Royal Australian Navy Discussions and Updates

[wrs]

That basic laws of economics also apply to defense-shipbuilding and that australia should not go down the path of certain european nations that have made it an independent point to hammer out every bolt and screw and write "made at home" on each piece, regardless of cost.

"The current state of the RN has very little to do with the state of their yards and everything to do with the state of their economy"

UK is spending huge ressources on their millitary including navy, thing just is that they don't seem to get get much bang for the dollar. With the price tag on f,ex, a type 45+missiles one gets an idea why they constantly lack money. That certain UK shipbuilders (there is only one large owner left, Bae) build expensive ships should come as no surprise, since they have been unable to win more than a single large private/commercial order in international competion for the last 15 years.

Eventhough I don't have much knowledge I quess the state of the australien shipbuilding can be summed up in; around 75% of activity is defense related. Larger commercial projects are high-speed, but smaller, ferries, no large projects.
High profits.

Interesting point noted on recent SBS show. South Korea does not try to compete with China, however builds specialist ships requiring advanced technology.
Regarding wages, the show advised the avedrage wage for skilled workers topped $80,000 US

 

[t68]

With RFA/HMAS Largs Bay undergoing refit to Australian spec’s in the UK will they also be doing any of the changes that the UK are making to their own fleet.

£12m refit for RFA Mounts Bay at Falmouth (From Falmouth Packet)

Or do you think they will wait till the first LHD are in service before making grand changes. And is their any idea when the commissioning ceremony will take place and announce her new name.

 

[riksavage]

Todjaeger



Yes, but it's not given that it's best to have the work done at home.
Ofcourse, some things are best done locally of natural reasons.
Though fitting a radar to a ship is hardly a good reason for maintaining an entire shipbuilding industry at the expense of the tax payers, less could probably do it.

The thing about building warships is that yard industry is also a commercial activity. That presents us with a problem if we can't keep our yards commercially viable, because then we will have to pay the investments, running costs and the innovation that the commercially viable yards are getting through doing business - and the volumne is huge.
Look at the sad state of the RN for a glimpse of what it means to have a navy while insisting on building the ships on non-viable yards.

Western economies need to adapt, the UK ship building industry for one declined because they simply couldn't compete with the likes of Japan. Japan in turn lost market share to South Korea, and today South Korea is losing contracts to Chinese yards. Further down the line we might witness China losing contracts to Vietnam if the price is right and quality assurance guaranteed.

UK manufacturing is actually going through a period of renaissance focusing on advanced processes, which can't be duplicated that easily by emerging markets. Renewable energy, plastronics and photonics are among the hi-tech markets set to contribute to Britain's manufacturing resurgence (according to a recent report by HSBC). There is a reason why so many Formula 1 teams are based in the UK, they are leveraging off the UK's composites and engineering expertise, skills derived from the aviation industry and through leading engineering research centres such as Manchester University. And whilst the UK can't compare with the likes of Germany (no one can, not even China) for machine tool and vehicle manufacturing, companies like Rolls Royce (marine/aviation), Jaguar, Triumph and Aston Martin have increased sales exponentially in the last 2 years. BAE is the single largest foreign arms supplier to the US, they continue to grow through indigenous growth and buy-outs and surprisingly unlike the Australian debacle appear to be winning and successfully concluding US naval contracts (as do RR).

The 'sorry state' of the RN has more to do with Government u-turns than the likes of BAE, if they had stuck to the original batch of 12 T45's, unit costs would not have been so high.

 

[Todjaeger]

That's incorrect.

The information I had mentioned, where local ship building could be something like 30% more expensive than a foreign build and still be at an economic break even point, was from a study commissioned by the CoA IIRC, I will see if I can relocate one or more of these studies, since AFAIK other countries with domestic naval construction capabilities have commissioned similar studies. Which would then mean that you are wrong about the example I had provided previously.

This is very simplistic, but I trust you get the idea:
Imagine this scenario: You are an australien worker, you can either work on the yard or in export oriented australien "beef industry". Both things will earn you 100 paper money (pm).

The australien state can choose between having the ship builded in australia or in China - the price is the same; 100 pm.

We will deal with two situations:
Situation A: You work at the yard and the goverment builds at home.
The goverment gives the yard 100 pm that ends up as your wage.
At the end of the day the goverment has a ship plus they have managed to tax your 100 pm wage for, say, 50 pm.
In short the goverment needs to loan 50 pm to get the ship (100 - 50 pm).

