Intelligence expands to take on China and the new world order
Assumptions that informed Australia’s strategic plan are no longer certain
Each morning shortly after 11am, Scott Morrison is handed a topsecret intelligence briefing prepared by the Office of National Assessments, Australia’s peak intelligence assessment agency. The Prime Minister receives this carefully distilled summary on a custom-engineered iPad. There is no electronic transmission. Instead, the device is loaded each day at the ONA, delivered to the Prime Minister’s office, then returned to the ONA to be prepared for the next day’s outing.
The classified daily digest is a practice instituted by Malcolm Turnbull following a recommendation of last year’s Independent Intelligence Review. The former prime minister, an intelligence sceptic when he took office in 2015, became, in the words of one close observer, something of an “aficionado” when it came to the work of the Australian Intelligence Community and its six collection and assessment agencies, particularly the hi-tech Australian Signals Directorate. In the past, the ONA had declined to provide a regular daily brief for the Prime Minister’s office, but this year the IT-savvy Turnbull instituted a regime to his liking, which Morrison has continued.
In July last year, Turnbull also set in train the biggest shake-up of our intelligence realm in 40 years, a series of reforms Morrison will oversee. The overhaul comes at a time of unprecedented challenges for the AIC. All six of the intelligence agencies have to contend with the sheer speed of technological change in cyberspace as well as monitoring profound shifts under way in the international order.
Strains on the “rules-based global order” are manifest. Key assumptions that informed recent government strategic policy have been called into question, including the 2016 defence white paper’s confident assertion that the US would remain the preeminent global military power indefinitely.
There is now a consensus among the leaders of our intelligence agencies that Australia’s strategic outlook is more uncertain than at any time since 1942, when Australians feared military invasion by Japan. The shift in the US’s long-held strategic predominance in East Asia and the emergence of China as a genuinely global power are dictating a change in priorities among intelligence-collection agencies such as ASIO, which is moving away from a hitherto overwhelming focus on counter-terrorism.
This means a swing back to more traditional counterespionage work. For assessment agencies such as the ONA, it means greater resources being devoted to analysing regional developments in North and Southeast Asia and the South Pacific.
When our intelligence chiefs look at the world today, they generally nominate the “three Cs” — China, counter-terrorism and cyberspace — as their focus. While counter-terrorism remains a priority, China’s rise, including
Australia’s strategic outlook is said to be more uncertain than at any time since 1942
its growing espionage and influence operations in Australia, is drawing ever more attention and resources. Intelligence sources say China has a keen interest in gleaning Australia’s defence industry secrets.
The intellectual property of local companies supplying hitech equipment to the Australian Defence Force is a prime target. Information, including about leading-edge technologies such as radar and broad-area surveillance systems, is highly sought.
China’s espionage efforts in Australia are conducted on an “industrial level”, one top government official has said. In the cyber realm, carefully targeted efforts are made continually to penetrate government, business, research centres and higher education computer networks.
Beijing’s foreign-influence operations in Australia also have increased steadily in recent years, including a sharp focus on the attitudes of the 160,000 Chinese students studying in Australia and a growing sway over Chinese-language local media outlets. As one of Australia’s most experienced former intelligence chiefs sums up, the China threat challenges government in ways they haven’t been challenged be-
fore: “It’s so persuasive, so multidimensional, so co-ordinated, so clever and so asymmetric.”
These evolving threats come amid a technological revolution that is changing the way our agencies operate. It requires the development of new capabilities to sift through the vast and growing digital domain to identify unusual activity, suspicious trends and tiny nuggets of vital information, and to monitor and combat cyberespionage, hacking and online disruption. Coming to grips with issues such as big data, biometrics and surveillance technology, encryption, artificial intelligence and cyber security has already had a significant impact on the way the AIC goes about its business, influencing the culture and practice of intelligence at the tactical and operational level through to strategic assessment.
The collection agencies, including the Australian Secret Intelligence Service, which remains heavily reliant on gathering human intelligence from on-theground networks of spies and sources, are making crucial investments in data analytics.
