2012-13 Defence budget: The magic pudding our politicians and economists seem keen on cooking

Cuts of $5.5bn in defence investment over the next four years announced in the 2012 federal budget have generated more heat than light on all sides. A fresh concern, however, has been the re-emergence of particularly uninformed commentary from economists, politicians and others who should know better.

The large cuts in defence investment over the next four years, the death of the 2000 and 2009 Defence White Papers and the looming demise of much of our defence industrial base are serious matters. 

Ensuing controversy has generated heat on all sides but history objectively provides and focuses some light. 

In 1999 Australia almost failed in East Timor, only 800km from Darwin, because our defence force had been so under-funded and hollowed out throughout the 1980s and 1990s. 

Both sides of politics then supported real increases to defence investment to reverse the prolonged neglect. 

Moreover, the enduring lesson of the 1991 Force Structure Review — which cut the size of our defence force by 28 per cent — is that subsequently rebuilding the numbers and capabilities over the last 21 years has cost much more financially, operationally and strategically than the funds supposedly “saved” in 1991. 

Therefore the renewed claims from ideologues and defence-of-Australia dogmatists seeking to resurrect or excuse the strategic policy mistakes of the 1980-2000 period have no validity. 

What is more worrying, however, is the markedly uninformed commentary on the implications of this budget’s cuts, especially from economists, politicians and others who should know better. 

Particularly when lazily based on long-disproven assumptions such as: 

  • defence investment should be purely and specifically threat-based, rather than capability and adaptability-based to forestall general strategic risks in a largely unpredictable future; 
  • even then investment should not happen unless we can all identify and agree now on highly-defined “threats” (which rarely happens and never happens in time); 
  • staving off potential invasion is the only reason we have a defence force anyway (which is nonsense — see below); and 
  • strategic policy should somehow be based solely on the funding thought to be available politically, rather than matched to strategic realities now and to likely or potentially catastrophic strategic risks decades into the future.

But our strategic freedom of action generally, and national sovereignty broadly, mean we always need to protect and further our enduring national interests and not just our territory. 

Such as the seaborne trade our whole economy and way of life depend on — over 99 per cent by volume and over 75 per cent by value. 

The secure sea-lanes these ships use are not somehow a free gift economically or strategically. 

We need to help secure them, in an international system that works, and which works peacefully when our near and wider regions are undergoing great strategic change. 

While investing in Australia’s national defence infrastructure may be generally unproductive economically, strategic risk from insufficient defence investment is more than just “unproductive”. 

The real arguments are always how much and where to invest, and what strategic and operational risk management is necessary, justifiable or responsible otherwise. 

Overall cost to the taxpayer and strategic risk are also minimised over the long term if investment is adequate, sustained and not subject to arbitrary and eventually expensive fluctuations such as in this year’s budget. 

Discussion of Australia’s strategic security options needs to be based on constitutional and fiscal facts: 

  • Defence is wholly a federal function. The other major areas of governmental responsibility, chiefly social welfare, health and education, are shared with the states and territories.
  • Developing and maintaining adequate defence capabilities is national infrastructure investment for the long term, not discretionary, avoidable or un-necessary funding for temporary purposes.
  • Defence investment is 6.4 per cent of this year’s federal budget. It has not been over 10 per cent since the Vietnam War and has hovered around 7-8 per cent for four decades. 
  • At 1.56 per cent of GDP it is the lowest proportion of national wealth since 1938. It has been under two per cent since the late 1980s and not more than three per cent since the Korean War. 
  • Defence investment did finally (and rarely) rise in real terms in the eight years after the 1999 East Timor crisis proved numerous deficiencies. But this was simply unavoidable catch-up funding to rebuild our defence force after decades of sustained under-investment. A small part of it was also the cost of several small wars. 
  • It is intellectually dishonest to claim recent defence investment has been “generous” or “excessive” without applying the long-term context and necessity of recent increaes, or conceding the serious damage to the ADF caused by prolonged under-investment previously. 
  • In the 2012/13 federal budget health was funded at three times the level of defence and education half as much again. Despite the federal government not owning a single school or hospital but being fully responsible for our defence force. 
  • Social security was funded at six times the level of defence. 
  • The states and territories collectively also spend tens of billions on these three functions, particularly health and education. 
  • The unarguable truth is that while defence investment has remained almost static proportionally as a national economic outlay for over half a century, national spending on social security, health and education continues to rise steeply and inexorably as a proportion of both governmental expenditure and GDP. 
  • Capital investment in new equipment for the ADF this year will be around six weeks worth of federal spending on social security, even before we add in state and territory spending. 
  • Finally, there is probably more questionable or wasted expenditure more often in these other portfolios than in defence matters, but it is less noticeable through being spread over a much larger number of much smaller amounts.

Our defence force cannot miraculously restore and modernise itself. 

Our national defence infrastructure is not a political magic pudding that somehow enables funding to be diverted elsewhere harmlessly. 

Future governments will eventually have to reinvest larger sums in the ADF to fix the burgeoning structural deficit entrenched by this year’s budget. 

Over the long run the taxpayer loses, coherent defence planning suffers, equipment has to be retained even when obsolete, and strategic, operational and OH&S risks increase unjustifiably. 

The victim – the ADF – is wrongly blamed when ships, aircraft and vehicles well past their use-by dates break down all the time. 

Once again Australia risks being forced to deploy an ill-prepared defence force in future. 

Just as we had to do in 1914, 1940, 1942, 1950, 1965, 1999 and arguably 2001-05. 

Finally, governments of both political persuasions perennially raid defence infrastructure investment only because the future generations of Australians whose security is risked do not get to vote now. Nor indeed over the political life-cycle of most governments.