Situation B You work in the beef business and the goverment builds in china.
You earn 100 pm by exporting beef to, say, Denmark.
At the end of the day your goverment has managed to tax those 100 pm for 50 pm.
The goverment hands the chineese 100 pm and gets a ship in return.
At the end of the day the goverment has to loan 50 pm for the ship (100 for the ship, minus the 50pm tax income of your activity of selling beef)

So there is no difference between situation A and B neither from the goverment point of view nor from your point of view.
Now, imagine that you are better at making beef than building ships, maybe you can earn 110 pm in the beef business but only 100 pm in the yard business further more imagine that the chineese are better at building ships than you, say, they will build your ship for 90 pm.
Then, clearly, you should make beef and the chineese should build ships, anything else would be stupid.

The above "comparative advantages" is the reason why it pays off to trade with other people. They make what they are good at and you make what you are good at, and both has an advantage of it. (it's also true that it pays to trade with a country that doesn't have any advantages over you)

There are a couple of realities which are being overlooked here. The first is that this is being treated as a commercial import/export transaction. It is not, nor should it be treated as such. The second is the (incorrect according to studies done) assumption that money 'spent' on a project is just gone, that none of it can/does come back to Government. The third is that economic factors are the only ones which matter in defence programmes.

Okay, now to illustrate the example provided went seriously off the rails.

First, ignore the entire 'beef' example, it has nothing to do with naval construction and ignores some differences between global trade and domestic production as well as the source of funding for global trade defence orders. If some nation wants goods/rawmats, it will either produce said items itself, or import them from whomever they can. What would decide whether or not China gets $100 mil. in 'beef' from Australia has to do with the quantity demand for beef in China, and the quantity and price for beef within China and various markets where beef is available.

Now, getting back to naval construction: domestic vs. foreign (and this does not just hold true for Australia), everything else being equal, it is better to build domestically than have a foreign build.

Using that same $100 mil. for naval construction, if a $100 mil. vessel was ordered from China for the RAN, once the RAN has spent that $100 mil. it is gone from Government coffers. China might want or need something from Australia, which means some of that $100 mil. might come back into Australia, but that is entirely up to what China wants to do with it. That same $100 mil. spent at an Australian yard is going to end up in the hands of yard workers in large quantities. Not all of it mind, since there are going to be normal business debts, investors, as well as whatever the yard might need to import from outside Australia. All the same, much of the money gets to yard workers, who then spend it in Australia. This means that the Australian Government will have revenue streams taxing the yard workers. Then when the yard workers spend money buying items like clothes, books, cars, houses, etc, the stores which make money and profits from selling to the yard workers get taxed by the Australian Government, and these same stores pay their employees. Now the store employees go out, take their pay and buy even more things and the same and/or different stores. Now there is even more profits being made within Australia from the economic activity and these profits are subject to taxation, as are any more flow-on economic activity withn Australia.

Any Australian money spent on a defence programme which is spent outside of Australia, is not subject to taxation like it would be if it was spent within Australia. Similarly, since money spent overseas is not ending up to some degree as pay for Australian workers, then Government cannot tax workers for money they earned while working on a defence programme. Plotting that out an additional degree of separation, those same 'workers' would not have money they earned from a defence programme to spend, and thus end up in the hands of non-defence related industries and workers, which means Government cannot tax non-defence workers on earnings they received while providing goods and services to defence workers.

Getting back to that hypothetical $100 mil. spent within Australia, using that figure of ~30% I have come across previously, that $100 mil. from the CoA leads toai $30 mil. in revenues to the CoA, which then works out to a net spend of only $70 mil, again assuming all other factors being equal. Or put another way, Australia could spend ~$130 mil. on a domestic build, resulting in a net domestic cost of $100 mil. or it could spend net $100 mil. for a foreign build.

Again, depending on the cost and nature of the items or ships in question, there are indeed times when it just makes much better sense to go out of Australia for a defence item, but that is not always the case.

Todjaeger...

Yes, but it's not given that it's best to have the work done at home.
Ofcourse, some things are best done locally of natural reasons.
Though fitting a radar to a ship is hardly a good reason for maintaining an entire shipbuilding industry at the expense of the tax payers, less could probably do it.

You seemed to have missed something I had mentioned previously, so I shall repeat it in bold here.

