by Peter Yule
moted them vigorously in Australia. In 1982 Eglo Engineering
formed a joint venture with Kockums to put together a bid – on
the basis that either side could opt out if it believed the bid would
not win.5
The currents of history and the vagaries of luck came together
to favour the campaign to build submarines in Australia. The
growth of the Australian economy since 1945 came to a sud-
den end in 1974 when the profligacy of the Whitlam government
coincided with the first oil shock to produce a severe recession
accompanied by rampant inflation. High unemployment and high
inflation continued throughout the Fraser government of 1975–
83, leading to a rising groundswell of opinion questioning the
central tenets of the ‘Deakinite settlement’ that had been the basis
of Australian public policy since the early years of federation.
The settlement had been based on the White Australia policy,
centralised wage fixing and protection of industry. It was inher-
ently introspective, defensive and dependent, fostering ‘a weak
domestically oriented business culture and a union mythology
of a workers’ paradise’.6 After a century of protectionism,
Australian manufacturing industry was inefficient, uncompetitive
and focused on making products for the small domestic market.
Unusually for a developed country, Australia’s exports were over-
whelmingly of primary products, leaving it highly vulnerable to
price fluctuations on world markets.
The nature and causes of and remedies for the structural defi-
ciencies of the Australian economy were fiercely debated through-
out the 1980s and a consensus emerged – transcending traditional
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political boundaries – that the Australian economy should be more
open and competitive, with a more flexible and better-educated
workforce. Support for this view came from the ‘dries’ in the Lib-
eral party, from within all factions of the Labor party and even
from notoriously militant trade union leaders. Equally, opposi-
tion came from across the whole traditional political spectrum.
Reform proved too hard for the Liberal government of 1975–83
and little was done until the election of the Labor government in
March 1983.
The refusal to take risks permeated all levels of the Fraser min-
istry. Hans Ohff remembers calling on the Minister for Defence
Support in the Fraser government to discuss building submarines
in Australia, but he ‘wouldn’t have a bar of it, saying “We can’t
build submarines – go away”’.
The final years of the Fraser government saw a wages explosion
destabilise the economy.7 The $4 billion deficit of treasurer John
Howard’s 1982 budget contributed to the worst recession since
the 1930s, with unemployment peaking at over 10 per cent in
mid-1983. Over 100 000 jobs were lost in the metal trades alone
between June 1982 and June 1983.
These circumstances prompted many left-wing union leaders
such as Laurie Carmichael, John Halfpenny and George Campbell
to support the Labor Party’s ‘accord’ with the union movement
to control wage increases. Beyond that, it inspired them to look
further than seeking a bigger share of the cake for workers, to
asking why the cake was shrinking and how it might be made
to grow again. Carmichael was one of the authors of Australia
reconstructed, a union plan inspired by the Swedish economy and
industrial relations system, calling for a more open and competi-
tive economy, with a more skilled and flexible workforce.8
The influence of the Swedish model was also strong in the
Labor Party, particularly among some of the key ministers in
the Hawke government. John Button wrote of his first visit: ‘I
had an impression of Sweden as a country where social harmony
coexisted with efficient and high quality manufacturing . . . it
seemed a contented, well-ordered place.’9 He was impressed with
the emphasis on research and development in Sweden and the
collaboration between government and industry, within the con-
text of a free market and an open economy. Similarly, Brian Howe
was attracted to the Swedish model of industrial relations in which
W E C A N ’ T B U I L D S U B M A R I N E S , G O A W A Y
43
the workforce was valued and involved. He saw manufacturing
conditions in Swedish factories as being much better for workers
than in Australia and was impressed with the enormous emphasis
on training and reskilling the workforce.
