EXPLANATORY STATEMENT
Issued by authority of the Minister for Defence Industry
Industry Research and Development Act 1986
Industry Research and Development (Defence Export Research and Development Program) Instrument 2026
Purpose and Operation
Section 33 of the Industry Research and Development Act 1986 (the IR&D Act) provides a mechanism for the Minister to prescribe programs, by disallowable legislative instrument, in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs.
The Minister for Industry and Science has, under subsection 33(6) of the IR&D Act, delegated the Minister’s power under subsection 33(1) to the Minister or Ministers responsible for the administration of indigenous sensitive products and supporting services of Australia’s defence industry sector under the Defence Act 1903, to prescribe the Defence Export Research and Development Program (the Program). This is currently the Minister for Defence Industry.
The statutory framework provided by section 33 of the IR&D Act enables a level of flexibility to provide authority for Commonwealth spending activities in relation to industry, innovation, science and research programs. This allows the Government to respond quickly and appropriately to the need to implement innovative ideas and pilot programs on an ongoing basis and as opportunities arise. Prescribing programs in legislative instruments provides transparency and parliamentary oversight of Government programs and spending activities, while reducing administrative burden on the Commonwealth.
Once a program is prescribed by the Minister under section 33, subsection 34(1) allows the Commonwealth to make, vary or administer arrangements in relation to activities under the prescribed program. Arrangements may include contracts, funding agreements or other arrangements, and may provide for money to be payable by the Commonwealth to one or more third parties. The power conferred on the Commonwealth by subsection 34(1) may be exercised on behalf of the Commonwealth by a Minister, an accountable authority of a non-corporate Commonwealth entity, or by their delegate under section 36.
The purpose of the Industry Research and Development (Defence Export Research and Development Program) Instrument 2026 (the Instrument) is to prescribe the Program. Although the Program will involve the commitment of money by the Commonwealth, funding for the Program will be fully sourced from amounts paid by participating foreign governments to the Commonwealth and credited to the Defence Endowments, Bequests and Other Trust Moneys Special Account 2019 (the Special Account).
Under the Program, the Commonwealth, represented by the Department of Defence (Defence), will enter into arrangements with foreign governments to facilitate the development and adaptation of defence capabilities that are manufactured by Australian manufacturers for supply, whether directly or indirectly, to foreign governments. Arrangements will be entered into with foreign governments and Australian manufacturers. An example of a defence capability that may be the subject of arrangements under the Program is the Jindalee Operational Radar Network (JORN) Over The Horizon Radar (OTHR).
All expenditure under the Program will be sourced directly from the foreign governments participating in the Program. Prior to any costs falling due, a participating foreign government will make payment to Defence to be held on trust and credited to the Special Account. When costs become payable (in accordance with the arrangement between Defence and the manufacturer or the arrangement between Defence and the foreign government), funds will be debited from the Special Account in accordance with the terms of the relevant arrangement. The Program will not involve any expenditure beyond the amounts credited to the Special Account by foreign governments in accordance with their agreements with Defence.
The purpose of the Program is to facilitate export opportunities for Australia’s defence industry through research and development, while ensuring that Australia’s defence capability needs are met. The Program will support increased defence capability research and development and the subsequent manufacture of adapted capabilities for supply, whether directly or indirectly, to the receiving foreign government. This will result in significant benefits for Australian defence industry, including workforce retention and skills development, and for the Commonwealth’s defence capability needs, including supply chain surety. The Program represents an opportunity to enhance Australia’s strategic relationship with trusted foreign government security partners through the export of defence capabilities and the sharing of research and development outcomes, as approved by Government.
The Program will be delivered by Defence.
The Program complements the Defence Industry Export Program, which provides funding for the manufacture, supply and sustainment of defence capabilities that are manufactured by Australian manufacturers for supply, whether directly or indirectly, to foreign governments. The Industry Research and Development (Defence Industry Export Program) Instrument 2024 prescribes that program under subsection 33(3) of the IR&D Act. The two programs share the same purpose, which is to facilitate export opportunities for Australia’s defence industry while ensuring that Australia’s defence capability needs are met.
The decision for the Commonwealth to enter into arrangements with foreign governments for the development and adaptation of defence capabilities, for supply (whether directly or indirectly) to the relevant foreign government, will be made by the Government (through Cabinet or one or more responsible Ministers). The Government will also make the related decision to enter into arrangements with Australian manufacturers to undertake those actions.
The implementation and administration of those arrangements may be undertaken by a Program Delegate. The Program Delegate is a Senior Executive Service (SES) officer who holds delegations under Defence’s general financial framework, including delegation under the Public Governance, Performance and Accountability Act 2013 and sections 34 and 35 of the IR&D Act. The Program Delegate can take actions such as entering into arrangements with foreign governments and Australian manufacturers, in accordance with Government decisions, and authorising payments in accordance with those arrangements.