It is absolutely true that domestic build programmes are not a 'retain at all costs' type of measure, but they are also very clearly not something to be dropped lightly either, since the advantages of a foreign build are not always so important.

With respect to retaining, or scrapping, a domestic naval construction capability, the economic costs are an important factor, but it is NOT the only factor, and not necessarily even the most important factor.

The thing about building warships is that yard industry is also a commercial activity. That presents us with a problem if we can't keep our yards commercially viable, because then we will have to pay the investments, running costs and the innovation that the commercially viable yards are getting through doing business - and the volumne is huge.
Look at the sad state of the RN for a glimpse of what it means to have a navy while insisting on building the ships on non-viable yards.

Umm... No, building warships for domestic use is not a commercial activity, it is a defence activity. There is potential for commercial activity if export orders for warships are placed, and/or the facility has the capability for dual naval/civilian vessel construction and receives orders for commercial shipping. Actually what I have been suggesting is it might be worthwhile for a rationalization for Australian shipyards also include effort at obtaining commercial shipping orders, so that whatever Australian shipyard remains is not strictly dependant on orders from the RAN for work.

-Cheers

 

[John Newman]

With RFA/HMAS Largs Bay undergoing refit to Australian spec’s in the UK will they also be doing any of the changes that the UK are making to their own fleet.

£12m refit for RFA Mounts Bay at Falmouth (From Falmouth Packet)

Or do you think they will wait till the first LHD are in service before making grand changes. And is their any idea when the commissioning ceremony will take place and announce her new name.

One thing that is interesting in the article is:

Kevin Murray, group technical superintendent for the RFA Argus and Bay Class ships said: “This will see some fundamental changes to the ships design with standard funnels replacing the aft low level exhausts... .”

You would assume that that if the "aft low level exhausts" are replaced with what the article calls "standard funnels", they would be moved to another location, if they are left in the same location that they would become a hazard for the helicopter landing spot.

The Dutch and Spanish "part" sisters have their funnells on the main superstructure.

So possibly the RFA is having them moved to a similar location, sounds like a pretty major redesign exercise.

As far as modifications to Largs Bay, I think that apart from "Australian" specific items, the only work that will be done to her will be rectification and reconditioning.

Anything beyond that wont happen until a time well after the LHD's are in service and Largs is due for a major refit.

 

[spoz]

One thing that is interesting in the article is:

As far as modifications to Largs Bay, I think that apart from "Australian" specific items, the only work that will be done to her will be rectification and reconditioning.

Anything beyond that wont happen until a time well after the LHD's are in service and Largs is due for a major refit.

It would seem from the reporting of the recent SLC hearings she will receive the modification package that is planned for the ships remaining with the RFA - it will be interesting to see.

 

[wrs]

The information I had mentioned, where local ship building could be something like 30% more expensive than a foreign build and still be at an economic break even point, was from a study commissioned by the CoA IIRC, I will see if I can relocate one or more of these studies, since AFAIK other countries with domestic naval construction capabilities have commissioned similar studies. Which would then mean that you are wrong about the example I had provided previously.

Interesting take on this subject
http://www.dbi.vic.gov.au/__data/assets/pdf_file/0005/297527/Inquiry-into-Naval-Shipbuilding.pdf

 

[Todjaeger]

Interesting take on thissubject
http://www.dbi.vic.gov.au/__data/assets/pdf_file/0005/297527/Inquiry-into-Naval-Shipbuilding.pdf

I do not think that was the specific document I was thinking of, but reading through the numbers do tally. Page 21 mentioned estimates of $1.2 to $2 bil. generated in revenue to the Commonwealth because the $5.6 bil. ANZAC project was built in Australia, and that revenue would not have been generated had the frigates been built overseas.

Or in other words, from a strictly cost (not workforce skilling or other intangibles) perspective, unless the ANZAC programme would have cost less than $3.6 bil. overseas and been completed to the same level of quality, the net cost to Australia was lower by building within Australia.

-Cheers

 

[Abraham Gubler]

BAE is the single largest foreign arms supplier to the US

BAE Systems Inc. is not a foreign arms supplier to the USA. It is an American company based in America, staffed by Americans, managed by Americans with a long historical American pedigree. It just happens to be owned by a British based multinational company (BAE Systems). Calling it British is as silly as when some Britfools starting claiming that H&K products were British during the brief period when Royal Ordnance owned that company.

