Download a copy of the Defence Capability Plan 2009 (published July 2009) in Adobe PDF format.
The following charts provide an indication of expected Defence acquisition and sustainment expenditure flowing to Australian industry from the DMO over the period FY 2009-10 to FY 2012–13. These charts show both the sustainment expenditure along with the approved and unapproved capital expenditure. All expenditure estimates are in constant year dollars.
Projections are based on the existing approved capital projects and current sustainment activities, and then add estimates for the unapproved projects included in DCP 2009, and their associated net personnel and operating costs.
There are a number of charts presented and these in total provide a comprehensive picture of order of magnitude of the work that can be expected by Australian industry. The initial chart shows the overall work that is expected to flow to Australian industry across the Forward Estimates period. Then there is summary information for Australian industry that has been broken down into five broad industry sectors:
Proposals have been attributed to industry sectors based on the proportion of the estimated expenditure attributed to that sector. In particular, it should be noted that the major electronic systems elements of each capability are separated out from the platform element and included separately in the electronic systems sector. As such, the proposed expenditure outlined in the figures below for Aerospace, Maritime, and Vehicles and Land do not include the major electronic systems elements. For example, projects such as a new ship could have expenditure across three sectors – maritime (for the platform), electronic (for the command, control and communications system), and weapons and munitions (for missiles and guns).
Finally a projection is provided of the estimated direct local workforce required across the Defence industry sectors.
Figure 2 provides a graph of the total expected in-country work over the next four years. The graph shows slow growth in sustainment reflecting the expected efficiencies to be gained through the SMART sustainment initiatives. It also shows strong growth is expected in the overall acquisition expenditure in-country. The five year historical real growth trend for local industry was around 3.1 per cent per annum. The average growth projection is about 4 per cent per annum across the next four years.
Figure 2: Total In-Country Expenditure.
1. These charts show acquisition and sustainment of Defence equipment, and exclude ICT or facilities expenditures.
2. The in-country expenditure graph does not include the DMO service fee which is also spent locally. This adds around 8 per cent of total expenditure to the in-country totals. Over 60 per cent of expenditure is expected in-country.
Figure 3 shows that demand for acquisition work in the local aerospace sector is reducing. This is because the majority of air platforms are procured offshore. It is also apparent that there is slow growth in the need for sustainment capacity. This is because less reliable platforms are being retired from service and they are being replaced by more reliable modern platforms. The average annual growth in this sector is 0.1 per cent per annum across the next four years.
Figure 3: In-Country Expenditure within the Aerospace Sector.
Figure 4 shows there is considerable growth in new acquisition work. This is associated with the Air Warfare Destroyer and the Landing Helicopter Dock projects. The five year historical real growth trend for local industry in this sector was around 3.2 per cent per annum. The average growth projection is about 8.3 per cent per annum across the next four years.
Figure 4: In-Country Expenditure within the Maritime Sector.
Figure 5 shows there is some expected growth in expenditure due to the major projects LAND 121 (Overlander) and LAND 17 (Artillery Replacement). The five year historical real growth trend for local industry in this sector was around 3.5 per cent per annum. The average growth projection is about 2.5 per cent per annum across the next four years.
Figure 5: In-Country Expenditure within the Vehicles and Land Sector.
Figure 6 shows that the demand from Defence is not likely to cause additional growth in this sector. While this DCP contains weapons projects, the majority of these are expected to be sourced offshore. The majority of the local weapons and munitions expenditure is directed to sustainment. The average growth (decline) projection is about –1.7 per cent per annum across the next four years.
Figure 6: In-Country Expenditure within the Weapons and Munitions Sector.
The electronics sector is associated with most major projects and as such there is considerable project based expenditure for Australian industry. As can be seen in Figure 7, there is a significant rise in local industry demand. This is associated with major projects such as SEA 4000 and a plethora of projects delivering command, control, communications, networking and data management. The five year historical real growth trend for local industry in this sector was around 3.4 per cent per annum. The average growth projection is about 4.8 per cent per annum across the next four years.
Figure 7: In-Country Expenditure within the Electronics Sector.
Also included at Figure 8 is an Australian industry workforce projection chart based on the above Defence expenditure projections. The workforce projection includes both direct and indirect workforce requirements, but does not include DMO workforce numbers. The local industry workforce chart indicates a significant rise in expected workforce numbers over the next four years. The average annual workforce growth is estimated to be around 3.1 per cent per annum, after assuming about 1 per cent per annum productivity improvement.
Figure 8: Australian Industry Workforce Projections.
1. This chart shows a smoothed moving average of the predicted workforce growth, to take account of project uncertainties and the recruiting and training times for skilled workers to deliver project outcomes.
In summary, the previous industry implications graphs have shown strong growth in demand for local industry over the next four years. The substantial capability plans in the 2009 White Paper foreshadows continuing strong demand growth beyond FY 2012-13. Defence would recommend to international and local industry that they ensure that their companies are positioned to respond to significant demand growth in this period and beyond.