Decisions by a Program Delegate will not be subject to external merits review, because of the close connection between those decisions and the decision by Government to enter into arrangements. A decision to enter into an arrangement with a foreign government is a policy decision of high political content. The Administrative Review Council has recognised that such decisions should be excluded from merits review (see paragraphs [4.22]-[4.30] of What decisions should be subject to merits review? available at https://www.ag.gov.au/legal-system/administrative-law/administrative-review-council-publications/what-decisions-should-be-subject-merit-review-1999). Entry into an arrangement with the relevant manufacturer for the production of the defence capability will be essential to facilitate the arrangement between the Commonwealth and the foreign government. Spending decisions made by a Program Delegate under the Program will be in accordance with the terms of such arrangements.
Persons who are otherwise affected by decisions or who have complaints about the Program will have recourse to Defence. Defence will investigate any complaints about the Program in accordance with its complaints policy and procedures. If a person is not satisfied with the way Defence handles the complaint, they may lodge a complaint with the Commonwealth Ombudsman.
Statement of the Relevance and Operation of Constitutional Heads of Power
For the purposes of subsection 33(3) of the IR&D Act, the legislative powers in respect of which the Instrument is made is the trade and commerce power in paragraph 51(i) of the Constitution.
Trade and commerce power
Section 51(i) of the Constitution empowers the Parliament to make laws with respect to ‘trade and commerce with other countries, and among the states’.
In that regard, the Program prescribed by the Instrument is aimed at facilitating international trade in defence capabilities.
Further details of the Instrument are set out at Attachment A.
Authority
Section 33 of the IR&D Act provides authority for the Instrument.
Consultation
In accordance with section 17 of the Legislation Act 2003 (Legislation Act), the Department of Industry, Science and Resources was consulted on the Instrument.
Before the Instrument was made, Defence consulted with the Treasury, the Department of Finance, the Department of the Prime Minister and Cabinet, and the Department of Foreign Affairs and Trade about the Program.
Parliamentary scrutiny
The Instrument is subject to disallowance under section 42 of the Legislation Act.
A Statement of Compatibility with Human Rights for the purposes of Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is set out at Attachment B. The Statement provides that the Instrument is compatible with human rights as it does not engage any of the applicable rights or freedoms or raise any human rights issues.
The Instrument is made by the Honourable Patrick Martin Conroy MP, Minister for Defence Industry, in accordance with the requirements of section 33 of the IR&D Act.
Attachment A
Details of the Industry Research and Development (Defence Export Research and Development Program) Instrument 2026
Section 1 Name
- This section provides that the name of the instrument is the Industry Research and Development (Defence Export Research and Development Program) Instrument 2026.
Section 2 Commencement
- This section provides that the instrument commences on the day after it is registered.
Section 3 Authority
- This section provides that the instrument is made under section 33 of the Industry Research and Development Act 1986 (the IR&D Act).
Section 4 Definitions
- This section provides for definitions of terms used in the instrument. The defined terms are ‘Act’, being the Industry Research and Development Act 1986 and ‘program’, meaning the Defence Export Research and Development Program prescribed in subsection 5(1) of the instrument.
Section 5 Prescribed program
- Subsection 5(1) prescribes the Defence Export Research and Development Program (the Program) for the purposes of subsection 33(1) of the IR&D Act. Under subsection 5(2) the Program provides funding for the development and adaptation of defence capabilities that are manufactured by Australian manufacturers for supply, whether directly or indirectly, to foreign governments. Such research and development may result in adaptations or evolutions to the capability, which Australia would then retain for current or future sovereign or export programs.
- Subsection 5(3) provides that the purpose of the Program is to facilitate export opportunities for Australia’s defence industry through research and development, while ensuring that Australia’s defence capability needs are met.
Section 6 Specified legislative power
- This section specifies, for the purposes of subsection 33(3) of the IR&D Act, that the instrument is made in accordance with the power of the Parliament to make laws with respect to trade and commerce with other countries, and among the States (within the meaning of paragraph 51(i) of the Constitution).
Attachment B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Industry Research and Development (Defence Export Research and Development Program) Instrument 2026
This Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Instrument
The Instrument provides legislative authority to expend funds in relation to the Defence Export Research and Development Program (the Program).
Under the Program, the Commonwealth (represented by the Department of Defence) will enter into arrangements with foreign governments to facilitate the development and adaptation of defence capabilities that are manufactured by Australian manufacturers for supply, whether directly or indirectly, to foreign governments. The Commonwealth may enter into corresponding arrangements with Australian manufacturers for this purpose. These arrangements will be carried out in accordance with decisions made by Government to enter into arrangements with foreign governments and Australian manufacturers. Under an arrangement with a foreign government, the foreign government will make payments to the Commonwealth to be held on trust, which will be credited to the Defence Endowments, Bequests and Other Trust Moneys Special Account 2019 (the Special Account). The Commonwealth will then make corresponding payments to the relevant Australian manufacturer from the Special Account, which will be debited accordingly.
The Program will facilitate export opportunities for Australia’s defence industry through research and development, while ensuring that Australia’s defence capability needs are met.
Human rights implications
The Instrument does not engage any of the applicable rights or freedoms.
Conclusion
The Instrument is compatible with human rights as it does not raise any human rights issues.