BMI's Executive Summary

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Australia's internal security situation remained stable halfway through 2007. The 2007-08 budget capped off a 13-month period that saw the government promise more than US$41bn worth of new defence initiatives over 11 years; around US$16bn in the last budget, US$14bn for this budget, and more than US$11bn in between. As a result, next financial year the defence budget will reach US$22bn. This is an increase of US$2.1bn over the funding for this year, and represents 2% of GDP. Key initiatives in the 2007-08 budget include US$6.1bn over 10 years for 24 Super Hornet F/A-18F aircraft, US$1.8bn for additional logistics and US$1.3bn for C-17 operating costs. Another US$1.3bn in operational supplementation was provided, which will bring the accumulated cost of the Australian Defence Force (ADF)'s commitment to Iraq to US$2bn and Afghanistan to US$1.7bn.

Australia's defence industry has experienced strong growth in recent years, mainly due to the ADF undertaking an ambitious development and upgrade programme. In the fourth quarter of 2006, Australia's defence industry continued to grow, with the most significant development being the takeover of ADI, Australia's largest defence firm, by Thales, whose share of ADI will increase from 50% to 100%. In Q407 defence company Tenix will likely be sold by its current family ownership, following a review of its strategic direction. Tenix is owned solely by the Salteri family and is Australia's second largest defence corporation, behind Thales Australia, formerly Australian Defence Industries. The business should sell for about US$1bn, according to industry analysts. The company's annual revenue is about US$1.2bn.

Australia's arms trade patterns remained largely unchanged and the country still imports a range of bigticket items, such as the purchase of the AGM-158 Joint Air-to-Surface Standoff Missiles (JASSMs) from Lockheed Martin's Alabama plant. The current production rate is 15-17 missiles per month, with 475 of the 779 missiles having been delivered. The decision to purchase the JASSMs was due to the reduction of unit cost if the missiles were purchased from the US.

Contents

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Chapter 1 - Executive Summary

Security

Defence Industry

Military Expenditure

Arms Trade

Chapter 2 - SWOT Analysis

Australia Security SWOT

Australia Defence SWOT

Australia Economic SWOT

Australia Political SWOT

Australia Business Environment SWOT

Chapter 3 - Political Overview

BMI Core Scenario

Domestic Political Outlook

Chapter 4 - Security Risk Analysis11

BMI’s Security Ratings

Table: Regional Security Ratings

Table: State Terrorism Vulnerability Index

Regional Security: South East Asia and Pacific Q406

Overview

Inter-State Conflicts

Internal Conflicts

Australia Security Risk Ratings

Terrorism Risk

Conflict Risk

Physical Safety Risk

Chapter 5 - Security Overview

Internal Security Situation

External Security Situation

Chapter 6 - Defence Industry

Armed Forces

Table: Regional Armed Forces

International Deployments

Weapons Of Mass Destruction

Chapter 7 - Market Overview

Industry Trends And Developments

Arms Trade Overview

Procurement Trends & Developments

Chapter 8 - Industry Forecast Scenario

Table: Australia Defence Sector Historical Data & Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 9 - Macroeconomic Forecast

Economy To Accelerate As Exports Revive

Table: Australia – Economic Activity

Chapter 10 - Company Profiles

ADI Ltd

Tenix Defence

Austal

BAE Systems Australia

Raytheon Australia

Boeing Australia

Chapter 11 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Competitive Landscape for Asia Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Asian Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: