Defence budget: give the dog a bone
15 May 2013|

A happy dog with a bone

Mark Thomson is widely quoted this morning as saying that the defence budget outcome is better than many observers hoped. Saved by the government’s decision to keep the overall budget in deficit, Defence was not subjected to some of the austerity measures that would have been needed to contribute to a national surplus outcome. I broadly agree with Mark’s assessment. But what has been delivered here is only a partial reversal of the large scale cuts implemented in the 2012 budget. Then, $5.5 billion was cut from the four year forward estimates. Last night, about $3 billion was added to the first three years of the new forward estimates, of which some $2.94 billion is earmarked for the ‘off book’ additional Super Hornet/Growler acquisition. And we don’t know what’s happened to the final year (it was not visible last year). In all likelihood, the new money in the first three years has simply been brought forward from that final year.

Pity the poor Defence budget planners who try to create some semblance of continuity from one year to the next. Although media headlines today point to how Defence was saved from even more dire outcomes, the best that can be said of the budget is that a proportion of last year’s slash and burn booty has been returned. It is as though the government has rethought its approach on Defence, and come to the conclusion that it can’t take the battalion completely over the lip of the trench into no man’s land.

The reality is that the long term budget outlook is still well short of the level of funding needed to deliver on the ambitious defence equipment plans articulated in the 2009 white paper as modified and added to by the 2013 effort. Beyond the forward estimates the government has provided what it describes as six years of ‘additional funding guidance’—in essence back of envelope advice saying there will be approximately $220 billion available between 2017–18 to 2022–23. Reading Stephen Smith’s budget overview statement it’s clear that the really big costs associated with the new submarine program and the Joint Strike Fighter acquisition only begin to bite within that time frame. But that little tail you see is actually attached to one really big dog, just panting outside of the six year guidance. If you buy the tail the rest of the dog won’t come for free.

Mark Thomson’s initial estimate is that defence spending will hover between 1.6 and 1.7% of GDP for the six years after 2016–17 in effect that means the ‘aspiration’ to lift defence spending to two per cent of GDP remains a very distant goal—as many as four federal elections away. The two percent figure is about as believable as the aspiration to acquire twelve submarines. The budget has the effect of delaying somewhat the inevitable day when hard decisions will have to be made between capability ambitions and financial realities, but that moment can’t be put off forever.

A small reduction of Defence public service numbers was expected, with 327 civilian staff cut, but there is also a massive increase of 1524 for the ADF. It will take closer analysis to understand why the ADF growth is necessary at a time when the three largest overseas operations are winding up. Long gone is that day when the quest for efficiencies means that ADF positions were civilianised to harvest cost savings in the order of 20 to 30%. Of course no government ever lost a vote cutting numbers of public servants, but the balance between APS and ADF is an important variable in any approach to making internal savings.

None of the above will have as much impact in Russell Hill as the result of two announcements that will presumably be cheered in the rest of the country. Finance Minister Penny Wong announced that in the quest for efficiency the amount of space allocated to public servants in new office space will be reduced from 16 to 14 square meters. Is that a cry of ‘if only’ I hear from across Lake Burley Griffin? The decision to tax car parking space within the Parliamentary Triangle will impact on some 9000 public servants and others including those at Russell Offices—to the tune of $11 dollars each a day. Will ADF personnel seek an exemption or a car parking allowance? Submarines may come and go, but car parking problems in Defence is the benchmark of worker satisfaction for much of Canberra—not that anyone outside the ACT will see that as a problem. See you on the buses!

Peter Jennings is Executive Director of the Australian Strategic Policy Institute. Image courtesy of Flickr user Michael Loke.

Note: a previous version of this post relied on news reporting, and has been amended to reflect the actual budget figures.