Senate Foreign Affairs, Defence and Trade Legislation Committee, , 4:45:35 to 5:12:40
The ADF reports on missing recruitment targets and provides a financial analysis of the $1.8 billion net return expected from property sales.
Topics: Public service staffing, Government spending, Infrastructure
Speakers: Celia Perkins, Hon Michaelia Cash, Hon Jenny McAllister, Lieutenant General Natasha Fox AO CSC, Unknown Speaker, Admiral David Johnston AC RAN, David Shoebridge, Greg Moriarty AO, Raff Ciccone
uh and I'll hand the call over to Senator Cash.
>> Thank you very much, Chair. If I could continue with the line of questioning relation to the defense asset sale. Um, Minister, in terms of any potential impact on recruitment and retention, um, are you able to provide an assurance that no ADF member who is a reserveist will be dislocated from their current unit location until a viable and appropriate alternative location is available to that ADF serving member.
Thanks very much, Senator. And I'll ask um Miss Perkins to talk through the arrangements that are being made for
>> Thank you, Senator Celia Perkins, Deputy Secretary Security and Estate. Yes, it is the intention in the transition plan that uh people won't be relocated from sites until an alternative site is identified and prepared for their
>> Okay. So, that's an intention. Is it also a guarantee?
>> Uh Senator, um there are the number of sites I described earlier today from which we'll be moving people where people are resident. I believe that number is about 45 sites. Yep. >> That is our intention. We fully anticipate that um planning challenges will arise sight by sight, but we we will need a place for our people to go and that's the planning we're doing now.
>> And just in terms of those planning challenges, um is one of the challenges that you actually do have to relocate someone but there is no actual site for them to yet go to?
>> No, not at this stage. Um, as we've uh rehearsed this morning, the published documentation last uh week for each of those sites indicates the plans in some of the sites. There's a number of options and so we'll be doing due diligence around uh which of those options provide the best outcome. We'll be doing that work working closely uh with our ADF uh leadership colleagues uh and in the engagement that we're doing at site.
>> Thank you, Miss Perkins. Um the ADF permanent force inflow target for the last financial year I understand was 8,15. Uh I also understand that this was unfortunately uh not met by more than 1,000 people. Has defense estimated how these changes will further impact recruitment, the changes obviously that we've been discussing uh for some time today uh going forward? Um my my
colleague uh General Fox is coming to the table who can speak to the first part of your question.
>> And Senator Cash just as the chief of personnel settles in I think just to be clear the ADF grew by 2 and a half thousand in the last 12 months.
>> So that was and so okay can I just okay
the figures then >> if we can give you the figures.
>> Yeah. Would you mind? Thank you. Um,
>> uh, Senator Lieutenant General Natash Fox, chief of personnel. >> Thank you, General. >> Um, so at the end of financial year 2425, our um, permanent and full-time headcount was 61,189. >> Yes. Uh, and in terms of the inflow into the Australian Defense Force or avenues, it was 77%. In terms of raw numbers, yes, we recruited the most amount of people we've recruited in 15 years in raw numbers into the permanent Australian Defense Force.
>> So that's what I just wanted to check. So into the permanent flow uh permanent flow.
>> Yes. >> Force. Yes.
>> Yep. Thank you. Okay. Thank you very much. Um just in terms of the sites um many of them are being used um and are crucial for the recruitment the training and supporting our reserves and cadetses and as we know in particular say Perth uh many of them are in metropolitan areas. Retired Brigadier in Langford posed the question, "How do you recruit and retain a workforce that is unable to serve in populated areas?" C. Can I ask what your response is to that?
>> Uh, Senator, we undertake recruiting right across Australia. Whilst we have fixed recruiting centers in each state and territory, we have mobile facilities now as part of the new contract. We have a mobile ADF career center and a pop-up ADF career center. The pop-up goes into locations for up to three months at a time um after uh consultation with the relevant council and we have seen through the popup career center increased applications from that um region. the uh mobile ADF careers center has um visited uh a substantial number of um towns across regions that may not have had um a visit previously and I'll get my colleague to talk to that very shortly. But we've also changed our approach to recruiting and have still have some work to do here. But we are certainly receiving more applications through job boards than we actually are through certain recruiting centers. So uh we are doing work in terms of our digital presence more wholesomely uh to help assist with uh all regions across Australia where we don't necessarily have a presence in the community.
