The AUKUS pact is a keystone initiative for Australia to strengthen our strategic and defence partnerships with the United States and the United Kingdom. Announced in September 2021, AUKUS initiatives were organised into two ‘pillars’: Australia’s acquisition of conventionally-armed, nuclear-powered submarines through trilateral collaboration with the US and UK; and the development of advanced capabilities through integration of the three countries’ defence industrial bases.
While ‘AUKUS’ is sometimes publicly viewed as synonymous with its first pillar, it is the second which offers the most immediate and potentially transformative impacts for Australian defence industry and capability writ large. Pillar 2 provides the opportunity for Australia to develop world-leading defence capabilities through industrial base integration and innovation with two of the world’s leading defence industries.
Executed successfully, Pillar 2 can both increase the development of advanced technologies in Australia’s defence industry, and equally importantly accelerate the ‘pull through to capability’ to place capability advantage in the hands of the Australian Defence Force.
However, the opportunity of AUKUS Pillar 2 will be what Australia makes of it. In its formal composition, AUKUS is simply a framework agreement through which the three countries commit to working towards these shared goals. Much of its practical impact will therefore depend on how it is realised through supporting policy frameworks as well as critical capability development and acquisition activities – developed individually by and collectively between the three parties.
To inform these ongoing efforts by the Australian Department of Defence, this project examines the factors required to build the international defence industry partnerships necessary to realise the ambitions of AUKUS Pillar 2. Through stakeholder engagement and policy research, the project provides an industry perspective on AUKUS Pillar 2, identifies enabling and constraining factors, and alignment of policy initiatives between the three countries that support deeper defence industrial and innovation collaboration.
The release of a strategy would assist industry, and the broader public, to understand the objectives of AUKUS Pillar 2, as well as the supporting activities, projects, lines of effort and timeframes. This would assist industry in positioning itself to support AUKUS Pillar 2 outcomes. To ensure the strategy is actionable, it should also clearly articulate a funding mechanism to support identified priorities. The strategy should include regular industry briefings, both at the classified and unclassified level, covering updates on progress, as well as funding priorities and opportunities.
The first phase of AUKUS Pillar 2 focused on foundational policy activities such as export controls reform. While these reforms were necessary and important, the next stage must now shift focus to capability execution. Clear capability development and acquisition pathways need to be established and properly resourced to ensure pull through to capability delivery.
Clear and reliable funding streams are critical to enable greater investment in defence industrial innovation and integration activities. To accelerate progress, Defence should establish new, capability- focused funding lines. These should support both targeted AUKUS Pillar 2 goals with near-term delivery horizons (under three years) and ‘fit for AUKUS’ supply chain uplift programs designed to enhance Australian industry’s competitiveness in securing opportunities within the supply chains essential for the realisation and delivery of AUKUS capabilities.
Pillar 2-related export controls reform has largely focused on one component of the enabling environment for defence industrial integration. Complementary and aligned reforms to cyber security harmonisation, procurement pathways, intellectual property and workforce policies are also urgently needed to improve the broader enabling environment.
Coordination mechanisms within Australia and between the AUKUS governments should be strengthened, including channels of engagement for industry. There is a need to establish formal mechanisms to coordinate Defence, industry, and research stakeholders between the three countries to reduce fragmentation, encourage industry participation and maximise the collective return on investment.
