Canberra manufacturer receives support through $270b defence package

The coronavirus pandemic has shut down Canberra defence manufacturer EOS Group's global supply chains, meaning for now millions of dollars worth of weapons systems are stuck.

Another $50 million of product is stranded at various points across the globe, unable to reach customers.

But the company has been given a lifeline, after the Defence Department accelerated plans to buy 251 remote weapon stations from the company in the next 12 months.

It is part of the $270 billion capability upgrade for the Australian Defence Force, under the new 2020 Force Structure Plan.

The systems will be added to the Army's Bushmaster and Hawkei protected mobility vehicles, and allow a gunner to operate a weaponised system from a protected position.

The deal will bring forward the timeline on products EOS was already contracted to deliver, to tide the manufacturer over during the temporary shipping hiatus.

"That single act is going to save thousands of jobs," EOS chief executive officer Ben Greene said.

"The reason for that is that the multiplier effect of what we do here is very strong in the community."

It is estimated the deal will provide work for 200 of EOS Group's engineering and support staff, and another 100 business across Australia further down the supply chain.

Australia is set to spend $270 billion over the next decade on weapons and infrastructure, including billions of dollars on long-range strike missiles, in a move that signals a more adversarial stance on China and less reliance on the United States.

Prime Minister Scott Morrison denied it was a provocative move, saying the investment would help create jobs and boost Australia's sovereign capability.

The equipment investment would "ensure that our interests are protected and that we can engage with other partners around the world as we achieve the stability that is necessary for peace and prosperity and there are jobs here on this form", Mr Morrison said.

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There are around 15,000 businesses and 70,000 workers in the Australian defence industry. The government says that will grow thanks to the strategy.

However it is unclear whether there would be any further incentives to build local capability under the plan.

"Like with all of our defence industry contracts there are clear plans to ensure we maximise local content. You've heard just how much local content is maximised through this operation here," Mr Morrison said.

Dr Greene said while the $270 billion investment was "fantastic", that amount of money over 10 years "will not support a critical infrastructure of defence"

"We need exports. In my company 95 per cent of everything we do is exported," Dr Greene said.

"We're clocking about $400 million of sales a year from this product."

However, Dr Greene also said: "Wherever we sell this product anywhere else in the world we produce more than half of it here."

"There are countries that mandate 50 per cent local production. We fight tooth and nail in those negotiations around the world to keep those jobs here," Dr Greene said.

The investment comes amid a wider debate about the role of science and manufacturing in pulling Australia out of its coronavirus-induced recession.

Industry has warned plans to lower the tax offset for onshore research and development will have the unintended consequence of pushing investment offshore at a time when Australia was trying to build capability in key sectors.

Medicines Australia said the changes would force them to choose investment in manufacturing and research and development, while Manufacturing Australia said the bill would put Australian jobs at risk.

Labor's industry spokesman Brendan O'Connor has urged the government to spike the changes.

"Australian businesses need support more than ever to not only survive but thrive post pandemic," Mr O'Connor said.

However Defence Industry Minister Melissa Price said,"if there was ever any doubt that manufacturing is alive and well I think we're seeing this on display today".

"I think there's nothing like a pandemic to get a nation focused on what is it we need to be good at," Ms Price said.