Gillard Bombs Defence Spending

Most Australians would agree that raising and maintaining a defence force adequate to protect Australia’s interests is a high-priority role for our government. Even small-government libertarians or dovish social democrats tend to agree on the need for an army, a navy and an air force.

But how big is big enough? And how much are we as a nation prepared to pay for it? That issue has come to the fore in the wake of this year’s federal budget. That’s because, after the big cuts to the Defence budget in May, it has become obvious that the Gillard government has no intention of delivering on the ambitious arms race to which Kevin Rudd signed up in the 2009 Defence White Paper.

To understand the context, it’s worth returning to the White Paper itself, released in May of that year. At the time, Kevin Rudd’s fortunes were riding high. The White Paper, which had been commissioned in the flurry of activity when Labor came to office, was framed in the early stages of the global financial crisis.

It embodied the robust fiscal conditions of the Howard years, which had seen a rapid increase in defence and security spending in the wake of the East Timor intervention and the events of September 2001.

The 2009 White Paper took those assumptions — that Australia needed and could afford a bigger defence force — and ran with them.

It envisioned a much bigger role for Australia’s military. Unlike the slimmed-down military of the 1980s, the ADF of the 2030s would be a muscular middle-power force, capable of deterring great power aggression from the north and able to operate well out into the Pacific and Indian Ocean archipelagos.

To do this, the White Paper sketched out a long shopping list of big-ticket weapons systems for our nation to acquire, including 100 F-35 Joint Strike Fighters, eight new frigates and 12 new submarines.

At the time, I was highly critical of the Defence White Paper. I argued it was expensive and unrealistic, relying as it did on assumptions that the rise of China and the decline of America would necessarily place Australia in a situation of containment or even conflict with our greatest trading partner.

The "China threat" thesis still continues to exercise the minds of defence planners, though. Prominent figures like Hugh White remain notably hawkish on the People’s Republic, and argue that Australia should beef up our armed forces by at least as much as the White Paper suggests.

There remains a substantial amount of technical debate about force structure within defence and security circles. Since 2009, China has indeed become more militarily aggressive, although whether this means China will aggressively move towards Asian hegemony remains very much an open question.

As a result, opinions are divided more by the make-up of the future military than the need for a bigger one. Should Australia invest more in our Army? Build or lease nuclear submarines? Or build up the RAAF, buying even more Joint Strike Fighters than the 100 currently planned?

But while the boffins debate the future size and structure of the military, the Gillard government has been making its own decisions at budget time.

In May, for instance, Wayne Swan and Penny Wong sliced billions out of defence’s budget. Last year, billions more disappeared. As a result, critical decisions on weapons acquisitions have been deferred or postponed. Plans to buy our first squadron of Joint Strike Fighters have been put off for two years, saving $1.8 billion. A plan to buy self-propelled artillery guns was also killed off, saving more than $200 million.

The future submarines, which could cost as much as $40 billion for the whole fleet, are still just an idea, with work yet to begin on a design, although $200 million has been committed to work out some early details.

Because of these cuts, timelines for weapons acquisitions have slipped out by years, perhaps as much as a decade. What this means, in the opinion of the Australian Strategic Policy Institute’s Mark Thompson, the expert on defence spending, is that the plans outlined in the 2009 White Paper are effectively impossible.

The cost of delivering the sort of capability envisaged by the White Paper runs into the hundreds of billions, at a time when the federal budget is only in balance by the slimmest of margins. While Labor has publicly maintained its commitment to Force 2030, when it comes to balancing the books, it has looked to the big dollars available in Defence for the political goal of delivering a surplus.

As Thomson writes in his annual report in the defence budget for ASPI, The Cost of Defence, the 2009 plans have already largely gone by the wayside:

"To date, $10.6 billion worth of promised funding from the first five years of White Paper has been deferred to parts unknown in the future, $10 billion in savings… have been cut from funding promised between 2011 and 2021, and another $2.5 billion of new initiatives over the decade have been imposed upon Defence without funding or offsets. Yet, somehow, over the past three years Defence has managed to hand back $1.6 billion in unspent funds."

One of the reasons Defence is handing money back to Treasury, even after all these cuts and savings, is that it simply can’t spend the money it has properly. As we’ve seen repeatedly over the last 15 years, managing big defence acquisitions is a tricky business. The cheapest and safest way to do it is to buy so-called "off-the-shelf" hardware — systems already in place with other militaries and currently on production lines.

But in many cases, the ADF doesn’t want off-the-shelf solutions. It wants bespoke hardware specifically designed for Australian conditions to do specific jobs.

The Collins-class submarines are a good example. Designed in Sweden but using American torpedos and weapons computers, they are among the most capable conventional subs anywhere in the ocean.

But they have been a maintenance nightmare. One of them almost sank after a systems failure in the Indian Ocean, and all of them are subject to regular, lengthy and expensive spells in dry-dock. As a result, the Navy struggles to have more than two submarines on operations at any one time.

The Joint Strike Fighter is another case in point. This so-called fifth-generation stealth fighter will be easily the most capable aircraft in the region, once delivered. It was meant to be an off-the-shelf purchase with Australia participating in a big production run that also includes air forces from the US, Canada, the Netherlands and Japan. But the F-35 is years late and has suffered a potentially crippling series of cost-overruns.

As a result, Australia has had to delay its purchases, because the planes aren’t ready. It also means we aren’t really buying a jet plane already in production, but will instead buy one at the beginning of its production run.

What it all adds up to, in Thomson’s view, is that it doesn’t add up. Politically, Australian voters do not put a big premium on defence spending — perhaps sensibly, given Australia’s benign strategic environment.

Even if we were to invest more money to bulk up the ADF, it appears the Defence Department would struggle to spend all the extra money, let alone deliver the new weapons systems on time and on budget. "The 2009 Defence White Paper was neither deliverable in practical terms nor affordable in political terms," Thomson writes.

The Gillard government apparently agrees. It has scheduled a new White Paper for next year. The 2013 White Paper will presumably revisit some of the more unrealistic goals of the 2009 White Paper. Perhaps it will also take a more nuanced and defensible view of Asian geo-strategy — one that acknowledges that the range of threats to Australia’s security are not primarily of a military nature, but in fact also include natural resource depletion, food security and climate change.

After all, Australia’s military is small by global standards, but large by regional standards. While the ADF would quickly be wiped out in any high-intensity conventional war against a major power, it is easily capable of defending Australia from any of our near-neighbours, in the unlikely event that they might seek to invade.

Australia’s defence force is also big enough to engage in foreign expeditions in support of out major ally, the United States; indeed, the Army has been continuously engaged in Afghanistan and Iraq since 2001. And, given that Australia’s economy continues to grow strongly, there is every likelihood that even by maintaining defence spending at current levels, we will maintain a capable and regionally powerful military well beyond 2030.

Say good-bye to the 2009 White Paper. It wasn’t much good anyway. As Thomson concludes in his recent report, "Australia can responsibly adopt a less ambitious defence strategy than that set out in 2009."

"The defence force we need," he argues, "is also the one we are willing to pay for".