Australia's sovereign capability reckoning – why the system is no longer fit for purpose

Host Steve Kuper is joined by former navy logistician Dave Grosvenor and chair of the Gravity Group Steve Hayes for a wide-ranging discussion on Australia's sovereign capability, industrial resilience and the growing gap between strategic risk and national preparedness in this episode of the Contested Ground podcast.

The conversation opens with a blunt assessment of Australia's strategic vulnerability, with the argument that it is no longer theoretical but "empirically established" through a growing body of evidence. The panel examines what concrete indicators – ranging from supply chain fragility to operational dependence on external partners – most clearly demonstrate this exposure, and why existing frameworks such as the Defence Strategic Review did not go far enough in diagnosing the scale of the challenge.

A key theme is urgency. The guests argue that incremental reform and repeated reviews are insufficient, making a comprehensive national audit of sovereign capability essential now rather than later. They explore how wargaming outcomes and scenario analysis increasingly point to Australia's limited resilience in the face of prolonged disruption, particularly across critical supply chains and industrial dependencies.

The discussion then turns to the structural limits of market-driven solutions. The panel outlines how market failures, foreign subsidies and competing international industrial strategies distort outcomes for Australian industry. They also unpack the "theory of the second best" in practical policy terms, arguing that partial reforms in a distorted global system can sometimes worsen outcomes rather than improve them. The debate extends to the real-world cost of inaction, framed not just in economic terms but in strategic and operational risk.

Attention shifts to what a national audit would need to deliver, including whole-of-government visibility, cross-sector integration and measurable outcomes rather than another cyclical report. The guests stress the importance of avoiding bureaucratic capture and ensuring the process translates into actionable reform rather than analysis paralysis.

The conversation then explores the policy tools available to government, including long-term procurement, sovereign industry funds, and strategic industrial zones. Particular focus is given to the most under-utilised levers in Australia's current policy toolkit and the skills gaps that continue to undermine sovereign capability ambitions.

International comparisons feature prominently, with the Republic of Korea highlighted as the most relevant model for Australia. The panel discusses Korea's long-term policy consistency, export-driven industrial strategy and state-enabled industrial scaling while questioning how much of that approach is realistically transferable to the Australian context.

Institutional reform is another focal point, with discussion of proposals for a dedicated Ministry of Sovereign Industry. The guests examine how such an institution might interact with Defence, Treasury and industry departments, and whether Australia can maintain continuity of strategy across electoral cycles without a dedicated anchor for sovereign capability policy.

The episode also addresses public trust and communication challenges, emphasising the need for transparency in how sovereign risk is communicated to avoid unnecessary alarm while strengthening social cohesion and democratic engagement.

Finally, the panel considers implementation realities – what can be achieved within a single parliamentary term, how bipartisan consensus might be built, and the respective roles of states, territories and private capital in delivering large-scale industrial transformation.

In closing, the discussion returns to first principles: what motivated the push for a national audit, how lived experience in procurement and logistics shapes the analysis, and what success would look like for Australia if it meaningfully closes its sovereign capability gap over the next decade.

Enjoy the podcast, The Contested Ground team