Many thanks to AmCham for the invitation to address you today. I spoke to this gathering a year ago almost to the day - 15 February 2024 - and called for a greater sense of urgency needed in Government, in Defence and in the private sector to make Australia’s defence sector more productive, more capable and more innovative. In today’s lexicon we might say “Make Australian Defence Great Again”. What an astonishing period we have lived through from that time to now! I still identify a need for greater urgency in our defence preparations and I’ll talk further on that today. But the key message I want to make is two-fold:

First: Prepare for disruption. Jarring change is coming, indeed in the United States where I concentrate a lot of my business focus and my personal time, change has come and the sense of dynamism and new approaches is obvious for all to see. I was in Washington DC for the recent Presidential Inauguration and the first three weeks of the new administration and witnessed it firsthand. Donald Trump is the most astonishing American political phenomenon I have seen in my lifetime. You can choose to like him, or not like him – its hard to be neutral.

As a businessman what I see is that he is focused on sweeping reform of the American government system. He wants to put American enterprise back in the driving seat of the country’s national security and prosperity. Big change can be exhilarating and maybe a bit scary, but here it comes. And let’s not forget that China is, under President Xi, a disruptive power, looking to remake the Asia-Pacific, if not the global international security order. And against this backdrop we are about to undertake a national election in Australia which has every potential to provide significant change at home.

In 2025, political disruption will be intertwined with technological disruption. We only need to look to China’s DeepSeek artificial intelligence app and the impact it had when recently released. It’s not as if we didn’t know that China, the US and a number of other countries are racing to outcompete each other on AI. DeepSeek has the potential to turn out to be another “Sputnik moment” that super charges US-China competition. I’m sceptical that the app represents a definitive breakthrough compared to the rapid progress with generative AI in the democracies. I doubt very much, for example, that a small Chinese company has found a way with minimal money and less than superb semiconductors to beat what has been developed in the democracies. But whatever the real situation, we are just at the start of a global technological revolution where there will be many advances from the major AI powerhouses.

On the first full day of this Presidency, Donald Trump chose to hold a press conference in the White House with the Stargate consortium to announce the biggest private sector investment in AI in history. Over $US500billion (three quarters of a trillion Australian dollars) of private investment backed by large scale government support including massive power infrastructure investments. It underscores the United States’ intent to assert dominance in AI development, framing it as a contest not just of technology but of economic and geopolitical power between the US and China.

AI will be thoroughly disruptive in 2025 and beyond. In my view AI will bring about change as big and as rapid as the global Internet uptake at the end of the 1990s, and the arrival of the iPhone a decade later. AI will redesign many aspects of our lives and we must all hope the change is for the better. It will transform how government operates and how defence forces arm, train and fight and it is already shaping how China seeks to build its dominance in the world. There will be an AI with Chinese Communist Party characteristics. It should be no surprise that, if you develop an algorithm by feeding it everything available online inside the Chinese firewall, then the AI is going to come out looking and sounding like an enabling instrument of the CCP.

So, one of the disruptions we have to prepare for is that the world will see two or more AI ecosystems deployed: a Western AI that will be more open, driven by capitalism and not available in China. And then there will be AI from China. That will be available in the west, just like Chinese 5G technology and TikTok before, it will come with its own not-so subtle strings attached. The sudden disruption of DeepSeek is yet another wakeup call for Australia to look to its own security interests.

I’m all for the US alliance, but a key part of our alliance contribution is to make ourselves a strong defence and security power, one able to look after its own interests.And of course that means we need a stronger defence Industry base; one that puts the interests of the ADF and Australia ahead of any other country; an industrial base that serves our interests first, always, reliably and for our unique needs. I said that my key message was two-fold. “Prepare for disruption” was just the first part.

My second message is that 2025 is going to be a massive year of opportunity. For companies that are prepared to deal with disruption, for those of us who can position to take advantage of a more competitive business environment, I think that substantial opportunities await. So where are the opportunities? Well, those of us in the defence sector hold to the view that contracts must start flowing soon to build on those policy foundations delivered by government in the 2024 National Defence statement. The Government and the Defence Department both understand that developing a more capable ADF starts to happen when industry is engaged to build, innovate and deliver new capability. Regardless of the outcome of the next federal election, the government of the day must act with urgency and mobilise our industrial base. And it is my believe that they will. Industry is ready to respond and the strategic circumstances continue to scream at government to act.

The AUKUS arrangement will be four years old in September. Now is the time for practical AUKUS developments to lead to tangible opportunities for industry. I should add that this isn’t just about nuclear propulsion for submarines.

AUKUS Pillar 2 represents a major opportunity for Australian companies and identifies all those technology priority areas where our three countries must prevail. AUKUS Pillar 2 covers quantum computing, cyber, undersea technology, hypersonic vehicles and counter-hypersonic technology, electronic warfare and autonomous systems. Dare I say it, but Pillar 2 also identifies Artificial Intelligence as one of the priority areas!

The US and Australian governments last year created an ITARS free environment between our two countries to facilitate industrial base collaboration. Companies need to exploit this new world and maximise transfers of technology and the establishment of new industrial base capabilities and partnerships across both countries. As we consider opportunities, I think it is instructive to note the very first official statements by Pete Hegseth after being sworn in as the new US Secretary of Defense. He said:

“The President gave us a clear mission: achieve Peace through Strength. …. This means reviving our defense industrial base, reforming our acquisition process, and rapidly fielding emerging technologies.” He pledged that as leader of the Pentagon he would “prioritize investments in AI, drones and counter-drone systems, among other technologies that he considers key to military modernization”. These are all AUKUS Pillar 2 priorities. And he highlighted “working with allies and partners to deter Chinese aggression in the Indo-Pacific” as key goals.