This shifting technological focus requires new levels of co-operation, which has not always been a strong point of the intelligence community. Joint intelligence centres have emerged in key areas such as cyber security and counterespionage, drawing on expertise from across the AIC as well as the private sector. The sheer breadth of the cyber challenge — from concerted attacks on government computer networks by state actors to attacks on businesses by criminal syndicates — is forcing agencies such as the ASD, which covertly collects intelligence by intercepting telecommunications and computer networks — to undertake a cultural shift, discarding the cloak of secrecy that has always hidden them from public view.
All of this has prompted the biggest overhaul of our intelligence community since the height of the Cold War. Interviews with those inside and outside the AIC have helped to piece together the motivations behind the reforms, as well as the potential impacts, benefits and challenges.
The main reform consists of two major structural changes to the current working of the AIC: the creation of a powerful new agency within the Department of the Prime Minister and Cabinet, the Office of National Intelligence, and the establishment of a broad-ranging Department of Home Affairs. The critical question is whether the new arrangements will enable the delivery of better, more timely and more upto-date intelligence that government can confidently act on. Will the reforms make for a more secure Australia? In early 2016, a classified report prepared jointly by ASIO and the ONA alerted the government to the extent of clandestine foreign interference in the Australian body politic. Its focus was China, and it opened Turnbull’s mind to the dimensions of Beijing’s espionage efforts. In May, ASIO director-general of security Duncan Lewis told a Senate committee that espionage and foreign interference in Australian interests was occurring on “an unprecedented scale”. Without referring to China by name, Lewis told the committee that foreign actors were attempting covertly to “influence and shape the views of members of the Australian public, the Australian media, officials in the Australian government and members of the diaspora community here”.
He said foreign actors from a range of countries were seeking to access “privileged and/or classified information on Australia’s alliances and our partnerships, our position on international diplomatic, economic and military issues, on our energy, on our mineral resources and our innovations in science and technology”.
These revelations came as Turnbull, in his early months in office, expressed unhappiness about the ONA’s intelligence reports and their lack of timeliness and relevance for policymakers. Of particular concern were the agency’s China assessments. The prime minister wanted a more indepth understanding of the internal dynamics and systemic risks of the Chinese economy. “He felt he wasn’t learning a lot more from the ONA than he could get from open sources,” observes one senior government insider.
Turnbull also was concerned about the differing assessments he was getting from individual agencies, and the loosely federated AIC’s inability to speak with one clear voice on overall information-collection priorities. Awakening government to the growing threat of Chinese interference generated hard questions about our agencies’ capacity to deal effectively with the challenge.
These concerns helped prompt Turnbull to commission last year’s Independent Intelligence Review, conducted by two former top public servants, Michael L’Estrange and Stephen Merchant. It was the third and most important intelligence inquiry since Robert Marsden Hope’s landmark 1977 Royal Commission on Intelligence and Security. The review followed inquiries conducted by Philip Flood in 2014 and Robert Cornall and Rufus Black in 2011. Flood recommended, and successive governments have accepted, a requirement for periodic independent examinations of the AIC.
L’Estrange and Merchant spent seven months conducting their review. In June last year, they delivered their report. They found that while the individual intelligence agencies were performing well, with high levels of professionalism, there was a need for much stronger top-down direction of the AIC, as there was in Australia’s two closest intelligence partners, Britain and the US. They argued for more effective co-ordination of the AIC, which led them to reassess the role of the peak agency.
Now 40 years old, the ONA prides itself on being the only intelligence assessment agency in the world with statutory independence. Its core mandate is to report and assess “international matters that are of political, strategic or economic significance to Australia”. Last year’s review found that its reports were well informed and held in high regard by Australia’s Five Eyes intelligencesharing partners (the US, Britain, Canada and New Zealand). But while acknowledging the ONA’s highly skilled staff and achievements, it noted: “We consider that its reporting and assessments could be more directly connected to the needs and requirements of policymaking, particularly in relation to economic issues.”
