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BUDGET ANALYSIS – Defence funding on track for 2 per cent of GDP


The government is sticking to its plan lift Defence funding, with the 2018-19 budget taking the headline figure to $36.4 billion, up from $34.7 billion in 2017-18.

Defence Minister Marise Payne said this budget maintained the Government’s commitment to provide Defence with a stable and sustainable funding growth path. This takes Defence spending to 1.91 per cent of gross domestic product (GDP), with 1.92 per cent expected for 2019-20.

Defence spending at the fabled two per cent of gross domestic product remains on track to be achieved in 2021-22, two years ahead of the year 2023-24 timeframe the government had initially forecast.

In a budget offering a large number of sweeteners to a jaded electorate which will go to the polls some time in 2019, there wasn’t much said about Defence.

The major budget items include tax cuts for those on lower incomes and significant spending on infrastructure and health. The budget deficit for 2017-18 stood at $18.2 billion, returning to a modest surplus of $2.2 billion in 2019-20.

Well towards the end of his speech to parliament outlining the government’s budget measures, Treasurer Scott Morrison declared the Liberal and National Party coalition could always be trusted to keep Australians safe.

“Stopping the boats and keeping them stopped,” he said. “Protecting Australians from the threat of terrorism. Hunting down criminals. Giving our defence forces what they need to do their job to protect our values and our freedom.

“Protecting Australia from those who seek to do us harm and exert unwelcome influence on our soil. This is what the Turnbull government is doing.”


On that basis, the security related budget initiative most likely to be noticed out in the community is $294 million to harden airport security, in particular $50 million to upgrade security infrastructure at 64 regional airports. That could mean passengers departing from regional airports will have to endure the full body scanning previously inflicted on passengers flying from larger airports.

An Australian Army trainer demonstrates a good seated firing position with a M40 bolt-action sniper rifle for an Iraqi security forces member, in preparation for the qualification portion of an advanced marksman course at Camp Taji, Iraq, Jan. 24, 2018. Camp Taji is one of four Combined Joint Task Force – Operation Inherent Resolve building capacity locations dedicated to training partner forces and enhancing their effectiveness on the battlefield. (U.S. Army photo by Spc. Audrey Ward)

The Defence budget outlines very significant reductions in operational spending, falling from $903 million last year, to an estimated $750 million in 2018-19, and to less than $100 million in 2019-20. That forecast is in line with a reduction in Australian involvement in the Middle East, with the planned return of the remaining elements of the Air Task Group, and the likely end of the Task Group Taji training mission in Iraq.

HMA Ships Maitland (left) and Larrakia alongside the wharf at Zamboanga, Philippines, during their arrival ceremony as part of Operation AUGURY. *** Local Caption *** On Friday, 10 November 2017, the Royal Australian Navy Armidale Class Patrol Boats HMA Ships Larrakia and Maitland arrived alongside the port of Zamboanga in the southern Philippines to begin conducting bilateral maritime patrols with Philippine Navy vessels as part of a combined Philippine Navy and Royal Australian Navy Maritime Security Engagement. The Royal Australian Navy’s participation in the Maritime Security Engagement is part of Operation AUGURY - the Australian Defence Force’s contribution to the Whole-of-Australian-Government effort to counter terrorism and violent extremism in the domestic, regional and global context. The two Australian patrol boats were welcomed alongside at Zamboanga by the city’s Mayor, Maria Isabelle Climaco-Salazar, Armed Forces of the Philippines Rear Admiral Rene V Medina - Commander Naval Forces Western Mindanao, as well as Australian Ambassador to the Philippines - Her Excellency Amanda Gorely, Australian Defence Attaché to the Philippines - Royal Australian Navy Captain Brad White, and Commander Joint Task Force 629 - Australian Army Lieutenant Colonel Ben McLennan. During the Maritime Security Engagement, the vessels will conduct patrols in the Sulu Sea, and will practice a broad range of seamanship skills, interoperability and maritime security tactics with a focus on counter-terrorism and counter-piracy techniques.

As well, the reduction in asylum seeker boat arrivals has allowed for a reduction in funding for Operation Resolute.

Curiously, the budget papers give no cost for Operation Augury, Australia’s assistance to the Philippines military in the bitter fighting against Islamic State insurgent for the southern city of Marawi, in particular the involvement of RAAF AP-3C Orions providing intelligence to support Philippine grounds forces. The government won’t disclose the cost of this operation “due to national security reasons.”

