Defence spending appears set to increase substantially in the next financial year compared to previous estimates, after the federal government confirmed in the 2015 Budget that the Defence Materiel Organisation (DMO) will be abolished, with its core responsibilities and funds transferred to the Department.
Funding for Defence is on track to reach $32.7 billion in 2015-16, which is $2.1 billion more than previously budgeted, and represents a nominal rise of 8.6 per cent over estimated actual spending for the current financial year.
The implementation of recommendations contained in the First Principles Review of Defence is getting under way in earnest, meaning the DMO will cease to exist as a separate agency within Defence accounts from July 1. And as a result of the Commonwealth’s decision to ‘disband’ the DMO following the release of the review last month, the DMO’s administrative budget of $805 million will be transferred to Defence, the budget documents state.
More than $750 million worth of extra funds to keep up the Australian Defence Force’s high operational tempo in Iraq and elsewhere – plus a hefty foreign exchange adjustment of a similar amount, given the lower exchange rate – account for most of the rest of the rise.
Between 2015-16 and 2016-17, total Defence funding is expected to fall by 3.3 per cent to $31.6 billion, before jumping 8.1 per cent to $34.2 billion in 2017-18. At the end of the forward estimates period in 2018-19, Defence spending is projected to have reached $36.6 billion.
“In the 2015 Budget, the government will continue to make a significant investment in the safety and security of all Australians,” Minister for Defence Kevin Andrews stated.
“This budget continues to deliver on the government’s commitment to increase Defence spending to two per cent of GDP within a decade, and builds on the government’s promise to provide Defence with a stable and sustainable funding growth path.”
Operation ‘Okra’, which is the Australian contribution to the effort to combat the Islamic State of Iraq and the Levant (ISIL) in Iraq, will receive $391 million in the next financial year, on top of an estimated $261 million that will have been spent by the end of June this year.
With the 2015 Defence White Paper still not yet released, project approvals remain very much up in the air, with the government only considering those project phases absolutely necessary to maintain the momentum of new capability endeavours already approved.
Just two new Defence Capability Plan (DCP) projects have been listed as in development for first pass approval in the coming financial year, alongside eight projects for second pass consideration – notably the Protected Mobility Vehicle Light (LAND 121 Phase 4) acquisition.
“The delivery of the Defence White Paper, along with the Defence Investment Plan – incorporating a Defence Capability Plan – and Defence Industry Policy Statement later this year, will provide the Australian community and defence industry with the clarity and certainty that Labor failed to deliver,” Minister Andrews said. “We will lay out a clear, fully funded plan for a strong and secure Australia.
“The government is committed to implementing its First Principles Review of Defence to ensure the department is properly structured and has the right business practices in place to support the Australian Defence Force in the 21st century. With ongoing reforms, Defence will be able to make better investments and provide better value to taxpayers.”
The federal government announced on April 1 that it had agreed or agreed in principle to 75 of the 76 recommendations that were outlined in the First Principles Review, with the majority of changes to be implemented within two years.