Awarding a greater share of Australian defence procurement to Australian-owned and operated businesses could see billions added to the nation’s GDP and tens of thousands of jobs created, according to modelling from independent research firm DeltaPearl Partners.
Beyond GDP and job gains, the research shows leveraging local industry also keeps profits, valuable intellectual property, tax revenue, strategic control and decision-making in Australia.
Released last week, The Defence Dividend: Gains to Australia’s Economy Through Sovereign Defence Procurement report – commissioned by the Sovereign Australian Prime Alliance (SAPA) – is the first study of its kind, providing a Sovereign Dividend Scorecard for government procurement.
According to the data, shifting just five percent of defence spending away from imports and directing 10 percent of domestic spending from foreign-owned subsidiaries towards Australian primes could boost Australia’s GDP by $5.0 billion to $8.2 billion annually while generating between 25,569 and 43,205 full-time Australian jobs.
The modelling – which calculates the GDP uplift, job creation and national resilience benefits generated when government and defence contracts are prioritised towards Australian primes – was based on existing defence spending levels.
Craig Wilson, Lead Researcher and Managing Director at DeltaPearl Partners, said the findings highlight the powerful impact of government procurement choices.
“In undertaking the analysis, we modelled only modest changes, sought to identify any adverse implications and held everything else equal,” he said.
“The results show that on a budget-neutral basis, but with an improved set of procurement criteria, the Australian Government’s Defence procurement program, which makes up 56 percent of the value of total federal government procurement, can achieve expanded economic and sovereign outcomes – a Defence Dividend.
“This confirms what Australian industry has been saying for years, that who we award defence contracts to matters enormously for Australia’s long-term resilience.
“The economic behaviour of fully Australian primes versus foreign subsidiaries differs. Australian primes reinvest here, hire here and build capability here. Decisions about intellectual property, taxation, dividends and management between foreign and domestic primes vary greatly.
“When we strengthen sovereign industry, we strengthen the economy and national security.”
The report comes hot on the heels of updates to the Commonwealth Procurement Rules, while shining a light on concerns recently raised by Defence leaders and the Australian National Audit Office that current practices fail to maximise Australian industry participation or sovereign capability.
To address this, it offers five key recommendations for the Australian Government, including redefining ‘value for money’ to include sovereign capability, economic multipliers, supply chain resilience, innovation and long-term national benefit.
It also suggests adopting a quantitative Sovereign Dividend Scorecard, strengthening the definition of an ‘Australian business’, empowering procurement officers with clearer guidelines and practical decision-support tools, and adopting a whole-of-government approach.
“Our research shows even modest shifts in procurement settings will deliver billions in GDP uplift, thousands of skilled jobs and a stronger sovereign base,” added Wilson.
“This evidence provides a clear, defensible basis for refining procurement rules to deliver maximum national benefit without additional cost to the taxpayer.”
As reported by PASA last week, Minister for Defence Richard Marles recently announced a significant reform to the Department of Defence, which will see the formation of a new independent procurement agency to replace three existing groups.
Referred to as “the biggest shake-up in 50 years”, the reform is linked to record-breaking defence spending, with the Department of Defence struggling to fight widely reported cost blowouts and major project delays.
