Defence Update

At least that was the aim last year when Mr Paul Dibb presented his Defence Capabilities Report. But not long after that, Defence spending came under the axe and Mr Beazley steadily has been retreating to various fallback positions. Since then, the 1986/87 Defence budget finished with a zero real growth position and the mini-Budget decisions will see 1987/88 with a minus one percent real growth.

However, Beazley believes the $350 million cut back on forward estimates for 1987/88 has to be looked at in the context of a total Defence Budget of close to $7. 5 billion, of which $2. 4 billion should be spent on capital equipment and facilities.

A side issue, that does not help Defence funding, is the proposed sale of a ‘substantial’ shareholding in the Government Aircraft Factory, Victoria. (More on that later). To soften the mini-budget blow, Minister Beazley was able to get Cabinet agreement to some key equipment items which have major ramifications down the line. A further order of 25 Sikorsky Black Hawk helicopters for Army support roles was announced and has been costed at $500 million. This takes the Sikorsky order for the Australian Defence Force to 55 – 16 Seahawks for the RAN and 39 Black Hawks for the RAAF/Army.

The Army heaved a collective sigh of relief with the announcement, parallel to the mini-Budget, that the production run for the new combat radios, known as Project RAVEN, would start up soon. The contract for the production of 2000 HF and 3900 VHF radios with ancillaries is worth $350 million and will be undertaken by Plessey Pacific Defence Systems Pty Ltd at its plant at Meadowbank, NSW. Most will go to the Army but some will be used by the RAAF and RAN.

Other announcements designed to take the ‘heat’ out of the funding cuts in Defence included a near $20 million contract with Sonobuoys Australia to produce more Barra sonobuoys for the RAAF’s anti-submarine warfare P-3C Orion aircraft. Sonobuoys Australia is a partnership between AWA and Plessey. Another project confirmed was the award of a $18 million contract to International Harvester Australia Ltd to replace the Army’s fleet of semi-trailers and prime movers with 88 prime movers and 115 semi-trailers and support equipment.

All these projects endorse Mr Beazley’s self-reliant Defence posture, although some of them stretch well down the track and do not require significant funding in the immediate future which continues to be dominated by the need for overall Government spending restraints.

As for Budgets and projects already on stream, in the pipeline or pending, the RAAF seems in little danger of having its F-18 programme disrupted by Government expenditure cuts. The programme remains set to run to about 1991 as planned. Any additional orders would stretch the production run out further. However, Minister Beazley indicated at the announcement of the contracts for the new Navy submarines that a run down in spending big sums on the F-18s was in sight and that this would mean funds for other projects.

The Sikorsky helicopter order has been augmented twice since the original Seahawk announcement and there is every prospect of additions to the present 55. The RAAF is also keen to get plans for in-flight refuelling in the Boeing 707 transports up and running. This is hardly likely to be denied at this stage.

The squeeze on funds also is unlikely to affect the Jindalee Over-the-Horizon Radar development and expansion project. Plans to develop a new ‘bare’ air base in Cape York Peninsula are expected to proceed within a few years, while the first phases of the “bare” base at Derby (WA) and the new permanent fighter base at Tindal (NT) will be completed soon. Derby will be ready this year and Tindal will become operational for No. 75 (with its first Hornets) from October 1, 1988.

The RAAF has approval in principle to update its 22 F-111 strike jets, but full details are awaited. The proposals have come a fair way down the line and it is unlikely that this vital project might slide. But a small slippage is a possibility. One factor that could counter that prospect is that the Australian industry could be heavily involved in the update work instead of having it done in the US. The modernisation of the F-111s, even if it does not go the whole hog, is an important factor in getting local industry involved in the high technology fields.

One worry for the Air Force is that there is no sign of a decision to acquire Airborne Early Warning and Control (AEW&C) aircraft to work side by side with the Jindalee early warning systems. AEW&C has been accepted as desirable in most Defence quarters although proponents of Jindalee see it as the “be all and end all in detecting aerial and surface intruders. Until all the points and counter points are clarified in much greater detail, the AEW programme could be held in limbo and therefore slide back in the Five Year Defence (Rolling) Programme – FYDP.

The announcement in the mini-Budget of the sale of a substantial portion of the Government Aircraft Factory, Vic. which is currently 100% Commonwealth owned has drawn some interesting conjecture. There is no doubt the Federal Government is prepared to sell a good slice of it if some company or group comes along with indications of a substantial workload. GAF has been renamed Aerospace Technologies of Australia and has been given a new Board of Management. Aerospace Technologies exists now and from July 1 took over the assets of GAF. At present the major work lies in the F-18 Hornet production/assembly line and preparation to do some subcontracting work on the new RAAF trainer, the Pilatus PC-9.

Offset work for some overseas companies also is carried out at GAF, but a steadier work load is required to make the facilities more cost effective, even with the rationalisation that started last year. So there is the flexibility at GAF to bring in private enterprise.

In his May 13 Economic Statement, Mr Keating devoted only six paragraphs to Defence. This is what he said on that topic “As Defence is such a large part of Commonwealth outlays (close to 10%) it must also contribute to the cuts required for Australia to successfully reduce its trade imbalance. Previous Defence forward planning allowed for a three per cent real increase in the level of Defence outlays. This will now be a one percent real reduction next financial year, saving $350 million. “The Government has also decided that the forward planning guidance for Defence spending will be reduced to a one percent real increase in 1988-89 and a two per cent real increase in 1989/90. Over the three years these reduced forward outlay figures will save the budget over $1400 million. However, this will still allow for the essential capital re-equipment and planning needs of the Defence forces as recently outlined in the Govern ment’s White Paper. ” In the proposed sale of Commonwealth assets, he mentioned the sale of Williamstown Dockyard, a substantial proportion of the Government Aircraft Factory in Victoria and surplus Defence property. But money gained from such sales will not be offset against Defence cuts but will be used to reduce the overall Budget deficit.

Attachment C which gives a detailed description of measures by function, Defence is listed as having to reduce real growth to minus one percent in 1987/88 and to one percent in 1988/89. In money terms this means a lopping of $350m In 1987/88 and of $496m in 1988/89. A two percent growth in 1989/90 is forecast.