M8200 Defence in Australia Industry Report

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M8200 Defence in Australia Industry Report, IBIS report, Australia.

Text of M8200 Defence in Australia Industry Report

  • 2 About this Industry2 Industry Definition

    2 Main Activities

    2 Similar Industries

    2 Additional Resources

    3 Industry at a Glance

    4 Industry Performance4 Executive Summary

    4 Key External Drivers

    5 Current Performance

    6 Industry Outlook

    9 Industry Life Cycle

    11 Products & Markets11 Supply Chain

    11 Products & Services

    12 Demand Determinants

    13 Major Markets

    14 International Trade

    16 Business Locations

    18 Competitive Landscape18 Market Share Concentration

    18 Key Success Factors

    18 Cost Structure Benchmarks

    20 Basis of Competition

    20 Barriers to Entry

    20 Industry Globalisation

    22 Major Companies

    24 Operating Conditions24 Capital Intensity

    25 Technology & Systems

    25 Revenue Volatility

    26 Regulation & Policy

    26 Industry Assistance

    27 Key Statistics27 Industry Data

    27 Annual Change

    27 Key Ratios

    28 Jargon & Glossary

    IBISWorld Industry Report M8200Defence in AustraliaDecember 2011 Paul McMillan

    Lock and load: The industry may look overseas for cheaper, more compatible equipment

    www.ibisworld.com.au | (03) 9655 3881 | info@ibisworld.com

  • www.IbISwOrLD.COM.Au Defence in Australia December 2011 2

    The Defence industry is part of Australias public sector. The industry largely consists of the Department of Defence, within which sits various groups involved in defence and national security. This includes the army, navy, air force,

    intelligence organisations and administrative and support functions thereof. The industry excludes manufacturers of defence materials, providers of services to defence and educational institutions for the defence force.

    The primary activities of this industry are

    Armed forces unit operation (except manufacturing, service contractors and educational)

    Civil defence operation (military)

    Government administrations (defence)

    Industry Definition

    Main Activities

    Similar Industries

    Additional resources

    The major products and services in this industry are

    Air force capability

    Army capability

    Command of operations

    Intelligence

    Navy capability

    Strategic policy

    Superannuation and housing

    About this Industry

    N8426 Government Schools in AustraliaThis industry is similar in that it is largely funded by governments.

    Q9630 Emergency Services in AustraliaThis industry is similar in that it provides community protection and is funded by governments.

    For additional information on this industry

    www.defenceindustry.com.au Defence Industry Australia

    www.defence.gov.au/dmo Defence Materiel Organisation

    www.dsto.defence.gov.au Defence Science and Technology Organisation

    www.defence.gov.au Department of Defence

  • www.IbISwOrLD.COM.Au Defence in Australia December 2011 3

    Market ShareThere are no major players in this industry

    Key External DriversCapital expenditure on defenceregional warsDemand from scientific research

    Key Statistics Snapshot

    Industry at a GlanceDefence in 2011-12

    revenue

    $23.9bnEstablishments

    397wages

    $9.5bnbusinesses

    15

    Annual Growth 12-17

    3.0%Annual Growth 07-12

    1.4%

    Industry Structure Life Cycle Stage MatureRevenue Volatility Medium

    Capital Intensity High

    Industry Assistance High

    Concentration Level High

    Regulation Level Heavy

    Technology Change High

    Barriers to Entry High

    Industry Globalisation Low

    Competition Level Low

    FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIx ON PAGE 27

    Mill

    ion

    10000

    2000

    4000

    6000

    8000

    1602 04 06 08 10 12 14Year

    Capital expenditure on defence

    SOURCE: WWW.IBISWORLD.COM.AU

    % c

    hang

    e

    20

    30

    20

    10

    0

    10

    1804 06 08 10 12 14 16Year

    Revenue Employment

    Revenue vs. employment growth

    Defence personnel

    28%NSW6.7%

    NT

    21%QLD

    6.6%SA

    1.4%TAS

    14.5%VIC

    14.3%ACT

    7.5%WA

    SOURCE: WWW.IBISWORLD.COM.AU

    p. 22

    p. 4

    SOURCE: WWW.IBISWORLD.COM.AU

  • www.IbISwOrLD.COM.Au Defence in Australia December 2011 4

    Key External Drivers Capital expenditure on defenceThe Defence industry receives the vast majority of its total revenue from the Government and is therefore very sensitive to changes in Federal Government funding levels. The level of defence spending reflects a governments political priorities (more money for defence will take money from other departments), immediate security threats to a country, and Defence industry and external advice on the industrys capability to face future challenges.

