Guns Or Butter? We've Got Both


Tony Abbott is worried about the government’s cuts in defence spending. That’s what he’s told the conservative pundits and wonks at influential US policy institute, the Heritage Foundation.

The Opposition Leader is in Washington on a whistlestop tour of US political scenery, in which a fawning speech to a friendly think-tank is de riguer. The speech itself was classic boilerplate, indeed almost pure cliché, complete with references to Ronald Reagan’s "city on the hill" and General Pershing’s doughboy soldiers in the trenches beside Australian diggers in 1918.

But, as often happens, it was Abbott’s less prepared remarks in subsequent question time that have provoked interest back in Australia. When asked about Australian defence spending, Abbott told his hosts that "I do think that it is irresponsible to save money in defence in a way that compromises your military capability given that Australia’s military capabilities are not vast to start with."

"As a result of defence cuts in the recent budget, Australia’s defence spending as a percentage of gross domestic product is now at the lowest level since, wait for it, 1938," Abbott continued. "So that is quite a concern given we do not live in a benign environment. We do not live in benign times."

Abbott’s remarks are not without context. In recent weeks, a number of senior US military and political figures have been sounding the warning bells on Australia’s recent cuts in defence spending. Veteran Republican hawk Richard Armitage has been giving interviews to the Australian’s Brendan Nicholson and Fairfax’s Peter Hartcher. "Australia’s defence budget is inadequate," the former top State Department official told Hartcher. "It’s about Australia’s ability to work as an ally of the US. I would say you’ve got to look at 2 per cent of GDP."

While on a recent visit with his task force, Samuel Locklear, an Admiral in the US Pacific Fleet, made similar remarks. "Your defence is not something you can turn on and off with a switch from year to year based on how bad the economies are, because you make investments in the military that are long-term investments, that require a lot of planning," Admiral Locklear told reporters last week in Canberra. "If you’re going to build a submarine force, you can take years to figure out how to make that cost effective and get what you need out of it."

Prime Minister Julia Gillard promptly criticised Abbott’s remarks, but let’s leave that aside. Are Abbott and the Americans right? Is Australian defence spending being cut to dangerously low levels?

There is no doubt that defence has suffered in recent budgets. As we observed in June, defence has born the brunt of the Gillard Government’s efforts to return to fiscal surplus. More than $5 billion was slashed from the defence budget in May. The delivery of a squadron of Joint Strike Fighters was postponed and an order for self-propelled artillery cancelled. The cuts come in the wake of a string of leaner budgets for the Defence Department, which on some counts total up to about $20 billion in "savings" (always nebulous in a department which struggles to certify its accounts). As a result, defence spending has fallen to its lowest level as a share of GDP since before World War II.

But does this mean Australia’s defence forces are missing out on critical new equipment? No. These cuts have to be seen in the context of the last decade, in which Defence has enjoyed massive increases in spending in excess of inflation. The post-2001 years of the Howard government saw a marked uptick in capital investment, and the first two budgets from Kevin Rudd weren’t too shabby either. As a result of this, Defence saw a huge inflow of money for more than a decade.

The ADF used that money to beef up. In the last decade or so, Australia has added two extra battalions to the regular Army, plus Abrams tanks, new helicopter gunships and Bushmaster infantry vehicles. The Navy has embarked on a huge ship-building program to construct three Hobart-class air warfare destroyers and two Canberra-class troop ships, costing well over $10 billion in total. The Air Force received 24 F/A-18 Super Hornets worth $6 billion as a backstop, while it waits for the F-35 Joint Strike Fighter to enter production. It has also bought C-17 transport planes and Wedgetail airborne early warning and control radar planes worth several billion.

All of this has occurred in a time of relative peace, in which the ADF’s engagements have all been in theatres far away from the Australian mainland. These small wars have been of dubious strategic value to our national interest. Nor have any of neighbours suddenly developed aggressive urges or embarked on massive arms build-ups of their own. Australia’s near-neighbours are remarkably peaceful and harmonious; while some countries to our north are modernising, there is no region-wide arms race. According to defence analysts at IHS Jane’s, south-east Asian military spending last year was about $24 billion. That sounds like a lot, but it is spread across many countries. In total, it doesn’t yet equal the defence budget of the south Pacific’s true regional power: Australia.

What about the so-called "China threat", which so worried the authors of the 2009 Defence White Paper? So far, it’s yet to eventuate. Yes, China has been active in the South China Sea. Yes, China is spending more on its military as part of a long-term strategy to build up regional power. And yes, China’s rise will have to be carefully managed in the long-term interests of all of Asia. But none of this means China is a military or security threat to Australia now, or will be in 2030. Many of China’s strategic interests in fact coincide with Australia’s: open sea lines of communication, for instance, and continued access to Australian raw materials like coal and iron ore.

So to argue, as Tony Abbott did in Washington, that our strategic environment is "not benign", is disingenuous, at best. At worst, it’s simply scaremongering.

What about the argument that Australia is not pulling its weight in the US alliance? This argument is not backed up by the facts either. Australia’s relationship with the US remains one of the closest and strongest of any of America’s allies. We stayed the course in Iraq and Afghanistan. Australia is home to many US military bases, and we will soon host more, as the US pivots to the Pacific and US Marines begin regular rotations through Darwin. If the US is really worried about its Pacific allies, it should worry about Japan, which has been regularly spending less than 1 per cent of its GDP on defence for years, in a time when its GDP has been shrinking.

The truth is that Australia spends plenty of money on defence. Given the peaceful circumstances we find ourselves in, there’s a solid case for arguing that Defence can’t spend the dollars it already gets, as the Australian Strategic Policy Institute’s Mark Thomson has repeatedly observed. Take the Joint Strike Fighters: one of the reasons they are not being purchased is that they’re not ready yet.

It’s also important to note that, while defence spending is low as a percentage of the whole economy, Australia’s economy is growing strongly, unlike some of our northern hemisphere allies. This means Australia’s defence spending will continue to grow in absolute terms. Further, many of the so-called "spending cuts" are really just deferrals. The ADF will still plenty of shiny new toys, just a bit later than it expected. This helps the federal budget now, while still ensuring that the ADF continues to buy new gear in future years.

In summary, there is no crisis in Australian defence spending. Australia retains the most powerful Navy and Air Force in our region, and we face few if any credible threats of a military nature. Guns or butter? Australia has both.

Ben Eltham is New Matilda's National Affairs Correspondent.