The Australian Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

Home­land secu­ri­ty spend­ing is expect­ed to increase at a CAGR of 10.60% dur­ing the fore­cast peri­od

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Lon­don, June 19th, 2012 – Dur­ing the review peri­od, the defense expen­di­ture of Aus­tralia exhib­it­ed a CAGR of -1.42% to reach an esti­mat­ed US$28.5 bil­lion in 2012, and is expect­ed to grow at a CAGR of 5.13% over the fore­cast peri­od to reach US$38.8 bil­lion by 2017.The gov­ern­ment is expect­ed to make cumu­la­tive cap­i­tal acqui­si­tions of US$40.2 bil­lion dur­ing the fore­cast peri­od, 35% of which will be pro­cured from domes­tic firms, in order to sup­port gov­ern­ment plans to increase the inde­pen­dence of its defense indus­try. The acqui­si­tions are expect­ed to focus on the improve­ment of capa­bil­i­ties of the Aus­tralian Air Force and Aus­tralian Navy (ref­er­ence see graph below).

The Aus­tralian DMO has tak­en crit­i­cism for the project delays and cost over­runs asso­ci­at­ed with its domes­tic defense pro­cure­ments, sev­er­al of which have cost dou­ble the orig­i­nal esti­ma­tions. Cur­rent­ly, the Aus­tralian defense indus­try is fac­ing cost over­runs and delays in its project to acquire 100 F-35 joint strike fight­ers. As a result, sim­i­lar oppor­tu­ni­ties may be offered to for­eign firms, rather than domes­tic firms, dur­ing the fore­cast peri­od.

The Aus­tralian Indus­try Capa­bil­i­ty (AIC) pro­gram sup­ports the domes­tic defense indus­try by encour­ag­ing for­eign OEMs to grant domes­tic access to the glob­al sup­ply chain in exchange for mar­ket entry. Glob­al sup­ply chain deeds can be entered into vol­un­tar­i­ly or as part of a pro­cure­ment con­tract, and insist that the for­eign OEM pro­cures its equip­ment or com­po­nents from a domes­tic com­pa­ny. While glob­al sup­ply chain deeds offer sub­stan­tial export oppor­tu­ni­ties to domes­tic firms, they can pose major con­cerns for for­eign OEMs, as Aus­tralian defense prod­ucts are often expen­sive due to high labor costs and expen­sive logis­tics relat­ed to the country’s geo­graph­i­cal loca­tion.

The Aus­tralian Government’s Novem­ber 2009 Cyber Secu­ri­ty Strat­e­gy pro­fessed the fact that Aus­tralian Gov­ern­ment com­put­er net­works are increas­ing­ly under threat from mali­cious cyber-attacks. Recent­ly the Gov­ern­ment has ini­ti­at­ed the Inter­net Gate­way Reduc­tion Pro­gram, which aims to reduce the num­ber of inter­net gate­ways to the min­i­mum for improved oper­a­tional effi­cien­cy, reli­a­bil­i­ty and secu­ri­ty. The domes­tic Aus­tralian cyber secu­ri­ty indus­try is enter­ing into part­ner­ships with the US cyber secu­ri­ty par­tic­i­pants in order to gain tech­ni­cal and strate­gic insights into the domain.

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