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The Defence budget: a first look

Posted By on May 15, 2013 @ 12:14

Mark Thomson is squirreled away producing his usual tour de force budget analysis (on the streets May 30) so readers of The Strategist will have to make do with my first take on the Defence budget.

Let's start with a look at the headline figures. A reasonable figure for how much money Defence will have is ‘Total Defence Funding’. Last year's budget (as amended at Additional Estimates) provided Defence with $24.355 billion. This year's figure is $25.434 billion—a nominal year-on-year increase of $1.079 billion, or 4.4%. But in real terms (allowing for inflation), the increase is a little over 2.1%, or about $519 million. It's worth noting that the increase is against a pretty low baseline—as Mark pointed out, last year's budget represented a greater than 10% real decrease on the previous year. Still, I suspect that Defence is relatively relieved by this outcome. At least for this year, the Lord giveth.

Table 1. Total Defence funding.

Table 1. Total Defence fundingSources: Defence Additional Estimates Feb 2013, Defence Portfolio Budget Statement May 2013.

One of my major interests is the capital acquisition budget; in crude terms, the money available to buy the ADF's new equipment and the facilities and support required to operate them. Looking out across the forward estimates, there's some extra cash there, amounting to more than $3.5 billion compared to last year. (See the table below.) But the budget papers say that the defence budget has been 're-profiled' over the forward estimates. In other words, money has been taken from future years to allow investment to proceed in the near-term. In that sense, there’s actually no extra money for equipment in the long-term, apart from the $200 million earmarked for the Growler acquisition. That said, there's more likelihood of the DMO actually being able to spend a more evenly distributed budget rather than eking out a living for a while and suddenly splurging.

Table 2. Capital investment budget (major projects + minor projects + capital facilities) – all figures in billions of dollars.

Table 2. Capital investment budget (major projects + minor projects + capital facilities)

Sources: Defence PBS 2012-13 and 2013-14.

The budget papers also tell a story about the management of the Defence workforce. When the 2012-13 budget was brought down in May of last year, the aim was to have 58,636 full-time ADF personnel. Clearly recruitment has failed to make up for separations, and the additional estimates figure in February this year was 56,751—a shortfall of 1,885 people. The 'increase' in full-time ADF personnel being reported this morning as a 2013-14 budget measure is in fact nothing more than a re-stating of last year's failed aspiration.

Table 3. The Defence workforce

Table 3. The Defence workforceOne final observation is the winding down of operations is showing up in the budget figures. Last year's budget (as amended at additional estimates in February) included $1.530 billion for operations, including $1.190 billion for Operation Slipper in Afghanistan. This year's estimate is $918.5 million, with Afghanistan accounting for $874.9 million.

But if there's a lesson we can draw from the last three Defence budgets (or for that matter the overall federal budget), it's that no government can tie the hands of the Treasurer who next steps up to the dispatch box on budget night. We can go through the entrails of this year's budget if we want, but next year might see a completely different set of externalities, government priorities, or both. In many ways, this makes the business of planning for multi-year procurements of capabilities that will span decades extremely difficult. But it's the form of executive government that we have, and all departments have to live with it.

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist.

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[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2013/05/Andrew-Table-1-130515.jpeg

[2] Defence Additional Estimates Feb 2013: http://www.defence.gov.au/budget/12-13/paes/index.htm

[3] Defence Portfolio Budget Statement May 2013: http://www.defence.gov.au/budget/13-14/pbs/index.htm

[4] Image: http://www.aspistrategist.org.au/wp-content/uploads/2013/05/Andrew-Table-2-130515.jpeg

[5] Image: http://www.aspistrategist.org.au/wp-content/uploads/2013/05/Andrew-Table-3-130515.jpeg