ISSUE 182 : Jul/Aug - 2010 - Australian Defence Force Journal

fleet is massive, with sustainment costs over $4.8 billion in 2008-09. Reducing the numberof equipment types and/or capabilities maintained by the ADF has a number of advantages.It would reduce the ADF’s exposure to disruptions to the supply chain. It would provide asignificant cost saving and it would reduce the management overhead. The cost savings couldbe re-invested in the remaining capabilities to increase their resilience.Reducing the complexity of equipment would be the next logical step. Realistically, there islittle that can be done to reduce the complexity of in-service equipment. However, for futureequipment acquisitions, there are significant measures that could be taken. These includeincreased fuel efficiency, focusing research and development on reducing or eliminating therequirement for raw materials that are likely to be in short supply in the future, and selectingequipment that is simple, robust and easy to repair.Reducing the length of the supply chain would further reduce complexity. Australia is wellendowed with raw materials, energy (in particular coal and natural gas), and research anddevelopment facilities. However, much of Australia’s manufacturing has moved offshore asa result of globalisation and low cost labour. Higher oil prices, associated with the onset ofpeak oil have the potential to reverse this trend, effectively reducing the advantage of low costlabour in nations such as China. 32 CTC Consultant Group research suggests that businessesthat have supplies of product as close to market as possible and energy efficient transportmodes are likely to gain a competitive advantage. 33The ADF can actively encourage Australian manufacturers by enhancing the Australianindustry capability program. It should also accept that developing Australian industry maynot be the most cost effective solution but that it will have a longer-term payoff. Whilethe Government has identified Priority Industry Capabilities (PICs)—that is, industries thatprovide an essential strategic capability advantage by being resident within Australia—theseindustries only support some 6-8 per cent of the ADF’s capability acquisition and sustainmentexpenditure. 34 Expanding the PICs to cover a wider industrial base and actively working toincrease the capabilities of Australia’s manufacturing industry, including its skilled workforce,is a significant opportunity that could enhance not only the ADF’s resilience and its capabilitybut the broader Australian economy and Australia’s influence in the world.Australia currently imports around 80 per cent of its transport fuel requirements, either asrefined product or oil for refining. This percentage is likely to increase over time as domesticproduction continues to decline and will likely result in a trade deficit of around $27 billion by2015. 35 Australia imports most of its oil from Vietnam, Malaysia, Papua New Guinea, Indonesiaand the United Arab Emirates. The oil exports of the first four countries are declining, implyingthat Australia will have to source more of its oil from other regions such as West Africa andthe Middle East, lengthening the supply chain, introducing geo-political risk and increasingcompetition from other oil importing nations. 36 Fortunately, Australia has large reserves ofnatural gas, which provides a significant opportunity to reduce the dependence on importedoil and significantly shorten the supply chain (although it would require a substantial programto transition vehicles to natural gas).The actions described so far will all reduce the likelihood that the paradox of military technologywill result in a substantial reduction in capability. There are a number of actions that could also52