Australia's defence needs long-term planning as well as more dollars

The Prime Minister thinks Defence needs more money - he said last week he could feel it in his bones. And he is right - Defence does need more money. But that has very little to do with the Bali bombing, and not much to do with September 11. Instead, it is all about the viability of the government's long-term plans to develop our defence forces over the next decade.

This seems counterintuitive. Bali has given Australians the biggest shock to our sense of security in decades, and it looks obvious that we should urgently build up our defence forces to respond. After all, if they cannot help us respond to Bali, what use are they?

But that is wrong, in two ways. First, because the Australian Defence Force will have at most a subordinate role in the urgent tasks of catching those responsible for Bali and reducing the risk that we might be attacked by terrorists again. And second, because terrorism, serious though it is, remains only one of a number of long-term security challenges for Australia, and we will need a capable defence force to respond to many of them effectively.

The government will be keeping these truths in mind over the next few weeks as it considers Defence's bid for more money next year. So far the debate has been a bit of a phoney war. Some, including Defence Minister Robert Hill, have argued that after September 11 we need to focus more on our ability to send forces to fight alongside allies in faraway places such as Afghanistan and Iraq. Others say that after Bali we should focus our efforts more on our immediate neighbourhood. But neither side is proposing any major changes to the defence capability plan that the government put in place two years ago in the defence white paper.

There is good reason for this conservatism. No one has shown that we need any major new capabilities that are not already in the plan. On the global front, even before Bali, it was clear that any further contribution we made to the American-led global war on terror would be on the small side. If we end up sending forces to fight in Iraq, for example, they will probably only be on the same scale as those we now have committed to Afghanistan. So there is no need to remodel the ADF for global reach; we can do all the government wants with what we have.

And on the regional front, even after Bali, there is not much the ADF can do to help address the very real short-term threat of further terrorism against Australia and Australians. That is a task for intelligence agencies, police, immigration, and diplomats to help build regional cooperation. There is still a lot more to be done in some of these areas, as the government clearly recognises. The highest priority is probably to organise a single, integrated intelligence effort against terrorism. At present our very capable agencies coordinate their work on terrorism, but now they need to go beyond that and integrate their efforts into a unified and focused intelligence campaign under a single authority. And they probably need more money.

This does not mean the ADF will sit on the sidelines. I very much doubt that our special forces will end up hunting Jemaah Islamiah operatives in Indonesia, but the government will place a high priority on having ADF assets ready to help respond to instability in what Paul Dibb rightly calls the arc of instability to our north. For example, the PM will want to be sure that the ADF is ready to help Australians leave if a crackdown on Islamic militants in Indonesia sparks anti-Western violence. But again, the ADF needs no major new capabilities to do that.

So there is some good news for the government: to help fight terrorism, Defence does not need big new capabilities beyond those already planned, nor a major increase in Defence funding to pay for them. At most, it might need some fairly small sums to top up operational funding and buy some relatively small items of additional equipment.

The bad news is that Defence does seem to need a lot more money to deliver the capabilities that are already planned and programmed. And that is on top of the very generous 3 per cent per annum Defence budget increases promised by the government in the white paper, and so far delivered.

No one knows exactly how large the hole in the Defence budget is, but $1 billion a year over each of the next five years is talked about. Some of the shortfall is caused by long-standing problems in logistics and support, but most of it comes from increases in the estimated costs of new equipment. But these are themselves only symptoms of the more deep-seated issue of Defence management, which successive Coalition defence ministers have tackled with differing degrees of success. One key symptom of the malaise is that, while Defence says it is short of money, it does not appear to be spending all the money it is getting now. There seems to be around $750 million in the bank - $250 million more than expected.

As they wrestle with these problems over the next few weeks, ministers will find no easy solutions. They will not be attracted to cutting back the white paper's capability targets. Today we are focused on terrorism, but we still have to keep in mind many other long-term security issues that have not gone away. We cannot afford to weaken Australia's commitment to the defence of our territory and the stability of our neighbourhood. So the defence forces that the government decided were necessary for Australia two years ago are just as necessary today.

On the other hand, simply to give Defence the extra money it says it needs would reward, and thus encourage, bad management. The ultimate solution is to take a more radical approach to fixing the way Defence is managed, but that will take time, and some very fresh and creative thinking. Defence may be unsettled to learn that Mr Costello is taking a keen interest. In a little-noted comment last week he put a clear ceiling on the scale of the increase in defence spending that he would contemplate. There will be tough talk in cabinet.