But the review went much further than recommending ways to expand the breadth and depth of ONA’s assessments and its consultations with experts outside government. It proposed an overhaul that finally would implement the vision for proper co-ordination within the AIC that was outlined four decades ago by the Hope royal commission. The review’s key recommendation was to replace the ONA with a new Office of National Intelligence, also located in the prime minister’s portfolio, which would provide overall policy direction and co-ordination of the AIC.
On July 18 last year, Turnbull announced the government had accepted this recommendation. At the same press conference, he revealed the government’s landmark decision — which was not a recommendation by the review and not within its remit: to estab- lish a powerful home affairs portfolio, bringing domestic security agencies, including ASIO, under a single minister. These two decisions are driving the biggest structural changes to the AIC since the reforms that flowed from Hope.
Hope recognised the government needed a broader range of intelligence sources beyond the defence and domestic security spheres then dominated by the Joint Intelligence Organisation, located in the Defence Department, and ASIO. The setting up of the ONA, which reported directly to the prime minister and conducted overall co-ordination of the foreign intelligence agencies, was the main reform that followed.
Hope intended that the ONA eventually would become responsible for the overall leadership and co-ordination of the AIC, including overseeing national intelligence-collection priorities, but successive governments have never given the organisation (still only 150 strong) the necessary resources to do the job. With the global expansion of the digital realm further blurring the old distinctions between foreign and dom- estic intelligence collection, Merchant and L’Estrange concluded that the case for the AIC to become more integrated, particularly in respect of technical capabilities such as data analytics and cyber tools, was compelling.
Next month the ONA will be replaced by the ONI, with ONA chief Nick Warner becoming its first director-general. The AIC will become the National Intelligence Community. Warner, a renowned diplomatic troubleshooter, joined ONA when it opened its doors in February 1978 and led ASIS from 2009 to late last year. As director-general of the ONI, he will have direct access to the prime minister and to the heads of the other intelligence agencies in the NIC.
The principal task for the ONI will be to oversee a greatly expanded intelligence community. The NIC will be composed of 10 organisations: the original six that comprise the AIC plus the intelligence functions of the Australian Federal Police, the Home Affairs Department — principally the Australian Border Force and the Office of Transport Security — together with the Australian Criminal Intelligence Commission and the Australian Transaction Reports and Analysis Centre, the financial intelligence agency. All these newcomers to the NIC are within the Home Affairs portfolio.
Warner will lead an intelligence realm consisting of more than 7000 people and with an annual budget now topping $2 billion. It’s an ambitious mission. The ONI will oversee the priorities for intelligence missions, drive more efficient spending, improve data sharing, evaluate the performance of all NIC agencies and plan investment in new capabilities such as collaborative efforts in data analytics.
With 300 staff, the ONI will be double the size of the ONA. Its analytical arm will increase to more than 100 area specialists, and its Open Source Centre, which collects publicly available information from around the world, will have 40 people.
Critics of the new ONI architecture argue that intelligence assessment — so integral to the culture of the old ONA — is likely to take a back seat to the role of coordinating the NIC. The risk is that the ONA’s traditional priority of providing independent strategic intelligence assessments to government will be subsumed by the increased demands for current intelligence briefings as well as by its extensive new oversight tasks. Some also believe a hugely enlarged co-ordination function will be an unnecessary encumbrance for an intelligence community that is already more intertwined and collegiate than at any time in its history.
But the seamless integration of our intelligence agencies into a genuinely national enterprise also could be threatened by a new behemoth. The Department of Home Affairs, which has 23,500 staff and a $3bn-plus budget, spans a vast range of agencies and activities, from refugee policy and counter-terrorism co-ordination to cybercrime and customs and border protection. It is a very wide brief. About 40 per cent of the enlarged NIC falls under the Home Affairs umbrella, including ASIO. The secretary, the hard-driving, ambitious Michael Pezzullo, together with his ambitious portfolio minister, Peter Dutton, will exert a significant influence on the department’s agencies, including assigning spending priorities.
