Senator the Hon Mathias Cormann
Minister for Finance
Date: Friday, 22 May 2015
JOURNALIST: Could you start with providing an update on what's actually going on with the AWD project?
MATHIAS CORMANN: The Air Warfare Destroyer project is a very important project for Australia. When we came into Government we inherited a series of problems with that project. The project was in very bad shape. Specifically, it was costing much more than had been budgeted for and it was running way behind schedule. Since we came into Government, we initiated a number of independent reviews and have also started to work to get the project back on track. One of the recommendations from the Winter-White Review was that we needed to properly quantify and forensically identify the extent of the cost blowout and the extent of the scheduled overruns before we could take the most important next step, which was to insert new management into the project, which is what we are now exploring. So over the last 12 months or so, we have significantly enhanced capability at ASC in order to lift productivity, in order to lift the performance of the project and to ensure that the project can be concluded at the lowest possible cost and the fastest possible time from here. What we know as of this week is that the project is now at least $1.2 billion more expensive than originally budgeted for and that it is running about 30 to 33 months behind for each of the three ships that are currently being built.
JOURNALIST: Why is the Government releasing the audit today? On the eve of the ship launch?
MATHIAS CORMANN: We are releasing the audit today because it has been received by Government and has been considered by Government this week. We want to ensure that we can take the next steps in making sure that the project is completed at the lowest possible cost and in the fastest possible time as soon as possible. We will now be entering into a limited tender process, where we will be seeking to either engage a managing contractor through the ASC for the project, or a management partnership agreement to enhance capability at the ASC further.
JOURNALIST: By bringing it to tender won't it delay it even further?
MATHIAS CORMANN: No. The work continues. We have already significantly enhanced capability at ASC by inserting personnel from BAE Systems, Navantia and Raytheon. What we are now doing, now that we know what the cost overruns and what the schedule overruns are, we will now be seeking to enter into a more permanent arrangement, to further build on the improvements that have been made in recent months.
JOURNALIST: So the ASC won't be stripped of their role in this project?
MATHIAS CORMANN: What we are looking at doing is strengthen the way ASC can perform into the future. What we are working on is to ensure that those three ships can be delivered at the lowest possible cost from here, bearing in mind that we inherited a $1.2 billion blowout in cost and that it can be delivered in the fastest possible time and now on schedule, on the revised schedule, given we inherited a situation from the previous Government where those ships are now delayed by 30 to 33 months.
JOURNALIST: This won't threaten Adelaide's workforce any further?
MATHIAS CORMANN: Not at all. What we want to see, we want to see a viable and sustainable ship building industry in Australia. We want to see a viable and sustainable naval ship building industry out of Adelaide. But the only way that's going to be done is if we successfully fix the sorts of problems that we inherited from the previous Labor Government. There is no sense putting our head in the sand. We can't ignore the fact that these ships are costing $3 billion a ship, when equivalent ships in other parts of the world would have cost us just $1 billion a ship. I've heard the comments from the Premier in South Australia. What I say to the Premier in South Australia is, if you want to have, as we do, a successful and viable naval ship building industry in South Australia, work with us to fix the problems that we have been confronted with as a result of the mismanagement of the previous Labor Government in Canberra. We are focused on fixing the problems and doing what needs to be done to ensure that there is a strong future for naval ship building in Australia. Putting our head in the sand is not going to be the way to address it.
JOURNALIST: The report by Infrastructure Australia today into congestion issues around the country, do you think that Australian governments collectively need to do more?
MATHIAS CORMANN: Our Government is doing more. Tony Abbott is the Infrastructure Prime Minister. We are working around Australia to invest in productivity enhancing infrastructure, to deal with traffic problems, to improve the opportunity for economic growth. I mean indeed, my good friend Steve Irons, the Member for Swan, and I we are here today dealing with a project to enhance traffic flows in this particular part of the world. There is no doubt that around Australia we have to do more. Our Government is doing more and we are looking to work with State and Local Governments around Australia to address these sorts of issues.
JOURNALIST: There has been a clear preference to invest in road over rail though, based on this report is it time for the Government to review its position on that?
MATHIAS CORMANN: We have a capacity at a Federal level to support road infrastructure in particular. We don't have the public sector infrastructure particularly to support investment in public transport infrastructure to the same degree. That is a matter really that is organised at a State level and the States are quite free to put forward whatever proposals they see fit, taking advantage of our asset recycling initiative.
JOURNALIST: Andrew Forrest has been out and about doing a number of interviews. Do you have any sympathy for his position after the Government announced no inquiry late yesterday?
MATHIAS CORMANN: Andrew Forrest is big and ugly enough to deal with whatever issues he needs to deal with. He is a senior businessman running a very big company here in Western Australia. He's been very successful over the years. I'm sure that he knows exactly what he's doing.
JOURNALIST: Did the Government cave in to pressure though on that inquiry?
MATHIAS CORMANN: Not at all. There was a proposal on the table a few weeks ago from an Independent Senator to have an inquiry through a Labor dominated committee in the Senate, which we did not support. We explored as to whether there was an opportunity to run a more sensible inquiry through a more sensible forum. Having consulted, we have made a judgment that there wasn't a case to hold such an inquiry. What is happening in the iron ore market is pretty basic free market economics. If you have increased supply and lower demand, prices come down. If you have lower supply and increased demand prices go up. That's the way any commodity market operates, that's the way the iron ore market operates.