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ELECTION 2013 – Two per cent for real?

written by Gerard Frawley | September 6, 2013
Will budget pressure impact Australia's plans to buy the F-35?

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.

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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.

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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.

Steer your own in-flight experience – available on print and digital Whether our classic glossy magazine in your letterbox, daily news updates in your inbox, peeling back a few layers in the podcast or our monthly current affair reports, you can count on us to keep you up to date. Sign up today for just $99.95 for more exclusive offers here. Subscribe now at australianaviation.com.au.

10 Comments

  • Tomcat Terry

    says:

    35% of Australia’s GDP spent on Social Welfare alone under Labor.. Obvious where the cuts are needed to get your calculated 3.5 Billion a year extra.

  • Dane

    says:

    Once the government culls foreign aid, the budget should open a bit

  • John N

    says:

    Hi Gerald,

    You said, ‘Both are committed to growing defence spending to 2% of GDP’. Sorry, what? But I haven’t heard that from both sides.

    I don’t want to sound ‘picky’ with words, but the fact we are talking about what our politicians say, we have to look very very very closely at what they actually say, and not ‘assume’ that it is what they say.

    To the best of my knowledge Tony Abbott has definitely said the LNP ‘will’ commit to getting defence spending to 2% within 10 years, announced during this current election campaign, so if he doesn’t deliver, at least he can get a genuine kicking for breaking that promise.

    On the other side, Labor has used words like a ‘long term objective’ or ‘increase defence funding toward a target of 2%’, both are lines used in the 2013 Defence White Paper.

    Def Min Smith has used similar terms such as ‘aspiration’, at a media conference in May this year at the announcement of 2013 DWP, Smith said:

    “I see a lot of reference to two per cent of GDP as an Australian Defence spend. I would much prefer to be closer to two per cent than to 1.5 or 1.6. But it is the case that this is an aspiration that the Government has and an aspiration that previous governments have also had. Australian Defence spending has not touched two per cent of GDP since 2000. So, we have had an aspiration as a country for two per cent of GDP since the year 2000. We have not met that over those years.”

    Please correct me if I’m wrong, but I have not heard the ALP actually state in ‘black and white’ terms that they ‘will’ increase to 2%, bottom line is if they don’t achieve it, they can fall back on the very selective words they used.

    But yes I agree completely, whoever wins is going to have a very very tough task to get Defence spending to 2% within a reasonable time frame.

    Cheers,

    John N

  • Andrew McLaughlin

    says:

    Good one “Gerald!”

    😉

  • John N

    says:

    Hi Andrew,

    Thanks for finding my ‘intentional’ mistake…… Opps! Sorry ‘Gerard’!

    Cheers,

    John N

    (Note to self: Proof read before hitting ‘submit’ button!!!)

  • SeaSure

    says:

    So we got ‘Liberal’ Gov and they are going to waste even more money on Defense. We should be looking at ways to spend less on Defense not more. Halve the number of JSF purchased and then spend halve the savings on disaster relief aircraft (C27, NH90, C130) and pocket the rest. It’s not the 1950s anymore people.

  • Tomcat Terry

    says:

    Interesting to see comments away from this forum and very similar to the last one on here…my question to them is what crystal ball are you using. Might not be the 1950’s anymore but if my history lessons serve me right didn’t Australia adopt that type of attitude towards defence spending just before a certain northern neighbour decided they need more resources in the early 40’s 🙂

  • Dane

    says:

    Because being walked all over by someone trying to invade Australia is such an appealing idea

  • paul davis

    says:

    Tomcat Terry,well said mate(35%GDP on welfare).Now get rid of the detention centres,asylum seeker accomadation and all their perks(internet,cigarets,etc) and we will be a superpower in 5 years.BRING THAT ON.

  • Andrew McLaughlin

    says:

    35% GDP on welfare? Got a source for that? I think you’ll find it’s about a tenth that amount…

Leave a Comment to paul davis Cancel

Your email address will not be published. Required fields are marked *

ELECTION 2013 – Two per cent for real?

written by Gerard Frawley | September 6, 2013
Will budget pressure impact Australia's plans to buy the F-35?