And if I may, Senator, to General Fox's response there, um, in in the deep analysis we've done of the impact of these sites, uh, there is only one recruitment center where we'll need to relocate, which we have a plan for. Um and and to the point you started with uh it's important um for the committee to understand that defense's p force posture around Australia and our representation in the major metropolitan areas and regional areas will remain largely the same. So we will remain a very visible presence in Sydney and Melbourne and Brisbane and Perth and Adelaide and Darwin and Canes and Townsville uh and many other places and that has been an important part of um working through uh the independent
>> Thank you and I do appreciate that. Can I just go back to those figures just to ensure that I've got the correct information? Um you did say you recruited more than we have in the last 15 years. Um, [clears throat] >> did you meet the target that you'd set or was that still under the target?
>> No, we did not achieve attain the 100%
of the target. >> Yes. You I think you said 77%. Was that correct?
>> Uh, all avenues of inflow. Yes.
>> Yeah. Okay. Thank you. I just want I just wanted to correct that. I do appreciate that. Um, going back to the 67 sites, Minister, can you remind me, was it an election commitment that you would sell the 67 sites?
>> I think it was well understood that we were undertaking an audit of the defense
>> So, was it an election commitment?
>> I think I've answered your questions.
>> Well, I don't think you do. It's a yes or a no. Was it an actual election commitment that you would sell the 67
sites? Senator Cash, the advice had been sought. It had been the subject of many discussions in this forum. Uh it was well understood certainly by parliamentarians that government was considering the advice. Uh this is a piece of work as I indicated in my answer to your earlier questions that has been deep serious structured and has taken some time and it's now uh moved to the next stage.
>> Okay. But again, you haven't answered my question. So, I'm going to have to assume the answer is no. It wasn't an election. And if the answer is no, it's no. It was not an election commitment. Is that correct,
>> Senator? I've answered your question.
>> Right. So, the answer is no. It was not. Well, how about this one? Can you point to a specific election commitment uh that you would sell the 67 sites?
Senator, I can assure you that Labour went to the election confirming our intention to establish arrangements for our national defense that were fit for purpose that addressed the strategic environment that we face and there are a range of things that we've been discussing with communities with the public for some time that included the work that we' commissioned on the defense of estate includes the investments that we have made in improving recruitment and retention. It includes the investments in capability. Uh we have been working in a very clear considered and we have communicated about this consistently since coming to government. I will say as I said earlier uh much of this is to address a period of dysfunction in the government that you were part of where there were constant rotations in and out of senior uh ministerial roles in the defense portfolio. uh there was significant overprogramming. There was a failure to establish the arrangements that are necessary and our government deter is determined to remedy that.
>> It's a very long answer and I still didn't actually hear a no because my understanding is it was not an election commitment. Um just in terms of the time frame of the sales themselves, we've spoken previously about three uh having already been sold. What's now the time frame in terms of the balance of the sites?
Senator, um as we've described, uh the Department of Finance will be undertaking the devestment of the majority of sites. Defense will continue to devest um uh those six sites that have activities underway. I can now um just run through uh that list for you and the time frames around them. Um the London area transmitting site um we are working through a formal offer and anticipate that that site will be devested this year 2026. uh the Perth multi-user depot. Uh we will shortly appoint a real estate agent and the site will go through the normal open market process to find >> a proponent. Defense site Marabanong uh is a site we we are in the concluding stages of a multi-step um open market tender process. Um we intend to conclude the final stage of that in 2026 with the selection of a preferred developer and we would anticipate >> um uh that u moving forward in 2627. >> Uh one of the sites is Pialago South um that is a site near the end of the um camper runway. >> Yes. >> Um uh >> we will be working through the optimal devestment strategy there. We have had conversations with the ACT government over many years on their interest in um that land parcel and where it fits in the CRA East Broadacre strategy. Uh the Stokes Hill site in the Northern Territory um uh we will continue to divest uh and we'll work through the optimum devestment strategy. Uh and there's a site in Queensland called Streth Mure which is uh adjacent to the Shaw Water Bay training area and we'll work through that strategy for the remaining sites um that defense is responsible for preparing to transition to the Department of Finance. Um we will be working um over the next two years to um be as mature as we can in planning and transition of such to the department of finance. As the deputy prime minister has said a number of times, uh we fully understand that some sites will be relatively straightforward and able to be transitioned over the next two years and some sites will have more complications or more difficult challenges in that transition and we will continue to engage with the government on that planning and the appropriate time frames around those.
Just in terms of the three that have been sold that you referred to uh earlier today in the finance estimates yesterday the department gave evidence that they had no role in those sales. Is that correct?
