Comment & Analysis

Comment: Australia to support defence industry during Covid-19 crisis 

Australia's Ministry of Defence is committed to keeping the defence industry afloat, according to GlobalData.

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The Australian GDP is set to contract by 0.5% in 2020 as travel-exposed sectors such as higher education and tourism are severely affected, according to GlobalData. The Morrison government will follow stimulus measures similar to those taken by the Rudd government during the 2008 global financial crisis.

As things stand, two stimulus packages and A$90bn ($61.2bn) from the Reserve Bank add up to a total cash injection of A$189bn ($128.6bn), approximately 10% of the Australian economy. To combat rising unemployment, the government will also subsidise wages to the tune of A$130bn ($88.4bn). Injecting stimulus packages into the ailing economy is the Morrison government’s solution to mitigating the impacts of Covid-19, although the rate of success will largely depend on the duration of the pandemic.

In a joint media release on 27 March, the Australian Ministry of Defense outlined its commitment to keeping the defence industry afloat. Minister for Defence Linda Reynolds explained that the industry was a priority for Australia, stating that it formed “an important contribution to our economy, our security posture and our safety”.

Fast-track payments to defence contractors will act as immediate measures to offset some of the impact of Covid-19. More than A$500m ($340.1m) worth of payments will be accelerated up to two weeks ahead of the originally contracted payment terms for some suppliers, once their invoice is approved by the ministry. The authorities will also work to ensure prompt payments by strategic prime contractors to their sub-contractors along the defence supply chain.

Although stimulus measures address immediate pressures on the domestic defence industry, Covid-19 will also have lasting effects on Australia’s security environment. Regional security in the Indo-Pacific will shift to address a recovering China as the US may turn inwards to alleviate the impact of Covid-19 shock on its own economy and prioritise the upcoming November elections.

The US Government has delayed the deployment of approximately 2,500 marines, part of the Marine Rotational Force-Darwin 2020, to Katherine in the Northern Territory scheduled for April due to Covid-19 travel restrictions. US power projection in the Indo-Pacific will be affected as international contingencies stop operations due to the pandemic. An example is the docking of aircraft carrier USS Theodore Roosevelt, which carries out Freedom of Navigation operations in the South China Sea, in Guam.

Meanwhile, the Chinese military is already recovering from Covid-19 disruptions, and has carried out an anti-submarine joint exercise with Cambodia in March.

In response to these strategic shifts, Australian may take the initiative to establish deeper security relationships with other regional security partners, members of the Quadrilateral Security Dialogue such as India and Japan. India has begun a substantial restructuring of its service branches toward a more unified command system, which increases its effectiveness as a security partner. Interests between the remaining members will coincide in maintaining a regional security status-quo as China expands its influence in the region and the US reduces its presence while efforts to mitigate the domestic impacts of Covid-19 are ongoing.

Image: Australian Army Soldier conducts quarantine compliance at Port Botany, NSW as part of the Australian Government’s Covid-19 response. ©Commonwealth of Australia, Department of Defence