By Professor Andrew O’Neil, Dean (Research), Griffith Business School
The 2018 Federal Budget endorses another positive year of outlays for the Defence portfolio and security more broadly. The Defence Portfolio Budget Statement confirms that the Turnbull Government has authorised growth in real terms, which equates to 1.9% of GDP.
The Abbott Government’s commitment in 2014 to endorse an expenditure target in the Defence portfolio of at least 2% of GDP per annum by 2020-21 has meant this area of the budget has effectively been ring-fenced from cuts. The ambitious strategic guidance laid out in the 2016 Defence White Paper (DWP), coupled with signs of a deteriorating security environment in Asia, has reinforced the logic of this in the eyes of senior policy makers, and it’s unlikely this would change in the event a Labor Government was elected.
“Australia currently outlays around $35 billion per year on Defence.”
As in previous years, the primary outlays in the Defence portfolio are fixed personnel costs, continuing global operations, and phased capability acquisitions through the Integrated Investment Plan (IIP). Released in sync with the 2016 DWP, the IIP allocates in excess of $50 billion over the forward estimates (i.e. the three years beyond the current budget) and $200 billion in capital investments over the next decade.
At least one-quarter of this spending will be devoted to underwriting the construction of a dozen new generation submarines and covering the increasingly opaque costs of the F-35 Joint Strike Fighter Program. To put this into perspective, Australia currently outlays around $35 billion per year on Defence, so it’s easy to see the central role of capability acquisitions in shaping — and in some cases blowing out — defence expenditure over time.
One new initiative in this year’s budget that has already received some coverage is the Turnbull Government’s decision to invest $50 million in seed funding for an Australian Space Agency. Its creation was announced last year, and while Education Minister Simon Birmingham is on the record as saying that ‘it’s not NASA’, the new agency will inevitably have a defence and intelligence function simply because of its involvement in the various dual-use domains of satellite technology.