>> Uh yes senator um defense undertook those devestments. There is a step in all um Commonwealth property devestments under the Commonwealth property framework where there is a consultation process with the department of finance uh and uh an approval by the minister for finance. That certainly happened in those cases but defense undertook the devestment action. Yes.
>> Okay. And that is the same process going forward or you said the department of finance you will actually be devesting them to the department of finance.
>> Yeah. So for those sites I just read out um uh where devestment was underway by defense, we'll keep those ones that I've just read into the record. >> The other sites um and it becomes maths at this point 60 67 - 3 - 6 um uh minus 12 that are leased sites. So um some of the cadet units are leased facilities. we will manage the wrapping up of leases uh and whatever that maths brings us to which is a number um that starts with a 50 and I'll I'll do the math shortly the department of finance will uh manage the devestment of those can I can I just ask
so in terms of again the estate audit three have been sold you've identified a timeline for some of them for the rest of them I'm assuming that could be in the future because there's no identifiable timeline yet And some of them as you say have complications like heritage listing etc. Defense knows who the owner of each site is. >> Yes. >> Okay. So in terms of that um last Wednesday when you put out your communication plan albeit after it was announced in the paper but that's no reflection on you that that's a government decision. Had the owners of all of the sites been informed
>> of the lease facilities? I'm sorry, Senator.
>> Uh, of the fact that their site was part of the estate sale >> or the estate audit?
>> I'm sorry, Senator. I'm not sure I understand your question.
>> So, there were 67 sites. you know, the owners of all of those sites. As we've already discussed this morning, um there's >> thousands of affected 80th men and women who woke up to that news and then they had the announcement. What about the
owners of each of the sites? Um so, um again going back to the maths, I'm an arts graduate, so it might get challenging for me. Of the three that have already been devested, um those transactions were concluded in um 2023 24 25. So separate then >> we haven't contacted them. I will take on notice whether we have directly communicated with the um owners from whom we lease the other 12 all the rest of them defense zones.
>> Ah right. So there are 12.
>> There are 12 leased properties. Yes.
>> Right. Would you take that on notice please and just find out a were they notified on Wednesday? B, if they were not, why not? Have they been notified? Um, uh, and on what days and by what means were they actually notified? >> We'll take that on notice. >> Thank you very much. That's 12 sites there. Um, in terms of the $1.8 8 billion in revenue uh that we have seen referred to by the minister as what this potentially will bring to the government. Can I ask you what's the funding profile for the 1.8 billion?
>> Uh Senator, uh we we I'm not in a position to describe that yet. the work that led to that estimate um both by the independent audit activity and the follow on defense verification um has taken uh an understanding site by sight of a market valuation where that's possible. Some
>> of the 67
>> yeah some sites aren't really easy to value. So um uh in the independent audit that was published last week, it describes in the final chapter where that work was done and where that more investigation would need to happen. >> But it is a a a good market tested valuation of the um market value of uh those sites. noting that the government agreed to now partially devest three and that means that will obviously change the market valuation and then we've also undertaken work at a site by sight basis and then grossed up the anticipated costs of devestment and their um costs were able to quite reasonably uh assess we we do this quite regularly in my term in this role we've devested uh a number of sites and so that is um that there are transaction costs and due diligence you undertake to prepare a site. We know that there will be environmental investigations uh and um contamination remediation requirements. We've talked already about work that we have kicked off to assess and manage heritage and history. Uh and there will be costs that we've built into our estimate which is replicating capability elsewhere and the costs of moving and transitioning people. So as an example on some sites um we will need to replicate uh higher security zone uh accommodation um based on the work that might move there. Uh we'll be doing some work around equipment that might need to be moved. If you go across all of the sites where defense people are and that is 46 sites and the work we'll need to do on the sites to be devested that that is the total number. I took on notice earlier this morning that we'll come back with the breakdown of what is movement, what is replication of capability, um what is um remediation work. Yeah.
>> Uh and just going back to our our previous conversation in relation to um when we think the sites will be sold. Um and and you've set out a time frame for the first few sites, noting that three have already been devested. Um is that over the next one year, two years, three years, four? What I'm trying to work out where's that time frame for the 1.8 billion.
>> Yeah. So the um so and we'll be establishing that in the the detailed work that's happening right now with the department of finance for the sites that will transition to the department of finance. They will be managing that process. Um and we will have an agreement on how sites transition uh to them for that process. But the principle we'll be working through under government direction is that um and I heard my colleagues at finance uh give evidence last night uh they'll be engaging a strategic advisor and um the the the intent will be that the majority of sites are are able to be released to market processes over the next two years. >> All of them that will be what we'll work through based on that transition. So I've given you the time frames on the ones that I'm going to remain responsible for. Department of Finance will be responsible working with their strategic adviser on how best to undertake that market approach >> and based on um uh how defense um proceeds in the important work of transitioning our people and capabilities to new sites.