    Regional warsThe Defence industry is particularly sensitive to instability in the world. The ADF currently has a number of troops in a range of operations around the world (in both combat and peacekeeping functions). These global operations may be conducted in conjunction with the UN, or as part of coalition forces. Military combat can lead to increased government spending on defence, for example for new weapons, systems and increased personnel.

    Executive Summary

    Government contributions towards the Defence industry are expected to rise at a rate of 1.4% per annum over the five years ending June 2012. The rise in Federal Government funding, which makes up 90% to 95% of total revenue, represents the governments commitment toward ensuring the safety and security of Australia and its neighbouring nations. Major operations over the past five years have included the conclusion of Australias combat role in Iraq, an increased focus of fighting terrorism in Afghanistan, peace keeping in Timor-Leste and assistance in response to natural disasters.

    In 2011-12, the industry will generate revenue of $23.9 billion, representing a fall of 3.8% from the previous year. Relatively large revenue fluctuations

    can occur from year to year, but volatility tends to smooth out over the long term. Industry revenue is expected to average 1.4% growth over the five years through 2011-12.

    Despite continued defence spending, there is uncertainty over agreements with Australian industries that supply products and services to defence, due to cost controls and the aim to maintain compatible equipment with the United States. This could mean that the Department of Defence and its Defence Material Organisation may bypass some local suppliers in favour of off-the-shelf systems that are cheaper, proven and extensively customised. Industry revenue is forecast to grow by 3.0% per annum over the next five years through 2016-17 to $27.7 billion.

    Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

    Uni

    ts

    45

    25

    30

    35

    40

    1399 01 03 05 07 09 11Year

    Regional wars

    SOURCE: WWW.IBISWORLD.COM.AU

    Mill

    ion

    10000

    2000

    4000

    6000

    8000

    1602 04 06 08 10 12 14Year

    Capital expenditure on defence

  • www.IbISwOrLD.COM.Au Defence in Australia December 2011 5

    Industry Performance

    Operations The major operational defence event over the past five years was Australia ending its combat role in Iraq in 2008. Australian forces had initially been deployed to Iraq in 2003 as part of a US-led multinational effort to mitigate Iraqs potential threat to the region. After the Battle of Iraq was won and the nation was largely secured, Australias role developed into providing security and training to local forces as the country rebuilt, elected a new government and embarked on the road to independence. Gradually the focus of the United States and its allies shifted to

    Afghanistan and efforts to control militant groups in the region. A greater focus by the United States and its allies on fighting resistance in Afghanistan has seen Australias role in that country grow through the involvement of Special Forces and an aviation support element. Other major operations involving Australian defence forces over the past five years have included peace-keeping in Timor-Leste, the protection of Australias offshore maritime areas and the provision of assistance in response to several natural disasters in other countries.

    Current Performance

    The Australian Defence industry operates within the public sector, predominantly generating revenue from Central Government funding. On average approximately 90% to 95% of funding is contributed by the Australian Federal Government. IBISWorld estimates that industry revenue will increase by 1.4% per annum to $23.9 billion over the five years through 2011-12. This is despite an expected decline of 3.8% in industry revenue in 2011-12 compared with the previous year. Revenue and expenditure are largely determined on a needs basis, relating to events in the geo-political environment such as wars and disasters.

    The modest growth in Defence industry revenue and hence in Federal Government spending on defence has been influenced by cost minimisation efforts. For example, several facilities have been closed and consolidated in recent years to improve efficiency. As a

    result, the number of locations the industry operates in has remained the same over the past five years. Efficiency has contributed to the industrys ability to maintain large operational readiness despite the decline in spending as a share of total government expenditure.

    Key External Driverscontinued

    Demand from scientific researchThe success of the Defence industry is dependent on the use of high technology equipment that creates an adva