There can be no stronger partner in the Indo Pacific for the US than Australia. And last week in Europe he put a finer point on that message by telling NATO partners: "Safeguarding European security must be an imperative for European members of NATO…Stark strategic realities, prevent the United States of America from being primarily focused on the security of Europe. The US is prioritizing deterring war with China in the Pacific" .

So, for Australian companies:

• We have a technology exchange agreement in AUKUS that provides the key areas of focus and priorities.
• We can exchange the necessary information in an ITARS free environment…which provides a unique competitive advantage for Australian companies dealing with US technologies.
• We have support from the new US administration to accelerate cooperation with Allied partners in the Indo-Pacific region.
• And we find ourselves on the front line of US efforts to deter war with China in the Pacific.

In Australia, now is the time for industry to be invited to the table to work out the best way to advance AUKUS. And when I say that I mean specifically Australian defence medium and small-sized companies. I put “medium” first, rather than the traditional phrase “small and medium” companies, because it just so happens that Australia has a good number of medium sized firms, which have the intellectual property, international partnerships and scale to really drive innovation.

What Australian companies have not seen in the current term of government is the necessary cash flow which comes from Defence contracts. That has to start flowing. And the timing and opportunity exists for whichever government will soon be elected to deliver that certainty. We can see in the US, in fact globally, that it’s industry which drives innovation in Pillar 2 technologies and beyond. The Australian Government that works out how to tap this innovation base in industry will unlock such a surge of creativity that the ADF will rapidly transform.

Some of you will know that, at the end of 2023, I released a study on the best way to strengthen Australia’s national defence industrial base. This report was commissioned by Gilmour Space Technologies, Austal, Macquarie Technology Group, the NIOA Group and the Australian Industry & Defence Network (AIDN). The good folk at Strategic Analysis Australia helped us shape recommendations to fast-track sovereign capability by harnessing the collective power of Australian-owned defence primes and SMEs. The plan calls for:

• A $500m investment, growing to $1b a year, in the Defence budget to acquire capabilities and services from Australian SMEs.
• An urgent review of acquisition policies with a commitment to buy from Australian-owned and run companies.
• An “Australian Defence Industry Steering Council” to manage collaboration with Defence Industry and the ADF.
• Redefining “industrial sovereignty” to drive government priorities.
• Reviewing procurement rules to recognise both economic security and industrial sovereignty as “value for money”.
• The ADF growing direct partnerships with Australian companies and changing core equipment procurement processes.
• Engaging industry to prioritise AUKUS Pillar Two projects.

And…

• Re-framing the Strategic Industry Capability Priorities (SICPs) to focus on the “consumables of conflict”.

You might expect me to say this but I think the report stands up well 13 months later. It’s available on the NIOA website and the sites of our partners. The work provides an industry view on the essential next steps to give energy and effect to Defence and government planning for the future ADF. Since the report was released, quite a number of international developments have reinforced the wisdom of Australia building stronger sovereign defence capabilities. These include:

• Watching Ukraine sustain its heroic defence against Russia’s illegal aggression by mounting a deeply impressive domestic defence industry and innovation effort.

Ukraine is, in fact, showing the world what the future of conflict looks like.

• Observing on the Ukraine battlefield that conflict is even more about sustaining the consumables of war – tens of thousands of drones used every month; reliable domestic ammunition stocks; relatively low-cost weapons being used to defeat million-dollar technology.
• On the other hand, we see how Ukraine worries that a change in American policy might cut essential supplies.

No medium-sized country can fight a large-scale conflict alone, but the lesson I take from the Ukraine war is that countries are stronger and better supported by allies the more they are able to look after their own interests. Successive Australian governments have committed to establishing a guided weapons manufacturing enterprise in Australia to support our own priorities as well as bolster the US defence departments supply chains.

The central pillar of this is to build large scale rocket motor and warhead production. We need to get on with this task urgently. There is significant ramp up time (years) to establish new factories and supply chains.

2025 must be our year of decision for this initiative.

It’s also clear that the re-election of Donald Trump means that America will have higher expectations of what they think allies need to do for their own defence. President Trump has made it clear that the previous NATO standard of spending 2 per cent of GDP on defence is no longer adequate. He is asking European countries to more than double defence spending to 5 per cent. Where the exact figure settles out is anyone’s guess, but we can all be certain he will look dimly on allies not prepared to increase well beyond 2 per cent. It would be naïve to think Australia would be exempt from this expectation.

I fully expect to see increased Defence budgets for Australia moving forward. American presidents since FDR have been calling for allies to do more and not free ride on American security expenditure. So this call is hardly new to Trump, but he certainly strengthens that message.

And I would caution our government and defence leaders to act before being asked to act by the US. We shouldn’t leave the door open to any genuine criticism of our efforts. This US administration sees things very black and white and we need to be on the right side of that view. The success of alliances is not measured by the battle laurels of the past but by our best efforts for the future. We need to position for the future quickly. On that measure it’s time for our governments, Defence and industry to move to a new level of effort to respond to the deteriorating strategic outlook Australia faces.

So let me come back to my two-part message: first, prepare for disruption. Second seize the opportunities which are at hand. The opportunities can be part of our shield, our deterrence framework, which will help us keep the region stable and at peace.

Or – let’s hope it doesn’t come to this – seizing opportunities will make a stronger ADF, equipped and maintained by industry. That will successfully defend our lives, land and interests, should the worst happen in the future.

The challenges are great, but we are a match for the task. May you all have a successful 2025, overcome disruptions and seize the opportunities to make us stronger.