Australia's defence industry and the rise of Asia | KPMG | AU

Australia's defence industry and the rise of Asia

Australia's defence industry and the rise of Asia

The lingua franca of Australia's defence industry has been the language of Lockheed Martin, Boeing, BAE Systems, Northrop Grumman and Raytheon. UK or US English, with a hint of French and a smattering of Spanish. But in this Asian century, the lexicon is changing and we can now articulate what a truly Asian-Australian defence industry will look like.


Partner, Advisory

KPMG Australia


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Right now, we are seeing the locus of global geostrategic competition shift to Asia, driven by regional economic growth, China's rise and the USA's realignment to increase focus on these emerging markets.

Unprecedented gross domestic product growth has created a consumerist middle class in Asia, whose needs can only be satisfied through access to resources. Attempts to secure resources may see an increase in confrontations over territory and sovereignty with the increased potential for miscalculation. Disputes also have significant (and hard to predict) spin-off effects, such as the Japanese legislative changes that are relaxing the policies that previously constrained the nation's export of defence technology and materiel.

"Whether as competitors or partners, future interaction with major Asian military industrial players by Australian defence industry corporations is certain."

Mike Kalms
Lead Partner, Defence Industry

As the national budgets of Asian nations expand, our neighbours are also spending more on defence, with a preference for self-reliance through domestic production.

Mitsubishi, Kawasaki, Hyundai, Samsung and Daewoo are all household brands in Australia, familiar suppliers of white goods, electronic equipment and vehicles. What is less well known is that these companies are part of Asia’s robust defence industry and significant producers of submarines, destroyers, aircraft, tanks and artillery.

Recently we have seen contracts to provide vessels for the Royal Australian Navy spark the interest of Korean shipyards and an armoured vehicle program entice Singaporean interest. Moreover, there is much public chatter around the very real potential of Australia sourcing submarines from Japan. When Australia and several other Asian air forces take delivery of the F-35 Joint Strike Fighter in 2020, it is expected that all these fighter jets will be repaired and maintained from a common facilities within the region, including Australia.

A tooled-up Asian military industry will be increasingly vying for export and co-production opportunities in external markets, including that of Australia. Given the example of the automotive sector since the 1970s, this is likely to see the arrival of new defence industry suppliers with a reputation for delivering quality goods at a competitive price.

Whether as competitors or partners, future interaction with major Asian military industrial players by Australian defence industry corporations is certain. And why not? They appear to bring an in-built level of diversification missing from the overly defence-dependant primes that dominate. What is less clear is whether Australia's defence industry is ready to join the conversation and take full advantage of the opportunities offered by the Asian century.

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