>> Just in terms of 1.8 8 billion and I know that you made a joke um that you're an arts graduate and as such uh figures but so perhaps secretary um I could ask you what is the total defense budget this year?
Just checking that uh defense's appropriation that excludes uh ASD and the submarine agency and the nuclear power safety regulator is 58.1 billion >> right >> for the year 2526
>> 58.1 billion So just in terms of the 1.8 billion, what is that as a percentage of the defense budget over the same time frame?
>> Why don't we take that on notice, Senator?
>> Or is there [snorts] a maths wiz in the room that could quickly pull out a calculator?
>> The point I would make on why I think it's important to take that on notice,
>> probably a 5-year-old child, to be honest with you all that
I have to [laughter] get my calculator. um uh we don't know what years that that um both the spend and the revenue.
making is that's exactly right. There's a lot of we don't know yet. The figure has been announced. People have got excited um in particular sort of in terms of not being told about this process, but you're looking at a defense budget of 58.1 billion for this year and then 1.8 billion over a length of period of time that no one can actually uh give me. Um perhaps perhaps I could ask another question then. Um in terms of 1.8 billion, what does it actually get you?
>> About a fifth of a hunter frigot.
>> Thank you. That is actually the answer I was looking for. Thank you. That was very good. Could you do the math as well for me? Um no, but that's that that is actually the that is actually the problem. The 1.8 billion. You're selling off all of these. Exactly. The 1.8 billion for all of the pain that you're actually causing and all you're going to
respond to our routine here implication
of Senator Cash's question which Senator Cash I think rather indirectly asks um is is the purp what is our purpose and is it worth that that is your question I think Senator Cash the answer is that we want a defense asset base that is contributing to our ability to defend Australia. It is the core principle that informed the work of the audit uh and informs the work that the government is undertaking now. Um you're right that there are and Senator Schub has made this point that there are costs associated with devestment. There are also expected nonetheless to be a uh net return to the Commonwealth as a consequence of this process. There are also avoided costs uh associated with having an estate that is focused in the areas where we need it to be uh and is dedicated to the activities that we wish defense to undertake. uh and Miss Perkins can talk you through some of the costs associated with sustaining uh assets uh and facilities that are not meeting that core goal of and that core goal being the ability to defend Australia and protect our national interest.
>> Can I just go to then SP estimates that the sales of the Victoria barracks in Sydney and HMAS Penguin alone would gross 1.55 billion. So if the total gross sales which the minister has put on the record is 3 billion and the estimate is 1.55 is coming from those two. How [clears throat] much does the entire economics of this fall down if one or two sites themselves don't proceed to sale? But worse than that how much are the other sites actually worth?
Um Senator um I would start by saying we've undertaken um in support of the independent audit market valuation. So the assess and we we've updated those uh prior to government decision-m. So the basis on which the $3 billion is projected has a sound market basis to it and uh we have quite a bit of contemporary experience in successful devestments and I've shared some of those already. Um I I just echo the minister's point though the cost of sustaining the estate is is large and the cost of sustaining um underused and degraded sites uh and and magnificent sites with a significant heritage overlay is a substantial drain on um my budget to sustain the estate. And the independent audit uh uh includes a figure of about $und00 million a year that we would uh save in sustainment if we fully devested the sites listed. Um we have uh been you know continuing to refine that number. Uh the other important point they make and that we've done analysis on is that were we to stay on these sites both to support people there and their legal obligations for safety and security and heritage, we continue to invest enormous sums of money in them. They are very expensive for us to operate and they usually have um uh relatively small populations. um where there are larger populations, the work being undertaken is primarily office based work that [snorts] could be done in um less expensive to maintain populations um or are in such a degraded state we have to make some serious choices about them. And the the headline um around that is that we would project um you know about another $2.5 billion that we would need to spend to stay on those sites.
>> And that so that is that sorry that is that remediation or
>> that's just to keep them operating every day. So while the sale process will proceed and we have a high level of confidence around what we can get done this year and next and uh I think a good sensible uh evaluation of the market value ceasing to operate from these sites will also ease um the estate sustainment
>> I I'll come back to another line of questioning.
>> Just mindful of the time. I'll come back to you later, Senator Cash. All right. Um, Senator Schub.