Ballooning Military Spending Comes At A Cost

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“We can do without butter, but, despite all our love of peace, not without arms,” said Joseph Goebbels in 1936. “One cannot shoot with butter but with guns.”

The Abbott Government appears to be adopting a version of this theory. Joe Hockey’s budget was tough on many: university students, young people on welfare, the poor, the sick, and the homeless. But there’s one area where the Coalition didn’t slash a penny: defence.

While nearly every area of the federal budget felt some pain, Australia’s defence budget was beefed up substantially. The budget projects huge spending increases for the next decade to come.

The reason? The Coalition has decided to keep an election promise to increase Australia’s defence budget to 2 per cent of gross domestic product. Because our GDP is growing, and because we’re currently spending well below that figure, the new target means tens of billions of dollars of new military spending.

The arms build-up that the Abbott government has committed to will have major fiscal consequences for future governments. There may be strategic consequences in our region too.

What is not in doubt is the size of the government’s war chest. After some lean years for the men and women in uniform during Julia Gillard’s prime ministership, the election of the Coalition government has turned the defence spigots back on.

A new report from the Australian Strategic Policy Institute’s Mark Thomson underlines the scale of the spending spree.

Thomson is something of a unique figure in Australian policy circles: perhaps the only person who truly understands the sprawling mess that is Australia’s defence budget.

With taxpayers forking out $29 billion this financial year, the military is comfortably one of the country’s largest fiscal outlays, well ahead of big-ticket items such as higher education or family tax benefits. 

This year’s budget boosted spending in defence by roughly $1.5 billion – a roughly 6 per cent increase on Labor’s last budget. That increase took the Defence budget to 1.8 per cent of GDP – up from a historically low figure of under 1.6 per cent in the dog days of Wayne Swan’s elusive search for a surplus. In fact, in Labor’s last budget, new money was promised for Defence: $220 billion over the next six years in all. At the time, many wondered if the Coalition was serious about spending so much money on guns when it was planning to slash welfare benefits and spending on health and education.

The wash-up from the 2014 budget is that, yes, the Coalition really does plan to slash social spending, but give more money to the generals. Lots more money.

According to Thomson, if the government is serious about reaching the 2 per cent of GDP target for the Defence budget, spending will rise at 5.3 per cent a year in real terms, all the way out to 2023-24. Not to put too fine a point on it, Defence will be awash in cash. Thomson calculates that the capital budget, to buy new weapons, would increase by something like 10 per cent a year.

“The resulting rapid growth in capital investment is extraordinary,” Thomson writes. “If achieved, it would mean that capital investment over the next decade would amount to $112 billion compared with a mere $66 billion over the preceding decade measured in 2014-15 dollars.” This is despite the fact that the Australian Defence Force has already invested heavily since the turn of the millennium, buying new ships for the Navy, new planes for the Air Force, and adding two extra battalions to the full-time Army.

Indeed, despite the generous increases in the Howard and Rudd years, the growth in Defence spending planned by the Abbott Government will be even faster. By 2023-24, Australia’s military spending could top $50 billion a year. So much for the budget emergency.

Australian defence spending will grow rapidly if the Coalition keeps its promise to boost it to 2 per cent of GDP. Source: Australian Strategic Policy Institute.

In truth, the military may end up with more cash than it knows what to do with. In the salad days before the global financial crisis, Defence regularly had to hand back money to the Treasury because it couldn’t spend it all in a calendar year. Even allowing for the vast expense of projects such as the Joint Strike Fighter and the new submarines to replace the Collins class boats, Defence may well struggle to spend its windfall.

Thomson thinks the upshot will be more waste. It’s hard to disagree, given the dismal record of Australia’s military industrial complex to deliver projects on-time and on-budget.

Recent history is littered with disastrous cost blow-outs and failed weapons acquisitions. The paradigm case was the Super Seasprite helicopter project for the Navy, which had to be cancelled altogether after the helicopters were unable to fly at night or over water. Plenty of current projects are in trouble, too. Just last week, the Air Warfare Destroyers — the Navy’s new flagships — were added to the government’s list of “projects of concern.”

With all this new money flowing into the bank accounts at Russell Hill, there will be strong temptations for the ADF to buy expensive new boondoggles that may or may not work. We’ve already seen the idea floated that Tony Abbott wants to buy the jump-jet version of the Joint Strike Fighter, to operate off the Navy’s Hobart-class transport ships.

This would turn those ships into mini-aircraft carriers, but at vast expense. The F-35B is the most troubled of the three troubled Joint Striker Fighter variants, and basing them aboard the Hobart-class ships would mean extensive modifications and retro-fitting. In particular, the flight decks of the ships would have to be rebuilt, as the F-35B’s jet fan is so powerful that it could melt through steel.

Why is Australia embarking on a massive arms race? We haven’t been told. As yet, the government has advanced no strategic reason for the increase in defence spending, beyond some motherhood statements about security in a dangerous world. For a formal and detailed reasoning explaining the arms build-up, we’ll have to wait until the next Defence white paper is released, sometime next year.

As Thomson writes at the end of his report, this is a case of the tail wagging the dog. He calls the 2 per cent of GDP defence spending target “an arbitrary number … set to unleash a previously unplanned expansion of the ADF at enormous cost and absent a consideration of what it will add to Australia’s security beyond sending a message to allies and friends.”

That’s not how Defence Minister David Johnston sees it. In media appearances and statements since the May budget, he has been trumpeting the Abbott Government’s arms spending. “The Abbott Government is committed to growing the Defence budget to two per cent of GDP within a decade,” he said in a media release following the budget. “We will lay down a credible path to achieving our target following completion of the 2015 White Paper and the associated comprehensive force structure review.”

Whatever the eventual outcome, one thing’s for sure. The age of entitlement has certainly not ended for the Australian Defence Force — or for the giant multinational arms corporations that supply it.

Ben Eltham

Ben Eltham is New Matilda's National Affairs Correspondent.

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