 

[gf0012-aust]

Western economies need to adapt, the UK ship building industry for one declined because they simply couldn't compete with the likes of Japan.

I don't think so.

There was a report done on the state of UK shipbuilding by US Dept of Commerce on behalf of of State Dept and the USN. This was a result of the RN and UK Govt calling in the USG via NAVSEA and BMP to try and fix build and quality issues. It was seen as a salient warning to Australia on what dangers we faced.

The classified version is scathing about UK shipbuilding and something which UK govt readily acknowledged

The PSP/PIP programs have been an unmitigated disaster and have served as a salient warning of accepting consultancy spin without deep diving with your own analysis.

everyone is moving away from UK models as fast as their feet can take them.

 

[Palnatoke]

@Todjaeger

I just posted a rather simplistical example that showed that it's not true that a goverment saves anything on diverting ressources to make a "home build". Economy doesn't work like that. It's a question of math. It's not something I have figured out, it's basic economics. That you certainly can find parties of interests that (exactly) has an interest in making things look different, does not surprise me.

It's sympthomatic that you refuse to consider the "Beef side of things" which represent the income that you loose by diverting production ressources (f.ex. workers) away from one industry to, say, yard industry, after all Australia has a good and efficient economy and a skilled guy employed in the yard business, would certainly also be able to get a job in another business (and if this other business is generating a higher revenue, there is a loss if he works in the yard business).

When you throw in the economical stimuli part of the equation it becomes a little bit more complicated. Because you are right that a given stimuli often will "accelerate" and create activity on it's own. But my rather simplistic example should also show you, that the Beef worker also represent an economical stimuli (he earns foreign capital from selling beef to danes). One can say that the stimuli created by the beef worker isn't so focused (some of the money will re-invested in beef industry, some into local buisnesses etc) while an investment by the goverment into a specfic product/sector is more focussed.
One thing all can agree upon is that it's not irrelevant whom or what you give a stimuli (you should stimulate the winners, not the loosers), but it's a political discussion who's best at choosing the winners; The free market or the politicians.

To bring this back on track;

Aim: We ("A circle of friends" ) need a defense industry (yards etc in this case) that can reliably produce our weapons&systems.

Problem A; most in the circle of friends have lost or are loosing their viable/commercially active medium-large scale shipbuilding industry.
There are however a few that have retained a significant viable shipbuilding capacity

Problem B:
A yard that's not operating on the commercial market (because it can't compete) but is only operating on the defense market - probably only the national defense market - can never, never, never, never, never stay as efficient as compared to a commercially active yard, since the former works on a huge market with huge investments while the first works on a tiny regulated market with little investments.

Premis: Let's leave the US out of this, it's a breed apart.

As I see this:

We can either choose to massage and give life surport via subsidies f.ex. in the shape of overprised defense projects to an ever decaying national yard industry and get less and less for more and more money as time goes by.

Or we can try to give the best possible conditions to the few surviving commercially viable yards that we do have left in "the circle of friends". That'll be a free and fair market in which those few yards can compete for lucrative defense contracts to bolster the competition against yards out side of "the circle of friends".
This will mean that many countries will loose whatever there is left of national "classical" shipbuilding (with the exception of repair yards and the like that depends on location) as it gets out-competed by the commercially viable ones.
The good thing will be cheaper ships that's not builded by potential enemies.

We should not try to make a USSR style planned economy for yard businesses: it will fail.
I am old enough to remember how we laughed at the "communists" when you had to litterally hunt for hours to get a tube of toothpaste in Moscow, or how the east germans signed up their infants so that they had a chance to be allowed to buy a very bad car 18 years out in the future.
It doesn't work.

 

[Palnatoke]

Western economies need to adapt, the UK ship building industry for one declined because they simply couldn't compete with the likes of Japan. Japan in turn lost market share to South Korea, and today South Korea is losing contracts to Chinese yards. Further down the line we might witness China losing contracts to Vietnam if the price is right and quality assurance guaranteed.