Pezzullo’s greatly enlarged domain will intersect in several key areas with Warner’s new co-ordination role as Australia’s intelligence supremo. Home Affairs has responsibility for counter-terrorism, cyber-security policy and counter-foreign interference. The sheer size of the portfolio and its newly joined intelligence agencies could drive a competition with the ONI for paramount influence within the NIC. Much will depend on harmonious working relations between the secretary of Home Affairs and the director-general of the ONI.
The final piece in the Coalition’s intelligence restructure — notably, also not a recommendation of last year’s review — was the shift of ASIO from the at- torney-general’s domain to Home Affairs. Before he received the review’s findings, Turnbull had been persuaded by Dutton and Pezzullo of the merits of bringing the various domestic security agencies into one portfolio, along the lines of British Home Office.
Since ASIO was formed, soon after World War II, amid fears about KGB spying in Australia, it has resided in the attorney-general’s portfolio. Like the ONA, it is a statutory authority, with the independence of its intelligence assessments guaranteed under the Australian Security Intelligence Organisation Act 1979. But the move to the Home Affairs portfolio may well produce divided loyalties and constrain the freedom of manoeuvre ASIO has traditionally enjoyed.
Of the six original AIC organisations, ASIO has undergone the most profound change since the turn of the century and the advent of the global terrorism threat. It remains the only Australian intelligence agency that performs both collection and assessment functions. At the end of the Cold War, it was downsized, derided and affected by poor morale. Now comfortably ensconced in its lavish headquarters across Lake Burley Griffin from the High Court, ASIO is riding high and will celebrate its 70th birthday next year. It now has a lot more people (about 2000), a lot more money (the annual budget tops $500m), far more sophisticated technology and much greater international reach.
Since 2001, counter-terrorism has been its main focus and swallowed the lion’s share of its resources. But now ASIO is coming back to its roots and dealing with a growing threat that dominated its workload during the Cold War: counterespionage. Here China and Russia remain at the top of the list of countries trying to steal Australia’s secrets.
For nearly two decades our intelligence agencies have been stretched by a very high operational tempo and increasing demands from government. While it is a matter of debate in the community whether policymakers have been getting the kind of assessments they need to inform longer-term decisions affecting our security, it is unarguable that our intelligence has been critical to the success of Australia’s counter-terrorism response and farflung military operations.
The AIC has exerted a powerful sway over ministers for years, growing rapidly and receiving extraordinarily generous funding, that is the envy of other arms of government. The role of the Department of Foreign Affairs and Trade, traditionally a vital source of intelligence, has been progressively diminished and its diplomatic footprint in areas of vital interest to Australia reduced. A strong case can be made for increasing the investment in our diplomatic service rather than dispensing ever more funding for intelligence gathering.
Senior intelligence sources acknowledge that the broad sweep of security challenges posed by state-sponsored cyber threats and China’s seemingly inexorable rise remain formidable. It will be crucial to shape the AIC to address these changes. The critical test of the Coalition’s overhaul will be whether the new NIC, led by the ONI, will produce enhanced strategic analysis and a superior flow of intelligence to government. The Home Affairs Department’s ability to oversee its enlarged intelligence realm, and to avoid internal friction, also will be crucial.
Forty years ago, Hope stressed the requirement for Australia to have its own intelligence-assessment and collection capabilities. He urged the government to continually scrutinise the benefits against the costs to Australia from its intelligence partnerships with other countries.
If our intelligence chiefs are right, the coming decades will bring the emergence of a broader and more complex array of national security threats. Technological advances will pose new risks, as will the changing power balance in the Asia-Pacific and the unpredictable consequences of climate change. As we enter a new age of strategic anxiety, policymakers will demand not only good intelligence and adroit diplomacy but also a greater level of self-reliance.
Our national capabilities, ranging from foreign intelligence operations to more pervasive surveillance technologies, will necessarily keep expanding, but so will the challenges, as the focus shifts to the new order emerging in Australia’s region. Patrick Walters is executive editor of The Strategist at the Australian Strategic Policy Institute. This is an edited extract from his essay in the latest issue of Australian Foreign Affairs, out on Monday.
‘(Turnbull) felt he wasn’t learning a lot more from the ONA than he could get from open sources’
SENIOR GOVERNMENT INSIDER