ELECTION 2013 – Two per cent for real?
For defence will it matter who wins the election? On paper there is little to split the two major sides of politics. Both are committed to growing defence spending to 2 per cent of GDP. Both are committed to big ticket items such as the F-35 Joint Strike Fighter and building 12 submarines in Adelaide. Perhaps the biggest difference is the Coalition policy to fast-track the acquisition of Triton HALE UAVs so that they are operational in three to four years, as part of its broader border surveillance package aimed at “stopping the boats”. But even then current plans to acquire Triton under AIR 7000 Phase 1B should see the high-flying UAV enter service late this decade anyway.
All in all, defence has featured little in this election campaign to date (other than its cameo role in border security policy), and it is hard to think that too much will change after the election. Regardless of who wins, we will certainly have a new minister (not to mention a new defence materiel minister), given Stephen Smith’s announcement of his retirement from parliament. But a David Johnston or a Mike Kelly (Kevin Rudd’s anointed Smith successor) as MINDEF would face the same challenges, the most critical of which will be how to match Australia’s ambitious equipment acquisition strategy with a defence budget that has almost always failed to keep up with the funding growth required.
As we have written about on this page before, the later half of this decade and into the 2020s sees a raft of major acquisitions planned – AIR 6000, AIR 7000, SEA 4000, LAND 400, SEA 1000 – and it is likely based on current defence budget levels that the size and scope of these projects will have to be reduced, or some cut altogether.
For we do know that under Labor the defence budget will grow by just $359 million in 2013-14 and $304 million in 2014-15, before being cut by $89 million in 2015-16 and no less than $1 billion in 2016-17 (the year Labor has promised to return to surplus) – basically the defence budget will go backwards by not going forwards. And that is if Labor sticks to its latest pledge, as defence spending has bounced up and down like a yoyo over the past six years.
The Liberals, meanwhile, have promised to grow Defence spending to 2 per cent of GDP without outlining how that would be achieved.
ASPI has highlighted the depth of the challenge to reach 2 per cent of GDP (from today’s 1.59 per cent): “If the government wanted to smoothly transition by linear increments to a level of defence spending corresponding to 2 per cent of GDP in a decade’s time, an additional $35.5 billion would need to be found.”
And that is the size of the task facing a Tony Abbott-led government, given his pledge at the Liberal Party campaign launch that defence spending would indeed reach 2 per cent of GDP in a decade.
By my calculator $35.5 billion over 10 years is over $3.5 billion a year in extra funding, or more than three times the growth in spending needed just to keep pace with inflation. Further, it doesn’t seem like an extra $3-4 billion a year can be found in the next two-three years, given the federal budget’s deficit position, so that suggests the real funding growth being back-end in the latter half of the decade. That seems implausible without big cuts to government spending outside the defence portfolio, or much faster than trend economic growth later this decade (can a China-driven mining resource boom strike twice?).
Good luck to whoever is MINDEF arguing for that sort of defence funding growth in cabinet.
This editorial first appeared in the August-September issue of ADBR.