The challenges ahead of Australia's defence industries

Australia's modernisation plans should create a boom time for domestic industry during the next decade and beyond. However, short-term delays and spending cuts point to a gloomy outlook for some local businesses. Jon Grevatt reports. Economic challenges and programme delays are threatening the future of an increasing number of Australian defence companies, putting at risk the country's capability to play a significant role in the planned modernisation of the Australian Defence Force (ADF) during the next decade and beyond. Jane's understands that at least 10 Australian defence-related small- and medium-sized enterprises (SMEs) operating in niche capability areas have been forced to either cease trading or withdraw services from the defence sector since the beginning of the year and more are expected to face difficulties in 2012. Nearly all companies that have decided to withdraw from the defence sector cited pressures related to Australia's falling defence expenditure, the strength in local currency and delays in the awarding of defence contracts. The latter in particular has often proved a decisive factor. Graham Priestnall, the national president of the Australian Industry & Defence Network, an organisation that represents Australian defence SMEs, told Jane's that if the situation is not addressed Australia's defence industry capability will be substantially depleted over time. He said the key factor influencing this gloomy forecast is delays in defence programmes. "The big issue is that there is not enough work coming through. That's the big problem," said Priestnall. "[If contraction of the industry base continues] we will lose key strategic capability in country. Companies will either collapse through cash flow issues or they'll move to other industry sectors and they won't come back. That's what'll happen."