The federal government has highlighted its support for the Australian defence industry as a key part of its “plan for jobs and growth” that, along with changes to the tax system and an effort to reduce long-term debt, represent what Treasurer Scott Morrison has presented as “an economic plan…not just another budget”.
An industry strategy spanning 20 years will secure the future of the domestic defence manufacturing base, the Treasurer said, and will help create jobs in Australia, including 3,600 direct jobs as a result of the government’s Naval Shipbuilding Plan.
“Big improvements in the nation’s defence capability also support innovation and skills development in advanced technologies,” Morrison said in his Budget Speech on Tuesday. “Through the 2016 Defence White Paper, we have made the decisions necessary to establish a pipeline of work that will secure an advanced defence manufacturing industry here in Australia, driving new high-tech jobs for decades.
“The nine Future Frigates, 12 Offshore Patrol Vessels and 12 new, regionally superior submarines will do the job of boosting our defence capability, but they will also drive jobs and growth in the new economy we are building, not just in the shipyards in Adelaide and Perth but right across the supply chain of our national economy.”
Nevertheless, things are set to get worse before they get better. A graph of the estimated strength of the shipbuilding workforce, presented by the government to show how it is “preventing” the ‘valley of death’, appears to show shipbuilding jobs dropping from about 2,000 currently to as few as 800 or so as late as in 2021, before work on the Future Frigates ramps up.
In terms of the budget figures themselves, as anticipated the Defence Portfolio Budget Statements 2016-17 document holds few surprises, with total departmental funding broadly in line with the numbers provided in the Defence White Paper that was released in February.
Indeed, the pledge to increase the Defence budget to two per cent of GDP by 2020-21 and invest about $195 billion in capability over 10 years has been reiterated.
Defence is being provided with $32.34 billion for 2016-17, which is very close to the figure in the White Paper, as increased funding for operations totalling more than $600 million is largely cancelled out by a foreign-exchange adjustment of over $100 million and a budget adjustment labelled “Defence Budget Rephasing” that cuts $500 million from the coming financial year’s budget.
Australian Defence Business Review understands that this ‘rephasing’ cut is being made in the context of the forthcoming federal election, in anticipation of generalised delays that are expected to occur across the Defence portfolio as a result of inevitable disruption to everyday business.
The $500 million has been shifted into 2017-18, giving a figure for total departmental funding of $34.55 billion, when other adjustments and budget measures are taken into account, which is somewhat higher than detailed in the White Paper. Funding for 2018-19 is put at $36.78 billion, and for 2019-20 at $39.23 billion.