Our Arms Budget Has No Legs


It’s time the Australian Government admitted that it simply can’t manage large defence acquisitions.

Consider by contrast Kevin Rudd’s new health reform plan, which is at least in part, an exercise in fiscal discipline. The current health system represents an "unsustainable funding model" according to the Government’s National Health and Hospitals Network policy document. But if health funding is unsustainable, what are we to make of the nation’s defence budget?

The Defence Department is already the largest employer in the country. It spends $26 billion a year, most of it on wages for soldiers and operations in places like Afghanistan but some of it on embarrassing items such as Chesterfield sofas, oil paintings and "stuff", according to a recent Fairfax investigation.

The waste and mismanagement in Defence seems to occur in every corner of the establishment. Some of it would shock Captain Yossarian from Joseph Heller’s Catch-22. According to Fairfax’s Linton Besser, Defence spent $1.4 billion on travel, accommodation and conferences in the past four years alone.

Just yesterday, the Australian Financial Review reported that the Australian Defence Force buys $30 million worth of ammunition from two factories managed by giant French defence corporation Thales and that it pays an additional $100 million to Thales simply to keep the factories open.

The Australian National Audit Office found that "Defence pays a premium for retention of the indigenous manufacturing capability, which now provides only 13 items of the approximately 830 EO line items in the ADF [ammunition]inventory."  Unfortunately, much of the ADF’s ammunition is useless: $1.2 billion worth is "other than serviceable", according to the Audit Office.

So profligate has Defence become that the Defence Minister John Faulkner has ordered an investigation. "Financial control is critical. All of these issues, if not dealt with already, should be and will be examined,” he told the Sydney Morning Herald. Of course, as Jim Hacker discovered in Yes, Minister, launching an efficiency drive is one thing; getting the department to actually deliver efficiencies is another. Departmental bureaucrats are past masters at hiding money by feather-bedding, by over-servicing or simply by concealing it in opaque accounts.

The Government may struggle to find its proposed $20 billion in proposed savings over the next 10 years. "Find" is the key word here, because Defence’s accounts are a mess.

Last year on budget night the Department could not even provide its Portfolio Budget Statement — the master budget document for the entire department for the year. It did eventually appear on the Defence website months later.

As the Australian Strategic Policy Institute noted at the time in its budget analysis: "As the first budget after a new Defence White Paper, there is a glaring absence of substantive information on funding, investment and reform. The best that can be said is that the budget is consistent with a White Paper that’s silent on when anything will occur or what things will cost." 

If the top-level numbers are rubbery, the day-to-day accounts are in trouble too.

Defence has real trouble paying its staff correctly. The department’s payroll facilities are so antiquated that soldiers serving in Afghanistan are regularly overpaid and then forced to pay back "debts" they didn’t know they’d incurred. Like Heller’s "IBM computer with a sense of humour", Defence’s payroll facilities don’t discriminate: the situation is so bad that in February, the Chief of the Army himself, Lieutanant General Ken Gillespie, admitted that he too had been a victim of the overgenerous payroll system.

Of course, a billion here or there pales into insignificance when we look forward to the really big-ticket weapons systems Australia has committed to buy, including the $16–18 billion purchase of a new fleet of F-35 Joint Strike Fighters.

There’s no doubt that Australia’s current fighter fleet, of legacy F/A-18 Hornets, is reaching the end of its life. The problem is that its replacement, the F-35, is not ready. Worse, the JSF program is in deep trouble, and has been almost since it began flight-testing. Touted as a "fifth-generation", truly stealthy multi-role fighter, the JSF was in fact designed as a semi-stealthy ground attack plane and therefore suffers from a number of design compromises. With only one engine, it is underpowered, and it lacks the range or payload of Australia’s retiring F-111s.

At every step of its development, the JSF has turned out to be heavier, less capable and more expensive than promised. The latest reports have seen its projected cost double to $113 million (from $50 million) triggering an embarrassing notification to Congress by Pentagon officials under the terms of a US law, in which defence projects must justify themselves if they run more than 25 per cent over-budget. The JSF is running 60–90 per cent over-budget.

And the fighter jet we will acquire will be, according to Australia’s most respected independent air power analysts — Air Power Australia’s Carlo Kopp and Peter Goon — markedly inferior to the new generation of Russian fighter jets currently being developed.

If you think the JSF is in trouble, spare a thought for Australia’s submarine fleet, which now spends more time high and dry than it does in silent service beneath the waves. Australia’s Collins Class submarines are reputedly very quiet and highly capable boats. It’s just that they don’t work very well, constantly requiring major repairs and refits. Only two submarines are currently serviceable, and two of them are so sick they will be out of action for a combined total of nine years. The Collins boats top a list of 10 "projects of concern" worth more than $7.5 billion.

But despite the acknowledged problems with our current fleet, Defence planners and the government still want to push ahead and build a new generation of submarines for the Navy, potentially costing more than $20 billion. It’s a mind-boggling figure, particularly when the Collins boats clearly establish the risk that they may not even be serviceable. As ASPI’s Andrew Davies told the ABC, "There’s certainly a lot of things to worry about when planning a future submarine project because you’d have to say at the moment the Collins fleet is in a shambolic state."

But "shambolic" is par for the course for Defence and planners will push ahead anyway. Kevin Rudd, for one, is thought to be a strong supporter of the push for new submarines. After all, his government will be long gone by the time the first boat pushes out into the water — sometime after 2025. Expect the Defence acquisition scandals to keep coming: bungling big purchases is what the department does best.

Ben Eltham is New Matilda's National Affairs Correspondent.