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Unrealistic expectations of Australian defence spending

By Tim Pascoe - posted Thursday, 4 April 2013


Unprecedented economic growth and evolving strategic circumstances in the Asia-Pacific have been accompanied by increases in regional defence expenditure: China doubles its defence budget every five years, India recently announced a 17% rise in defence spending, and Indonesia has increased its annual defence budget by 35%.

Indeed, almost every country in South-East Asia has embarked on a similar build-up, and for the first time in modern history Asia’s military expenditure is poised to surpass that of Europe.

Recognising this regional defence boom, and to enhance Australia’s ability to secure the northern approaches and critical sea-lanes of communication in the Asian Century, the 2009 Defence White Paper focused on procurement for the principle of “self reliance in the direct defence of Australia”.

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However, this regional defence build-up doesn’t necessarily constitute the threat of an arms race or malicious intent: Asian nations are exploiting rapid economic growth to update their military hardware and modernise defence forces.

Moreover, the ambitious goals of the 2009 White Paper were railroaded by the 2012–13 Federal Budget that slashed defence spending to 1.56% of GDP, the lowest since 1938. In light of these cuts, the government’s commitment to retain the White Paper’s “core capabilities”, or big-ticket purchases of Joint Strike Fighters (JSF) and the Future Submarine Project (FSP), represents an inefficient allocation of a reduced spending commitment.

The most troubling aspect of the ADF’s big-ticket purchases was the abandonment of the competitive tender process for the JSF, thereby foregoing cost, capabilities and alternatives analysis and an assessment of the construction schedule. The project has since been mired in technical difficulties, rising costs and delayed completion. Despite planning to procure 100 JSFs, Canberra has ordered only two planes, and an internal debate is underway regarding the utility of the plane. The cost per plane has risen to $150 million, excluding the maintenance and operating costs, which are two to three times the initial purchase price. It is revealing of ADF profligacy and a general lack of strategic vision that the JSF project did not undergo due diligence considering its expense and supposed critical importance.

Early estimates indicate that the FSP could cost anywhere between $10 billion and $40 billion over the next 15 to 20 years, making it the largest defence project undertaken by Australia, while the delayed completion of these projects is anticipated to create a costly capabilities gap.

Australian defence planners must abandon the inefficient big-ticket capital purchases in favour of a more sustainable and balanced defence force structure. Rather than embarking on expensive developmental projects, equipment can be purchased from foreign military sales, taking advantage of Australia’s favourable terms of trade and high dollar. Purchasing foreign equipment also enables greater flexibility to respond to changing strategic situations and defence force structures, instead of being tethered to expensive projects of questionable utility for 30 or so years, as is expected with the troubled Collins class submarine.

While commentators identify proliferating regional threats –China-US antagonism and a nuclear North Korea – the ADF cannot be expected to maintain blanket military preparedness for all contingencies. Defence spending and force structure must be prioritised on the most probable employment of the ADF, namely regional deployment. Canberra’s current bout of bipartisan fiscal conservatism, which is likely to see Defence spending remain relatively low, is an opportunity for the ADF to balance its books.

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The general benefits of defence fiscal austerity are twofold.

First, it would force defence planners to make more prudent purchases based on a favourable cost-benefit ratio and enshrine the competitive tender process leaning towards practical, and arguably equally effective, alternatives such as the 60 F/A 18 Superhornets rather than 100 JSFs, six off-the-shelf foreign submarines instead of 12 Future Submarines.

Second, fiscal discipline would necessitate prioritised spending and give the Defence budget purpose. Rather than wallowing in a lack of strategic direction and lavishing on ‘versatile’ new toys, the ADF could invest in a balanced force capable of achieving strategic goals, such as a naval force of varied assets rather than over-reliance on whatever form the FSP takes.

The recently released National Security Strategy (NSS) was a largely aspirational and rhetorical paper, light on policy outcomes, serving primarily as a public overview of basic defence sentiment. It is understandable that the government brought forward the next Defence White Paper to 2013. The 2009 White Paper has become untenable, and the Defence budget is in chaos. This and the profligacy of big-ticket capital purchases threaten the prospect of a sustainable and functional defence force structure. The Defence White Paper must be mindful of political/fiscal realities and aware of the unique security challenges facing Australia to 2030, while accommodating the ambitious economic and diplomatic goals of the 2012 Asian Century White Paper.

Defence austerity shouldn’t be considered punishment for past profligacy. Tightening the belt will improve procurement processes and clarify national strategy by prioritising spending.

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About the Author

Tim Pascoe is currently completing a Master of International Law and International Relations at UNSW.

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