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Defence funding: three cheers for 2%

Posted By on May 9, 2014 @ 12:15

[caption id="attachment_13759" align="aligncenter" width="773"]Projected Defence funding Projected Defence funding
Source: National Commission of Audit[/caption]

Numerous commentators have criticised the government’s promise to raise defence expenditure to 2% of GDP within a decade. Given the seeming arbitrariness of such a figure, and strategists’ desire for precision-guided policy prescriptions, the sceptics have scored some telling hits on the goal. A case has already been made to adopt the target on alliance-management grounds but, as budget night looms, I’d like to outline some broader reasons in favour of the 2% target.

Critics of the proposal are many and varied. Aid enthusiasts would rather live without greater defence spending than cut the five-times-smaller development budget (noting poverty-reduction assists regional stability). International relations scholars say it’s uncertain we face a threat from China or elsewhere, when only the US has the capacity to invade, and acquiring capabilities such as Joint Strike Fighters could spur arms-racing and weaken the economic basis of our future national power. The Commission of Audit’s call to reassess the 2% commitment aims to address that ‘balance of strategic and fiscal priorities’ ($11 billion extra would be required in 2023-24) and reflects a feeling in some parts of government that Defence should deliver better value for money using current resources before receiving additional funding. Defence wonks complain that using a funding ‘slogan’ as a starting point for policy ‘contradicts proper strategic planning logic’, which classically flows from problems to solutions, missions, appropriate tools, and only then to funding requirements. They warn the GDP variable is a poor measure of historical spending patterns domestically—the Rudd government spent a higher percentage during the Global Financial Crisis than John Howard, who doubled funding during a long boom—and misleading internationally, given that Japan’s spending, though only 1% of its vast economy, is huge.

How then could anyone suggest taxpayers forego schoolrooms, hospital beds, or even large-screen televisions, for bigger submarines, on the basis of such a crude metric? True, the Americans would like it. And, as Crispin Rovere shows, that’s not an entirely craven argument: the US is willing to ‘subsidise’ Australia’s defence to advance its own interests but wouldn’t accept our formally settling for ‘free-riding’. Although alliance dues are subject to ongoing negotiation of evolving expectations (PDF), and many US partners don’t set the bar high, the new QDR revises those expectations upward. Signalling we aim to meet the aspirational benchmark identified by NATO countries will help preserve our influence in Washington; maintain the likelihood the US will back us in local contingencies (as in 1999); and, by giving America confidence that it has well-equipped allies, support its continuing role in Asia.

Increasing defence spending should also be important to Australians interested in more self-reliant action in less gothic scenarios. Whether or not China’s growing military capability and assertiveness totally upend our strategic situation (most experts still think not), long term trends slowly work against our relative power closer to home too. Although our per capita GDP remains high, our absolute GDP—larger than ASEAN’s combined some years ago—will be half the size of Indonesia’s economy alone by 2030. That doesn’t mean we need go on a war-footing—we’ve a big head-start in our technology edge, a longer capability lead, enduring geographical advantages, and many shared interests with near neighbours. But it hardly suggests we wait until Defence runs as efficiently as a Swiss clock to weight-up either. And the $30 billion mismatch between objectives and money in Australia’s capability plan is exacerbated by inexorable above-inflation increases in acquisition and sustainment costs.

Of course we could revise our ambitions downwards and settle for less capability than we’d like in uncertain, possibly transformational, times. But we need to pursue interests and forestall harms short of avoiding invasion. Making tough choices below certain funding parameters wouldn’t necessarily give us a focused force; it might just move the ADF from a balanced force to an unbalanced one. Over-optimising Army for stabilisation missions, for example, could expose it to avoidable risk if deployed further afield for more contemporary operations, as has often occurred despite strategic theology.