The consequence of these many interlocking factors was to
provide support for the campaign begun by Hans Ohff and John
White to build submarines in Australia. These influences are
reflected in a speech made in 1992 by Senator Robert Ray as
Labor’s Minister for Defence. He argued that, quite indepen-
dent of any military considerations, the decision to build the sub-
marines in Australia ‘was to benefit Australia, not only through
job creation but also through technology transfer, creation of new
skills, improved quality practices and . . . development of modern
management techniques and the introduction of new and more
progressive industrial relations practices’.10
In mid-1982 the economically and industrially focused cam-
paign run by Hans Ohff and Eglo Engineering to build submarines
in Australia came together with the navy’s nascent project to
replace the Oberons. The project director, Captain Graham White,
was sitting in his office in Campbell Park West in Canberra (where
old sailors were sent to forget the smell of the sea) when the secu-
rity guard called him and said there were two people who wanted
to talk about submarines. Soon White was listening to Hans Ohff
in his fluent, but strongly accented English saying: ‘I’m just a
square-headed German – if I annoy you, just tell me to leave.’ But
Graham White listened, while Hans Ohff and John White talked
about building submarines in Australia. Graham White had never
heard of Eglo before. He had thought there would be logistical
advantages in building in Australia, but did not know whether
submarines were within the capabilities of Australian industry.
The three talked for hours and Graham White became convinced
that ‘it was not only possible to build in Australia, but it was
essential’.11
C H A P T E R 6
The acts of the apostles
The commitment of Graham White and the project office to build-
ing in Australia had dramatic and far-reaching consequences for
the new submarine project. Most significantly, it harnessed sup-
port for the project from many groups that would otherwise have
been indifferent or even opposed to buying submarines, notably
the left wing of the Labor Party and the trade unions. Without
this broad base of support, it is likely that the project would have
been considered too hard and expensive and fallen victim to the
balance o
f payments crisis in the mid-1980s.
The project office joined Hans Ohff and John White as the
leading apostles for building the submarines in Australia, widely
preaching their gospel, the central tenets of which were industrial
regeneration, technology transfer, modular construction, quality
assurance and industrial relations reform.
In early 1984 a third force appeared when Jim Duncan, a for-
mer naval electrical engineer, was appointed to lead the South
Australian submarine task force created to get the submarines
built in South Australia. Duncan had served with Graham White
on HMAS Vampire and they shared a similar attitude to many
issues, notably the problems of Australia’s old naval dockyards
44
T H E A C T S O F T H E A P O S T L E S
45
and the navy’s lingering colonial dependence on Britain. Duncan
also had close links with Eglo Engineering, developed through
Eglo’s construction work at Port Adelaide. On 7 April 1984 he
recorded in his diary:
Lunch at home with John White from 1200–1730.
Discussion centred on philosophy of Eglo’s proposal. It also
served to bring John and I to a closer understanding of the
way we each think. John is a gifted person who genuinely
believes in the national issues at stake with this programme. I
feel very pleased we are fellow travellers. It would seem to me
that all the factors necessary for success of this programme
are synchronised in time and place.1
Jim Duncan realised that South Australia could not compete
against the political clout of New South Wales and Victoria and
the pressure to sustain the old dockyards at Cockatoo Island and
Williamstown. He saw that South Australia had to present the
case for a fresh site free from the constraints of the poor indus-
trial relations, inefficient work practices and outdated technical
processes in the old dockyards. Consequently, the case he put
together emphasised South Australia’s relatively good industrial
relations record and the possibilities for industrial regeneration,
involving issues such as modular construction, quality assurance
and the Australian adoption of high technology.2 Jim Duncan and
the South Australian premier, John Bannon, formed an effective
lobbying team, focusing attention on industrial modernisation and
undermining the chances of the traditional shipyards.
The challenges of logistic support had created some interest
within the navy for building the Oberons’ successors in Australia,
and the benefits from local production increased as military
equipment became more complex. Orm Cooper recalls that the
destroyer HMAS Perth was delivered from the United States with
no documentation and spare parts sufficient for only 18 months.
Planning for continuing support was inadequate and the navy paid
a fortune for both spare parts and documents. As deputy director
of naval matériel, Cooper had to send his people into the library at
the American navy base at Subic Bay to photocopy the documents
they needed.
Admiral Bill Rourke, in particular, ‘carried the torch for an
Australian build’ and did much to have the idea accepted (if ever so
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reluctantly) by the defence bureaucracy.3 While British support of
the Oberons was generally better than with Perth, the submarines
were still highly dependent on the Royal Navy and British compa-
nies for technical knowledge, supplies and spare parts. Cockatoo
Island had become proficient at refitting the Oberons, building up
both knowledge and a hoard of spare parts, but it was always
at the end of a long supply chain that could be easily disrupted.
