really for industry to manage these opportunities itself.

ADM: Looking at one specific industry sector, when do you expect to announce the sale of the Australian Submarine Corporation?

Reith: In due course - obviously it's a matter under consideration. I don't really want to put a timeline on it. There are complexities in the managing of ASC. I'm more concerned to make sure we get it right.

ADM: The sale of ASC will trigger the rationalisation of the naval industry in this country - do you expect the government will play an activist role in this process in order to shape the outcomes it seeks?

Reith: Obviously governments, through their tender processes, allocate work - when we're selling a facility such as ASC that may have other effects. In the end it's still the case that we have, generally speaking, competitive tender processes and existing facilities and assets are managed by private companies. How they manage those resources and assets is essentially a matter for them.

ADM: Are you confident the Defence Materiel Organisation has learned the lessons of the Collins-class submarine project?

Reith: Reasonably. There has been a lot of constructive remedial and rectification work done on the Collins-class. We've had very good assistance from the US. We've put in place some processes which we think are better, learning some of the lessons from it, and the McIintosh Prescott report gave us some objective, independent views about managing this issue in the future. Cleaning up after Kim Beazley is a long and protracted process!

ADM: We're just starting the Wedgetail project; that does embody some of the lessons learned from the Collins-class submarines. Are you confident that we'll manage to avoid the pitfalls, both in this project and in the future, that we identified in the submarines?

Reith: We've put somebody in charge of the Wedgetails, we've
ADM: Are you confident Industry has learned these lessons?

Reith: As much as one can reasonably say - there's been a lot of discussion about some of these issues with industry.

ADM: Do you believe the current White Paper's more detailed guidance about the ADF's capability needs will translate into a smoother acquisition process overall?

Reith: I do, because I think it gives industry a much better
ADM: What feedback have you had on the defence contractor score cards you sent out earlier this month?

Reith: The matter was raised at DIAC and there was a reasonably positive response, but it's still early days.

ADM: Do you think they'll give you the leverage you need when dealing with, for example, a company which has a monopoly on an essential product, technology or service, where there's no competitive pressure, or an alternative source of supply?

Reith: I'd say this: the question opens up a very broad area for governments to grapple with in the future when it comes to buying expensive defence equipment. We're seeing a rationalisation in some key defence industry capability areas - ships and planes, for example. Even in the US, even though it's a big defence market, we're still seeing in some areas a lessening of competitive pressures. I think the challenge therefore for governments is to develop means of ensuring value for money in that less competitive environment, and so we'll hear a lot more about this concept of alliance contracting in the future.

As a committed free enterprise person I've been brought up with the idea that competition means value for money - which is still true. However, despite that we are going to face a less competitive environment for our acquisitions so what we've got to do is develop techniques to satisfy ourselves and the taxpayer that they're not being dudded by some monopolist or oligopolist.

So scorecards, as part of an overall strategy to deal with a less competitive market, are a very useful tool. I think we've got to insist on greater transparency in the inner workings of suppliers and other mechanisms to obtain accountability - these are not things you'd normally seek in a competitive market where there are lots of buyers and lots of sellers, because those matters all in the end get dealt with by the market. If you don't have much of a market then I think we are going to have to be imaginative in the future to deal with this issue.