Critics of the 2% target rightly insist defence planning be strategy-led. But the new white paper must meet strategic uncertainty with clever words and numbers (plus further reforms to improve the way defence is run and hopefully make modest savings). Mark Thomson and Ric Smith each identify more nuanced criteria—annual growth in real spending or proportion of Commonwealth outlay—if commentators insist on funding yardsticks. Still, it’s precisely the simplicity of establishing 2% as a minimum target that elevates it above a mere ‘soundbite’. A straightforward measure could help hold governments to account when they’re tempted to raid defence coffers. Finding and spending additional funds will be hard for Treasury and Defence, but Australia spent over 2% from 1939-93 and the target pales against the 15-20% military spending critics warn harmed the USSR.

Government shouldn’t boost spending too far before next year’s white paper. But delivering ‘no cuts to defence, full stop’ on budget night means avoiding a reduction in real terms, and that requires a modest funding increase next week.

Karl Claxton is an analyst at ASPI. Image courtesy of National Commission of Audit.

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[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2014/05/CoA-graph-2-per-cent.png

[2] on alliance-management grounds: http://www.lowyinterpreter.org/post/2014/05/06/Defence-budget-2-target-essential-for-Australias-alliance.aspx

[3] Aid enthusiasts: http://devpolicy.org/in-brief/commission-of-audit-recommends-flat-aid-and-independent-ode-20140501/

[4] poverty-reduction assists regional stability: http://ada.asn.au/commentary/letters-to-the-editor/defence-investment-is-also-foreign-aid.html

[5] weaken the economic basis of our future national power: http://theconversation.com/the-best-security-money-can-buy-25927

[6] $11 billion extra would be required in 2023-24: http://www.theaustralian.com.au/national-affairs/policy/assess-threat-then-budget-accordingly/story-e6frg8yo-1226902634807

[7] value for money: http://www.ncoa.gov.au/report/phase-one/part-b/7-8-defence.html

[8] contradicts proper strategic planning logic: http://www.securitychallenges.org.au/ArticlePDFs/SC9-4CarrandDean.pdf

[9] poor measure of historical spending patterns: http://www.aspistrategist.org.au/two-the-magic-number/

[10] Rudd government spent a higher percentage: http://theconversation.com/factcheck-is-defence-spending-down-to-1938-levels-17427

[11] subject to ongoing negotiation of evolving expectations: https://www.aspi.org.au/publications/how-much-is-too-little-learning-to-live-with-a-smaller-force-by-mark-thomson/Policy_Analysis103_how_much_is_too_little.pdf

[12] revises those expectations upward: http://www.aspistrategist.org.au/united-states-so-long-and-thanks-for-all-the-fish/

[13] long term trends: http://www.aspistrategist.org.au/more-graphs-of-the-week-where-will-we-be-in-33/

[14] half the size of Indonesia’s: http://www.themonthly.com.au/issue/2013/june/1370181600/hugh-white/what-indonesia-s-rise-means-australia

[15] inexorable above-inflation increases: http://www.aspistrategist.org.au/the-ongoing-unreality-of-australian-defence-planning/

[16] settle for less capability: http://www.aspistrategist.org.au/cutting-our-cloth-part-iii-a-force-structure-for-straitened-times/

[17] unbalanced: http://cogitasia.com/changes-in-australian-military-leadership-the-team-that-must-balance-the-adf/

[18] reforms: http://www.aspistrategist.org.au/defence-reform-after-the-national-commission-of-audit/

[19] annual growth in real spending: http://www.aspistrategist.org.au/2-percent-can-we-should-we-will-we/

[20] proportion of Commonwealth outlay: http://www.lowyinterpreter.org/post/2014/05/02/Defence-spending-hold-government-account.aspx

[21] raid defence coffers: http://www.thesaturdaypaper.com.au/opinion/topic/2014/04/26/after-the-last-post/1398434400#.U2npafmSx8E

[22] no cuts to defence, full stop: http://www.smh.com.au/federal-politics/assistant-minister-stuart-robert-says-defence-is-one-sector-joe-hockeys-budget-wont-cut-20140426-zqyug.html