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.

Advertisement
Advertisement

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.

PROMOTED CONTENT

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.

Steer your own in-flight experience – available on print and digital Whether our classic glossy magazine in your letterbox, daily news updates in your inbox, peeling back a few layers in the podcast or our monthly current affair reports, you can count on us to keep you up to date. Sign up today for just $99.95 for more exclusive offers here. Subscribe now at australianaviation.com.au.

10 Comments

  • Tomcat Terry

    says:

    35% of Australia’s GDP spent on Social Welfare alone under Labor.. Obvious where the cuts are needed to get your calculated 3.5 Billion a year extra.

  • Dane

    says:

    Once the government culls foreign aid, the budget should open a bit

  • John N

    says:

    Hi Gerald,

    You said, ‘Both are committed to growing defence spending to 2% of GDP’. Sorry, what? But I haven’t heard that from both sides.

    I don’t want to sound ‘picky’ with words, but the fact we are talking about what our politicians say, we have to look very very very closely at what they actually say, and not ‘assume’ that it is what they say.

    To the best of my knowledge Tony Abbott has definitely said the LNP ‘will’ commit to getting defence spending to 2% within 10 years, announced during this current election campaign, so if he doesn’t deliver, at least he can get a genuine kicking for breaking that promise.

    On the other side, Labor has used words like a ‘long term objective’ or ‘increase defence funding toward a target of 2%’, both are lines used in the 2013 Defence White Paper.

    Def Min Smith has used similar terms such as ‘aspiration’, at a media conference in May this year at the announcement of 2013 DWP, Smith said:

    “I see a lot of reference to two per cent of GDP as an Australian Defence spend. I would much prefer to be closer to two per cent than to 1.5 or 1.6. But it is the case that this is an aspiration that the Government has and an aspiration that previous governments have also had. Australian Defence spending has not touched two per cent of GDP since 2000. So, we have had an aspiration as a country for two per cent of GDP since the year 2000. We have not met that over those years.”

    Please correct me if I’m wrong, but I have not heard the ALP actually state in ‘black and white’ terms that they ‘will’ increase to 2%, bottom line is if they don’t achieve it, they can fall back on the very selective words they used.

    But yes I agree completely, whoever wins is going to have a very very tough task to get Defence spending to 2% within a reasonable time frame.

    Cheers,

    John N

  • Andrew McLaughlin

    says:

    Good one “Gerald!”

    😉

  • John N

    says:

    Hi Andrew,

    Thanks for finding my ‘intentional’ mistake…… Opps! Sorry ‘Gerard’!

    Cheers,

    John N

    (Note to self: Proof read before hitting ‘submit’ button!!!)

  • SeaSure

    says:

    So we got ‘Liberal’ Gov and they are going to waste even more money on Defense. We should be looking at ways to spend less on Defense not more. Halve the number of JSF purchased and then spend halve the savings on disaster relief aircraft (C27, NH90, C130) and pocket the rest. It’s not the 1950s anymore people.

  • Tomcat Terry

    says:

    Interesting to see comments away from this forum and very similar to the last one on here…my question to them is what crystal ball are you using. Might not be the 1950’s anymore but if my history lessons serve me right didn’t Australia adopt that type of attitude towards defence spending just before a certain northern neighbour decided they need more resources in the early 40’s 🙂

  • Dane

    says:

    Because being walked all over by someone trying to invade Australia is such an appealing idea

  • paul davis

    says:

    Tomcat Terry,well said mate(35%GDP on welfare).Now get rid of the detention centres,asylum seeker accomadation and all their perks(internet,cigarets,etc) and we will be a superpower in 5 years.BRING THAT ON.

  • Andrew McLaughlin

    says:

    35% GDP on welfare? Got a source for that? I think you’ll find it’s about a tenth that amount…

Leave a Comment to paul davis Cancel

Your email address will not be published. Required fields are marked *

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