2004/05 Defence budget: More gambling with the future of our children

As expected, the 2004-05 federal budget was mainly targeted at buying swinging votes in marginal electorates. This was to be expected in an election year where a close race is likely and where, despite occasional rhetoric to the contrary, both parties are naturally reluctant to draw attention to their long and indifferent records of insufficient and inconsistent investment in meeting their national security responsibilities.

The overall allocation for defence is $16.3 billion comprising an appropriation of $15.9 billion and other revenue (asset sales, etc) of $400 million.

This is about $725 million (or 2.4 per cent) more than last year.

Defence spending is about 8.5 per cent of the total federal budget ($192.3 billion) and is estimated it will be around 1.8 to 1.9 per cent of projected GDP.

The non-defence intelligence and security agencies also received an additional $56m.

It is worth noting that the opaque accounting methods used meant the nation’s main newspapers again all quoted different figures for defence spending in their budget analyses.

Purely for comparison, social security ($82.6 billion) is about 43 per cent of the budget, health ($35 billion) around 18 per cent, and education ($14.2 billion) about 7.5 per cent.

Given that defence is wholly Commonwealth funded, but these other three areas also receive significant inputs from the states and territories, this budget again puts paid to the myth that somehow we are ‘wasting’ too much on defence and not allocating enough for social spending.

These days, as long as the overall defence allocation is not cut, the budget night detail is not as important as it once was.

The funds necessary to run our defence efforts fall into three broad categories: people, operating costs and capital investment.

Most public interest is in the latter category and government press releases tend to emphasise the monies allocated to shiny new kit for the ADF, and new base facilities — generally listed by federal electorate as well as geographic locality to emphasise the pork-barrelling intent and political spin behind at least some proposals.

Equipping the defence force requires phased investment over time.

Not least because of the long periods taken to procure weapons and equipment, but also because many of the larger items (ships, aircraft, etc) or fleets of equipments remain in service for 2-4 decades. Or longer when the phasing is cocked-up or otherwise delayed.

In basic terms the capital investment component each year tops up the first year of the rolling Defence Capability Program (DCP).

  • This runs out to around 25 years in some cases but only the first 10 are budgeted in detail for project funding.
  • This year’s DCP top-up included $2.9 billion for major equipment, $421 million for facilities and $518 million for minor equipment, repairs, rent and intangibles.

As per normal, around 41 per cent of this budget, some $6.7 billion, will be spent on personnel costs (pay, allowances, health, housing, superannuation, etc).

One in five dollars goes on Defence’s public servants and the remainder on the defence force.

The remaining 30 per cent of budgeted funds (around $5.7 billion) goes on a wide range of operating and other one-off costs, including about $132 million for another year in Iraq.

The capital investment program has not been cut to subsidise personnel and operating costs. This is always good news because it is a constant party-political temptation to satisfy the proclivity for short-term electora advantage.

However, because Defence was unable to spend some $600 million of capital investment funding last financial year, there has been some deferment of projects in the DCP to later years in the program. There is always the risk that such investment promises are never fulfilled.

This will be a problem if those funds are not made available, as scheduled, in subsequent budgets.

The 2004/05 budget largely continues the sustained underinvestment in defence of the last three decades and will further postpone or limit much-needed ADF modernisation.

Our short-term focused allocation of national resources to defence still fails to match the long-term strategic challenges we face.

The small real increase in defence funding this year still lags well behind both GDP and general expenditure growth.

As a nation we could and should spend more on defence but we choose not to in a, largely uncalculated, gamble on the future.