To a certain degree. I think the story of north european shipbuilding is more that: The UK had very destructive industrial policies, first they tried to protect their yards, when that failed they turned to subsidies and that didn't work either.
The scandinaviens had four important yards; B&W of Copenhagen, Lindø of Odense, Krockums(?-not sure, the one in Goteburg) of Sweden and a finish one.
(you might laugh of 20M scandinaviens and shipbuilding, but those yards were once world leaders). The swedes and danes forcussed on ever increasing their efficiency of producing.
The finish focussed on special ships, like the dutch did and both have viable yards to day.
The germans seized a special oppertunity during the reunification and stroke a deal with the EU that it was OK for germany to subsidize east-german yards - What happened was that west-german yards bought the east germans for peanuts and used the subsidy to make a foothold on the market for special ships, effectively ,by cheating, stopped Danish and swedish attempts to enter the same market (or that's how danes and swedes view that) leaving them to fend against the asians on the market for big ships, which was/is a loosing game (Lindø is the last, and is closing).
In the rest of europe: France have large yards that appear viable in special ships business. Itally and Spain got large yards, but goverment owned (so they are probably not viable).

The 'sorry state' of the RN has more to do with Government u-turns than the likes of BAE, if they had stuck to the original batch of 12 T45's, unit costs would not have been so high.

Agree that it's not BAE's fault. It's damaging industrial policies that is at fault.

 

[StingrayOZ]

I think things are even more complicated than this. Building ships within your boarders allows secondary suppliers the possibility of intergrating new technologies in builds something that would happen extremely rarely with builds from outside nations.

Fledgling industries might then get a break with allied partners. Auspar, Nulka, Bushmaster truck, Jorn, etc etc. Sometimes it pans out, sometimes it doesn't. Sometimes other synergies get up and going, sometimes its enough to keep talent local and keeping capable people inbetween projects. Its not just a profit and loss economic equation.

Many of these industries globally aren't playing on a dead level playing field. US can afford economies of scale and money to ensure global edge. UK can't quiet complete at that level but in certain areas is a major player and caters to a market that may not want to buy US, for what ever reason (maybe cutting a deal for more european input etc).

 

[Palnatoke]

I think things are even more complicated than this. Building ships within your boarders allows secondary suppliers the possibility of intergrating new technologies in builds something that would happen extremely rarely with builds from outside nations.

Fledgling industries might then get a break with allied partners. Auspar, Nulka, Bushmaster truck, Jorn, etc etc. Sometimes it pans out, sometimes it doesn't. Sometimes other synergies get up and going, sometimes its enough to keep talent local and keeping capable people inbetween projects. Its not just a profit and loss economic equation.

Many of these industries globally aren't playing on a dead level playing field. US can afford economies of scale and money to ensure global edge. UK can't quiet complete at that level but in certain areas is a major player and caters to a market that may not want to buy US, for what ever reason (maybe cutting a deal for more european input etc).

I agree that it is very complicated. But if you are a small-medium country working on this dysfunctional defense market I don't really see much future. Yes you can have a partially protected home defense industry that surplies weaponry to your own forces, and the others are doing the same and won't readely buy foreign (your) products of the same reason why you don't buy their products. So give and take some buy-back deals your market is pretty much defined by the home defense spendings which are not exactly forecasted to be growing a lot in the future.
The big countries, that has the advantage, can suck up some extra activity selling to those that doesn't have such defense products at home.

In a free and fair market the small would have better chances. We could imagine that an australien company developed some brilliant "gismo" that they could sell to the defenses of many countries, because it's "the best". 'but that will never happen; The french will insist that is made by a french speaker before they buy it. A british PM will annouce that he has saved 100 british jobs in some far away scotish town (at least for a couple of months) by not buying the australien gismo, the US won't buy it, end of story etc. So the australiens can sell to Denmark or Norway, and we won't be needing much....

 

[Palnatoke]

An interesting read on warship building and failures of the european warship/yard industry.
Much of it is relevant also for non-european countries.

http://web.cenet.org.cn/upfile/53059.pdf

(Naval Shipbuilding in the UK and Europe:
A Case for Industrial Consolidation? by Keith Hartley
Director
Centre for Defence Economics
University of York).

Except:

Conclusion

Warship building is a classic example of European governments failing to exploit the gains
from competition and free trade. Two market situations apply. First, some nations such as
the UK are committed to national procurement of warships so long as competition amongst
domestic firms is possible; but the commitment to ‘buy British’ means that foreign firms
which might be lower-cost suppliers are not able to bid for UK warship contracts. Second,
other nations have national procurement policies which favour their ‘national champions’ but
the complete absence of competition means that they have to pay the price required by a
domestic monopoly. Yet, all these European governments recognise the benefits of
competition and the gains from free trade from the Single Market in civil good and services
and civil pubic procurement. Extending the Single Market to warships and other defence
equipment procurement would offer gains to taxpayers and the Armed Forces; but the losers
from such a policy would be the inefficient.

