Tasmanian Government’s submission Senate inquiry into the future of Australia’s naval shipbuilding industry December 2014 0 Table of Contents 1 Introduction ....................................................................................................... 2 2 Defence and regional Australia ....................................................................... 2 3 Tasmania’s capability........................................................................................ 3 1 1 Introduction The Tasmanian Government welcomes the opportunity to contribute to the Senate Inquiry into the future of Australia’s naval shipbuilding industry. Tasmania has significant capability in terms of naval shipbuilding. With our skilled workforce, extensive marine and maritime industrial base and innovative capability, Tasmania is well-placed to have a greater role in delivering products and services to the Australian Defence Force. While the Tasmanian Government accepts that the imperative in terms of Defence procurement must necessarily be to deliver value for money and quality, the Tasmanian Government suggests that Defence procurement should be directed wherever possible towards creating economic outcomes and expanding capability in regional Australia. This would grow and diversify regional economies and improve security of supply for the Australian Defence Force. 2 Defence and regional Australia As noted in the Tasmanian Government’s submission to the Defence White Paper, the Tasmanian Government welcomes the Federal Government’s commitment to increase Defence spending over the next two decades to two per cent of Australia’s gross domestic product. The Defence Issues Paper acknowledges that the Australian Defence Force makes a significant contribution to the development of regional Australia and seeks to maximise Australian industry involvement where it provides value for money or is in the national interest to do so.1 The Tasmanian Government encourages increased direction of Defence procurement towards building capability and creating economic and social outcomes for regional Australia. It accepts that procurement must provide value for money and quality, but suggests that, wherever possible, greater efforts should be made towards developing regional supply chains. This would also enhance security of supply to the Australian Defence Force. One mechanism to facilitate supply chain development in regional areas would be levelling out Defence procurement demand. Reductions in Defence spending in 2012 compounded hardships to Tasmanian (and Australian) manufacturers from the high Australian dollar and low-cost import competition. Declines in the world market for fast ferries, and a decline in the global mining demand for new machinery, have created further challenges for the viability of some of Tasmania’s key manufacturers. Defence spending has the potential to offset many of these regional challenges. Regional economies, such as Tasmania’s, would benefit significantly if Defence spending was used to smooth out cyclical uncertainty and enable major manufacturers to plan for the long term, including building human capital and 1 Defence Issues Paper p27 2 retaining skilled engineers, tradesmen and scientists. Value-for-money considerations in procurement should take into account the value of skills and capacity developed and retained within Australia and particularly within regions. 3 Tasmania’s capability Manufacturing is Tasmania’s largest sector, contributing over sixteen percent of gross state product. The majority of the State’s elaborately transformed manufactures are for off-island sales or export and are already connected to global supply chains. This includes land machines (mining) and high speed light ships which meet best in class standards. History of shipbuilding Tasmania has a long history with boat and ship construction. As an island community, vessel building has long been undertaken in Tasmania. The first trading vessel recorded as being launched on the Derwent was the Henrietta Packett in 1812, a 40 tonne schooner. More regular vessel building began in the 1820s with the construction of 30 to 100 tonne vessels for the coastal trade. Four main centres of vessel building activity developed: at Launceston, at Hobart, on the Huon, and at the penal settlements, first Macquarie Harbour and later at Port Arthur. In 1826, a yard was established on the Tamar that produced, amongst others, the schooner Rebecca, built at Rosevears, in which John Batman landed at Melbourne in 1834. 1836 saw the beginning of an expansion in both the number and size of vessels being built. The colonial builders began to construct vessels large enough to take their place on the Australia-England route. Between 1838 and 1848, 107 vessels were built. During this time, Hobart was producing more ships than the remaining Australian colonies combined. However, the five years to 1853 were the height of ship building in Van Diemen’s Land with 118 vessels constructed at an average of 78 tonnes. Included was the largest ship built at that time in Australia, the 580 tonne Tasman. At that time, ship building costs were lower in Tasmania than on the mainland and the availability and excellence of the native timber allowed the industry to boom. During the second half of the 19th century, the advent of steel-hulled sailing vessels on the major international sailing routes saw the vessel building industry decline in Tasmania. During the early decades of the twentieth century, employment in vessel building in Tasmania averaged 65 persons. During the 1930s, this slipped to an average of 35 people, with most ships servicing the State constructed overseas. World War II saw the resurgence of vessel building in both the private shipyards and in the newly established government yard at Prince of Wales Bay. The government yard constructed wooden-hulled cargo vessels to 600 tonnes and at its peak employed more than 600 men. Private yards at Battery Point and on the Tamar built shallow-draft hospital vessels and harbour defence motor launches. After the surge of activity associated with the war effort, the vessel building industry again declined and stabilised at a level commensurate with servicing the local demand for fishing vessels and other craft. Sections of the industry retained this 3 inward looking focus; however, the Tasman Bridge disaster of 1975 saw a revival of the trans-Derwent ferry service and in the 1980s an emergence of companies successfully concentrating their activities on new innovative vessel designs. These pioneering developments culminated during the 1990s in the attainment of world leadership in the design and manufacture of a new generation of fast vehicular and passenger ferries. The emergence of world-competitive suppliers to the international fast ferry industry soon followed, supported by a supply chain built around the ship repair companies. In 1994, Incat Executive Chairman Robert Clifford was conducting sea trials with the new owners of the Condor II when she ran aground at high speed on Black Jack Rocks in Storm Bay, south of Hobart. The impact was so great that the aluminium hull was welded to the rocky outcrop by mechanical friction. It took three months to re-float the vessel in what is still seen today as one of the most difficult above water ship repair and retrieval operations in the world. Ship construction and ship repair could not have been more inextricably associated. The Condor II is still in active service in Saudi Arabia. It is anecdotally known around the world that this maritime disaster did more to promote the virtues of aluminium ship construction than any other event. In the early 1990s, the Tasmanian Government encouraged local builder John Fulsang to establish North West Bay Ships at Margate. North West Bay Ships built several trimaran and catamaran ferries for Asia, a $70 million trimaran superyacht and a number of Defence work boats and sea farm vessels. In 2007, North West Bay Ships sold the premises to Austal Ships of Western Australia. Austal operated the Margate yard for the next four years and built seven significant sub-50 metre ferries and police boats maintaining a crew of over 100 skilled tradesmen for that time. Following the global financial crisis, Austal consolidated and the yard closed in September 2010. In the last several years, Tasmania has hosted wharf side refits to significant vessels, such as the $8 million refit and additional deck for TT Line's Spirit of Tasmania lll (24 000 tonne), and the $4 million refit of the New Zealand inter-island ferry DEV Arahura (14 000 tonne). These were led by Taylor Brothers Slipway and Engineering. Since 2000, Incat Australia Pty Ltd has delivered four wave piercing catamarans for military service. HMAS Jervis Bay - 86 metres, theatre logistics vessel used by the Royal Australian Navy during the East Timor crisis. HSV-X1 Joint Venture - 96 metres, US Military high speed craft evaluation platform for various trials for different forces. TSV-1X Spearhead - 98 metres, Advanced Concept Technology Demonstrator for the US Department of Defence, US Army Theatre Support Vessel. HSV 2 Swift - 98 metres, Interim Mine Warfare Command and Support Ship for the US Navy. 4 With its joint venture partner, Bollinger USA, Incat has demonstrated to worldwide authorities the potential of the commercial fast ferry platform for military applications. In 2003, a 112 metre, stern-ramped wave piercing catamaran of the Evolution One12 type was developed and three of these have been