EOFY Shopping Spree for the Australian Defence Force (ADF)

Investing Psychology, Politics Jul 7, 2020 / Reading Time: 2 mins
By Divik Nigam Reading Time: 2 mins

The COVID-19 pandemic is responsible for the fragmentation of Australia’s international relationships; especially that with China. Increased tensions emanate after Australia pushed for an independent inquiry into the origins of COVID-19, subtly implying China as the nation to blame. This was far from well-received as China responded by blacklisting Australian abattoir exports, applying tariffs on Australian barley and propagating propagandistic perspectives on Australia’s “racist attitude” toward Chinese students and tourists, warning them to not return.

China has also been accused in recent territorial disputes in the South China Sea, the East China Sea and the India-China border, followed closely by China’s increased competitive stance in the Indo-Pacific region. These areas are rich in resources such as oil and minerals which are vital to global trade.

Peter Jennings, the Executive Director of the Australian Strategic Policy Institute (ASPI), has expressed his narrow perspective on his motivations to prepare Australia for threats specifically from China, outlining that the “only country which is annexing territory, coercion and influencing domestic politics by the use of cyberattacks at industrial levels, is the People’s Republic of China”.

China’s ‘strategic’ positioning, compounded by the ruptured bond between Australia and China, has pushed PM Scott Morison, to fund A$270bn into the Defence Sector. This investment takes place over the next 10 years and its primary goal is to ensure the alignment of Australia’s Defence Weapons and Technology, with the global environment.

This includes ensuring a more durable supply chain, enhancing the ADF’s self-reliance by creating more high-tech Australian jobs and encompassing lethal and long-range capabilities to hold adversary forces.

 

The Investment: Broken Down

Key purchases include $9.3bn to be spent in R&D onto high-speed, long-range weapons which include hypersonic weapons, another $80m will be used to purchase the Lockheed-Martin AGM-158C LRASM (Long Range Anti-Ship Missile) from the U.S. Navy and $5bn – $7bn will be used to install an underwater surveillance system using high-tech sensors, which may also include the purchases of unmanned submarines. The Lockheed Missiles will be initially employed by the RAAF’s fleet of 24 Boeing F/A-18F Super Hornet fighters, with initial operational capability to follow in 2023. Integration of the missiles with Australia’s F-35A jets, which are also made by Lockheed, is also to follow.

Recently, Australia also has been the victim of cyber-attacks and consequently, the Prime Minister has allocated $15bn on cyber and information warfare capabilities over the next 10 years. Of this $15bn investment, $1.3bn will be used to boost the cybersecurity activities of the Australian Signals Directorate and the Australian Cyber Security Centre (ACSC).

The Government’s pledge to boost Defence spending to 2 per cent of GDP by 2020-2021, which was announced in April 2019, coincides perfectly with the current circumstances.

 

Key Mover:

A key mover in the market following the $270bn funding, was Electric Optic System (ASX: EOS), a company which specialises in the Defence’s RWS (remote weapon systems) & communications installations, which in response to the funding, went into a trading halt and moved by 46.61% over 5 days (1st of July to the 5th of July).

 

Source:

https://www.abc.net.au/news/2020-06-30/australia-unveils-10-year-defence-strategy/12408232