The article is from 2003 and is a bit dated. The UK f.ex. now has an effective monopoly in the warship industry (BAE) and the discussion on the type 45, has to modified by the later cost increase and resulting reduction in numbers, that had yet to happen in 2003.

 

[Todjaeger]

Okay, this will be the last time I try this before I stop wasting my time responding to obtuse or argumentative responses.

@Todjaeger

I just posted a rather simplistical example that showed that it's not true that a goverment saves anything on diverting ressources to make a "home build". Economy doesn't work like that. It's a question of math. It's not something I have figured out, it's basic economics. That you certainly can find parties of interests that (exactly) has an interest in making things look different, does not surprise me.

It's sympthomatic that you refuse to consider the "Beef side of things" which represent the income that you loose by diverting production ressources (f.ex. workers) away from one industry to, say, yard industry, after all Australia has a good and efficient economy and a skilled guy employed in the yard business, would certainly also be able to get a job in another business (and if this other business is generating a higher revenue, there is a loss if he works in the yard business).

As I mentioned before, drop the whole 'beef' production/export arguments made in the posts. As the saying goes, "You are comparing apples and oranges." Or in this case, literally comparing Australian domestic commercial production and export of beef, with an Australian Government purchase of naval warships. The only relationships between the two are indirect, the first is the potential for a revenue stream to the CoA from sales of Australian beef to assist funding the purchase of warships. The second is the possibility of a loss of exports from Australia due to the SLOC being cut by enemy activity, requiring deployment of RAN warships.

This whole discussion is not, despite what appear to be attempts to turn into, a discussion of whether the CoA should provide funding for Australians to raise beef, or provide funding for the RAN to purchase warships.

When you throw in the economical stimuli part of the equation it becomes a little bit more complicated. Because you are right that a given stimuli often will "accelerate" and create activity on it's own. But my rather simplistic example should also show you, that the Beef worker also represent an economical stimuli (he earns foreign capital from selling beef to danes). One can say that the stimuli created by the beef worker isn't so focused (some of the money will re-invested in beef industry, some into local buisnesses etc) while an investment by the goverment into a specfic product/sector is more focussed.
One thing all can agree upon is that it's not irrelevant whom or what you give a stimuli (you should stimulate the winners, not the loosers), but it's a political discussion who's best at choosing the winners; The free market or the politicians.

A number of key points here, and I will be repeating myself since some of these very important points are either being ignored, or are not sinking in.

Much of the economic discussion has so far, been completely irrelevant to the topic, which is once again, the acquisition of warships for the RAN. Free market economics, not relevant. Stimulus money, again not relevant.

I do not wish to go off track here, but a brief explanation of free market economics is needed to demonstrate why it has no relevance to the topic at hand. I do not wish this to derail any further fftopic therefore additional discussion on the topic of free market economics will not be entertained.

Keeping things very simple, free market economics is about getting the best possible purchase prices from a variety of suppliers, while obtaining the best possible sales prices. The idea being that by requiring those who supply a business to compete, the business reduce supply expenses and therefore maximize their profits since the business supply expenses will be lower.

This has no relevance to a CoA purchase, because the CoA is a government, not a business entity. The revenue stream for the CoA is not based off earning from the sales of goods and services. Instead, the revenue stream is based off of taxes upon businesses, business activities and individuals within the CoA. While competition amongst various suppliers to the CoA can potentially reduce the cost the CoA pays for some supplies, any reduction in cost the CoA pays is not going to increase profits for the CoA, because the CoA is not making a profit in the first place, it is a government.

Now, as also mentioned, 'stimulus' is also irrelevant, because a warship purchase for the RAN is not about providing stimulus. It is about getting the RAN a warship. If the RAN has a requirement for a new warship it is going to purchase that warship. It will do so to meet CoA imposed requirements on the RAN. Now if those requirements mean that the RAN needs to spend $100 mil. on a new warship, it will spend $100 mil. because it has to meet those operational requirements. The purchase is not about getting money into the hands of Australian workers, or providing some form of industrial stimulus. It is about getting a new warship for the RAN.

The discussion some of us here have been attempting to have, is what is the most efficient (for the CoA) use of funding the RAN receives to purchase new warships. And this 'most efficient' discussion includes both initial purchase and throughlife support costs, as well as revenues to the CoA resulting from any warship purchases.

