Since 2007, the Defence Materiel Organisation has run an office charged with boosting Australia's defence exports. The Defence Export Unit, as it was initially known, was established with a budget of $34 million. It had a relatively inauspicious start – in 2009 it was unable to conduct its own business and strategic planning so called in the consultants. Shortly thereafter, its name was changed to Team Australia, and the unit adopted a strategy of mustering the many and varied Australian defence industry companies under a national banner at trade shows around the globe. In 2012, the same office was rebranded and relaunched as the Australian Military Sales Office.

In Senate Estimates last year, the Department of Defence concluded that in the seven years since the initiative was launched, over 240 companies had participated in export activities, helping to achieve industry contracts of over $760 million. It seems a reasonable return, but is it, given that Australia is the 13th largest spender on military hardware globally?

Australian and Australian-based defence companies have had some success in exporting to the rest of the world. New South Wales company Quickstep now produces the tail fin component for the Joint Strike Fighter, a contract worth more than $139 million over the next 14 years. This success came with federal and state government assistance totaling at least $14 million.

The Australian operations of French defence company Thales have also had some success in exporting their Bushmaster vehicle (pictured). The Bushmaster has been a successful project, its introduction perfectly timed for the expansion of Australian Defence Force (ADF) operations in Afghanistan; its sturdy design is believed to saved many soldiers' lives. Thales has sold Bushmasters for use with the Netherlands military, UK Special Forces, and most recently it sold four of the vehicles to the Japanese Self Defence Force.

Another success is the Australian-owned and publicly-listed Austal, which has constructed patrol boats for militaries in the Middle East and was selected as one of two companies to build Littoral Combat Ships for the US Navy. There have also been positive noises about the export potential for radar technology developed by CEAFAR and currently being retrofitted to the Royal Australian Navy's Anzac class frigates.

But compared to Australia's status as a major purchaser of military equipment, our defence industry could do better as an export industry. Part of the problem is our necessary dependence on Foreign Military Sales from the US and the relative lack of integration of our defence industry companies in US military supply chains. The bigger problem though, is that it is not clear what Australia's comparative advantage in defence industry is.

As the shape of ADF evolves in response to budgetary constraints, a changing strategic environment, and emerging defence technology, it will be important to assess what type of defence industry Australia should specialise in. One area ripe for investment is the emerging field of autonomous and unmanned underwater (as well as surface) vessels. DSTO is doing some work in this field and the Royal Australian Navy is sponsoring some innovative research, but it is far from clear that Australia is seriously investing in this technology. It makes sense for Australia to be a world leader in the development, production, and export of autonomous underwater vehicles (AUVs). We have a skilled technological workforce, access to sophisticated defence technology, excellent defence scientists, and trusted collaboration linkages with the US Department of Defense and US defence industry. Most importantly, we have a pressing need for this kind of technological development – our large coastline and small population and military are pointing towards the development of AUV solutions.

Yet Australia does not have a good track record of embracing this kind of technology. The Royal Australian Air Force is years behind the debate on unmanned aerial vehicles (UAVs), and has only a small section charged with thinking about how to integrate UAVs into the RAAF force structure. The better example is the step-change investment into UAVs undertaken by Israel during the mid-1990s. Facing the dilemma of being a small country with a pressing need to innovate and maintain a defence technology edge, Israel disproportionately invested in the development of UAV technology. Today, Israeli companies lead the world in export sales of UAVs. Even the UAVs Australia deployed in Afghanistan were Israeli produced.

If Australia is to modernise its defence force at a cost of several hundred million dollars over the next 15 years, it needs to also be thinking about how to modernise its defence industry. A critical part of that will be working out where Australia's comparative advantage lies – what we can build that both the ADF and the rest of the world wants.

Photo by Flickr user ISAF Media.