During the Falklands War in 1982 it became impossible to get
spare parts for the Oberons. The navy believed building the new
submarines in Australia would lessen logistics dependence on an
overseas builder and navy.
However, better through-life support would not have been suf-
ficient justification to overcome the strong preference for overseas-
sourced equipment then held within the Defence Department. The
chief of air force technical services, Air Vice Marshall Lyndon
Compton, said: ‘Certainly in the RAAF we generally are not over
enthused about something being made in Australia . . . because it
usually leads us into a large management task, a lot of problems,
delays in deliveries, cost overruns, failure to meet performance and
so on.’4 The same feeling was widespread in the army, navy and
the defence bureaucracy. There were few contacts between defence
and industry and widespread scepticism about the capabilities of
Australian industry. The naval dockyards, with high standards but
slow and expensive work practices and ancient equipment, were
the limit of most naval officers’ knowledge of industry. Many
believed attempting to build submarines in Australia was an invi-
tation to disaster, a view shared by a large number of civilian
policy makers in Canberra.
Graham White realised that there would be strong opposition
to building in Australia so, with the encouragement of Hans Ohff
and John White, the case was developed and extended. Graham
White recalls that the team covered much ground that was com-
pletely new for a defence project in a rapid but comprehensive
learning process. They explored the problems and capabilities of
Australian industry, learnt of innovations such as quality systems
and modular construction, and investigated the macro-economic
impact of Australian construction.
One of White’s first moves was to ask the Australian Taxation
Office about the taxation impact of building the submarines in
Australia. He was thinking in terms of wages coming back into
T H E A C T S O F T H E A P O S T L E S
47
the government’s coffers as tax payments and money circulating
in the economy. The tax office said that nobody had asked them
a question like that before, but when they did a study they found
that the multiplier effects were dramatic. The argument that it was
more expensive to build in Australia never took this into account.
The financial case for building in Australia was taken further
by the South Australian task force in its 1984 ‘Study of the finan-
cial costs and benefits of constructing submarines in Australia’.
This showed that the Commonwealth’s increased tax revenues
would more than cover any extra cost associated with building
in Australia, which would also help counter Australia’s chronic
trade deficit and have a positive impact on the broader economy.5
Armed with these new arguments, the project team left the
sheltered confines of Campbell Park, not to go overseas with a
chequebook, but to go out to Australian industry to find out what
could and could not be done in Australia. They had to sell the
idea that it was possible to build the submarines in Australia and
persuade industry to accept the qua
lity requirements for defence
work.
There was much scepticism about the project in industry. Gra-
ham White recalls a presentation at a Business Council lunch after
which Brian Loton, the managing director of BHP, commented to
him: ‘We can’t do these things in Australia – give up on the idea.’
This attitude was understandable. Industrial malaise had
gripped Australian industry since 1974, and decades of protec-
tion had produced a narrow, inward-looking focus, creating pes-
simism about Australian manufacturing. The current model for
industry participation in defence projects was through ‘offsets’ –
work given to Australian companies by overseas suppliers who
had received contracts to supply defence equipment. However,
reports in 1981 and 1984 found that offsets had been of little
benefit except for the aerospace industry. They had failed to pro-
duce significant technology transfer and frequently the cost of the
offsets was simply added to the price of the equipment. Further,
only 25 per cent of defence offset commitments were ever com-
pleted and, of those that were, one company, Hawker de Havil-
land, received one-third.6 Industry needed to be convinced that
the submarine project offered more.
A key area was steel, because making and working special-
ist steels is essential for submarine construction. There was a
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widespread belief that Australia could not make the light, strong,
high-yield steel required, and at first the project team did not ques-
tion this. They made enquiries overseas to source steel supplies and
were surprised when foreign manufacturers replied that Bunge
Industrial Steels in Port Kembla was a world leader in high-yield
steel. The team was assured by Bunge’s chemist and production
manager that such steel could be supplied. Told 12 000 tonnes
would be needed, the production manager said Bunge could sup-
ply it in a fortnight if they worked double shifts.
After this, the project team began applying the same test to
everything: ‘You can’t build static converters in Australia’; ‘Who
says so?’ and they would go looking – often beginning with the
Yellow Pages – for Australian companies that made a particu-
lar product or were involved in a particular area. In most cases