In short, if an Australian shipyard and a foreign shipyard are both equally capable of building the exact same warship for RAN service within whatever ship delivery schedule the RAN has, then the CoA has to decide the following in terms of (initial) cost.

Which costs the CoA less? Australian domestic warship build costs less the revenue streams back to the CoA as a result of the Government spending within Australia, or the cost of the foreign warship build.

If the purchase cost to the CoA for a foreign-built warship is less than that of an Australian built warship after adjusting for the CoA revenue stream, then the foreign build has a lower initial price.

As for the paper from 2003 about European naval construction, aside from the paper being rather dated, that is Europe, not Australia. Europe has a common, multi-national economic zone with the various 'local' national economies closely tied to each other. If naval construction were to cease for one country, and instead be sourced to another, there would still be economic returns back to the European country ordering the warship because of how closely linked the various economies are. Australia is not part of any similar mult-national economic zone and there would be no similar revenue streams returning back to the CoA as a result of orders placed with foreign yards.

-Cheers

 

[riksavage]

BAE Systems Inc. is not a foreign arms supplier to the USA. It is an American company based in America, staffed by Americans, managed by Americans with a long historical American pedigree. It just happens to be owned by a British based multinational company (BAE Systems). Calling it British is as silly as when some Britfools starting claiming that H&K products were British during the brief period when Royal Ordnance owned that company.

I will rephrase my statement as follows to aviod any confusion: BAE Systems, parent company of: BAE Systems, Inc. (comprising the group's US-based businesses: Land & Armaments; Electronic Solutions; Intelligence & Security; Platform Solutions and Support Solutions) listed on the UK stock exchange and headquartered in Farnborough, Hampshire, United Kingdom is the largest foreign owned supplier to the US armed forces.

 

[Palnatoke]

@Todjaeger

Don't take my word for it, read that linked I posted. It's only about 10 pages in which Keith Hartley who is/was the Director of the Centre for Defence Economics at the University of York, adresses many of the points that you fail to understand.

However he isn't adressing the falacy that an economy (magically) gains anything from diverting ressources away from healthy industry to goverment subsidized industries. Maybe, because that's common knowledge amoung all people that have passed a short course in macro economics at undergraduate level. Though he will explain to you why national centric navial procurement is a destructive thing for the industry as a whole.

. Australia is not part of any similar mult-national economic zone and there would be no similar revenue streams returning back to the CoA as a result of orders placed with foreign yards.

Doesn't matter, for the purchase as such. But, assuming that australia has an efficient ship-defense industry, such an industry would certainly benefit from being part of a larger market like the single market of europe had it included defense.

 

[StevoJH]

Ok. One post from me on this topic.

* The business tax rate in Australia is 30%
* Assuming that the *average* wage approximates out to roughly $50,000pa. The staff will be paying *at least* $8,550pa in income taxes each year.
* In addition for any $1 each of these staff spend, $0.09 will go to the government in GST.

Now lets say that each contracter will be making a 10% profit. before tax. There will be potentially multiple contractors in any program, each will be paying roughly 3% of their contract price back to the government.

Each of their employees will be paying almost 20% of their wages back to the government in income tax. Each of their employee's will be paying a further 9% of every dollar they spend back to the government in GST.

Each employeee employed by a company is saving the government a considerably amount of money in potential income support payments.

Each contractor will be purchasing goods from other companies within the australian economy. For example steel from BHP, Radars from CEA technologies, Electronics from SAAB etc.

None of this money gets fed into the economy with an overseas build. And this is without taking into account the upskilling of the workforce and the building up and maintenance of an independent capability within the nation.

Remember, Australia currently produces many of its own munitions at Benalla, it produces small arms at the Thales Plant at lithgow, it produces Armoured Vehicles at Bendigo and it has the capability to produce minor warships, major warships and submarines at a number of facilities including Williamtown Vic, ASC SA, Henderson WA, Newcastle NSW etc.

In addition other strategic industries would include the automotive industry in Vic and SA along with various Aeronautics firms primarily located up and down the east coast. These include Raytheon, Boeing, QANTUS, De Halivand etc.

 

[t68]

And we still have our live beef export overseas, oh wait that stopped today bugger me there goes the economy.

I guess we will have to rely on shipbuilding instead.