While the 2017 Defence budget confirms a commitment to large-scale projects currently in play, an emphasis on job creation in the Defence arena also moves to reaffirm the government’s ‘Australia first’ agenda.

By Professor Andrew O’Neil, Griffith Business School


By far the most complicated dimension of defence budgets is aligning the timing of key acquisitions with the strategic guidance laid out in successive Defence White Papers. Historically, very few governments have been able to do this largely because major acquisitions are, by their very nature, devilishly difficult to control. Aircraft and naval acquisitions in particular are difficult affairs, often characterised by cost overruns, equipment delays, and changing geopolitical circumstances that sometimes throw the logic of the initial purchasing decision into question. Australia’s single most celebrated acquisition – the F-111 fighter-bomber — was ordered in 1963 because it was the only aircraft on the market that could fly non-stop to Jakarta to deliver a payload without refuelling. By the time it entered service in the RAAF a decade later, the acute sensitivities in Canberra to the threat from Indonesia largely passed. Nevertheless, the F-111 remained the RAAF’s workhorse in various theatres for nearly 40 years until its retirement.

Defendingthe Defence budget

Ever since the Abbott Government committed in 2014 to reaching defence expenditure of at least 2% per annum by 2020-21, this area of the budget pie has effectively been ring-fenced from cuts. This has been controversial in some quarters. The quarantining of defence has generated criticism from influential constituencies that have pointed to the major cuts in foreign aid, which detract from Australia’s capacity building footprint in the South Pacific and the ability of Australia to maintain an active middle power presence in the region. Searching questions have also been asked about the prospective combat capability of acquisitions such as the Joint Strike Fighter and how realistic it is to cap the cost of building twelve new submarines at $50 billion.

Keeping commitment

This year’s defence budget can best be described as ‘steady state’ in its emphasis. After Mark Thomsonpointed out last yearthat half a billion dollars in expenditure had been deferred in the 2016-2017 budget to 2017-2018, it’s heartening to see the Government has kept to this commitment and resisted pressure to cut spending. All up, it’s clear the Turnbull Government is maintaining the trajectory of previous commitments. The thrust of the budget with respect to defence is consistent with last year’s statement, and reflects a commitment to maintaining all large-scale projects currently in play. Importantly, the Turnbull Government commits to 1,000 new civilian employees in the Defence Department to help drive the capability development that lies at the heart of the 2% GDP target.Still, the budget also serves to reaffirm the Government’s increasingly jingoistic ‘Australia first’ agenda that permeates broader industry policy, which in turn drives an emphasis on job creation in the defence area, most notably in the area of shipbuilding. These days, it’s sometimes hard to tell what’s driving acquisition decisions in the naval area: genuine strategic imperatives or the promise of domestic job creation in key electorates.

Increases possible

In a period where regional security in the Asia-Pacific remains anything but stable, and concerns persist about the long term reliability of the US nuclear umbrella, the Turnbull Government will not be revising the 2% of GDP target set in 2014. Indeed, we may well witness a further increase in defence spending if the Trump administration is seen to be failing to deliver on its alliance security guarantees in the Asia-Pacific. While one can never say never in terms of budget cuts in any portfolio, it is extremely hard to see any Government in the near term — Coalition or Labor — reversing course in the steady rise in Australia’s defence expenditure. In an increasingly tight fiscal climate, defence spending is likely to remain one of the very few areas immune to pruning.