A No. 11 Squadron A9-664 AP-3C Orion at Defence Establishment Fairbairn. *** Local Caption *** Australia’s newest maritime surveillance aircraft, the P-8A Poseidon, has been welcomed into the Air Force. The P-8A Poseidon is a cutting edge maritime surveillance and anti-submarine aircraft which will dominate the skies around the nation’s coastline. It will greatly enhance Australia’s ability to keep our borders secure and guard our maritime approaches. The Prime Minister of Australia, the Hon. Malcolm Turnbull MP, the Minister for Defence Industry the Hon. Christopher Pyne MP and the Minister for Immigration and Border Protection the Hon. Peter Dutton MP, together with the Chief of Air Force, Air Marshal Leo Davies, welcomed the new Poseidon aircraft at a ceremony in Canberra on 16 November 2016. These new aircraft will strengthen our existing comprehensive maritime surveillance capability, helping secure Australia’s borders, play a vital role in the fight against people smugglers and providing state of the art anti-submarine defences. The P-8A Poseidon is a modern, highly reliable aircraft based on the commercially-proven Boeing B737, modified to incorporate the latest maritime surveillance and attack capabilities. This aircraft has been designed by the US Navy to dominate in Anti-Submarine Warfare and will work closely with existing Australian Border Force assets to protect our border. This is the first of 15 aircraft the Government committed to in the 2016 Defence White Paper, with 12 already contracted to be delivered by March 2020. These aircraft will be based and sustained at Edinburgh, creating over 30 direct jobs. The acquisition includes development and sustainment cooperation with the United States Navy and will keep the RAAF P-8A at the forefront of maritime patrol aircraft innovation for years to come. The 15 P-8A Poseidon aircraft and up to seven MQ-4C Triton unmanned aircraft will together provide an advanced maritime surveillance capability to replace the ageing AP-3C Orion platform.

However, spending on operations could just as easily ramp up again in event of a fresh crisis elsewhere. Traditionally the government supplements Defence for the cost of operations, except for those small deployments which Defence funds from its own resources.

The government made no new project announcements in this budget. It perhaps figures there’s more benefit in making such announcements away from budget time when they’ll actually be noticed.

Australian Strategic Policy Institute (ASPI) senior analyst, Dr Marcus Hellyer said the budget contained no shocks, with the government set to take defence funding to two per cent of GDP in 2020-21. Although on current budget figures, that will actually be 1.99 per cent, which would appear to be close enough, he said. To achieve that, there will need to be significant funding increases – around $3.3 billion in 2020-21.

Budget papers do show $500 million has been brought forward which Dr Hellyer said Defence would repay over the next four years. “Defence gets bills from the US for equipment,” he noted. “Because our financial years are out of sync, we can pay things a bit earlier or a bit later to help out the rest of government.”

A35-003, A35-004 and A35-005 arrived at Luke Air Force base. *** Local Caption *** Australia’s Joint Strike Fighter program has taken another significant step forward with the acceptance of the next three Australian F-35A aircraft from Lockheed Martin. The three aircraft are joining Australia’s first two F-35A jets at Luke Air Force Base in Arizona, where Royal Australian Air Force pilots and maintainers are currently training and instructing.

Dr Hellyer said the big spending on new equipment was now well under way, including the Project AIR 6000 F-35 Lightning II which will this year consume $1.8 billion, up from $1.1 billion last year.

“It is going to keep going up, it will probably hit $2 billion,” he said. “Spending on Future Submarines is (also) ramping up – this year they are spending $418 million.” Last year, $319 million was spent on the new submarine project.

“Future Frigate puts in an appearance for the first time, but it’s only $52 million,” he said.

ESPS Cantabria of the Royal Spanish Armada departs in company with HMAS Success of the Royal Australian Navy off the coast of Sydney, as Cantabria departs her temporary home port of Fleet Base East for the last time, to return to her home port of Ferrol, Spain after serving with the Australian Fleet. *** Local Caption *** ESPS Cantabria of the Spanish Armada sails in company with HMAS Success of the Royal Australian Navy out of Sydney Harbour. Cantabria sailed from Fleet Base East, her temporary home for eight months, after a deployment with the Royal Australian Navy Fleet. Cantabria will now sail for her home port of Ferrol, Spain.

Budget papers show $280 million will also be spent in 2018-19 on the two new Navy replenishment ships, now under construction by Spanish shipbuilder Navantia. Construction will also start this year on the first of 12 new Offshore Patrol Vessels under SEA 1180, with the budget allocating $274 million of the $3.6 billion project cost towards initial work.

PACIFIC OCEAN (July 25, 2014) Royal Brunei Navy offshore patrol vessel KDB Darussalam (OPV 06) steams in formation with forty-one other ships and submarines representing 15 international partner nations during Rim of the Pacific (RIMPAC) Exercise 2014. Twenty-two nations, more than 40 ships and six submarines, more than 200 aircraft and 25,000 personnel are participating in RIMPAC exercise from June 26 to Aug. 1, in and around the Hawaiian Islands and Southern California. The world’s largest international maritime exercise, RIMPAC provides a unique training opportunity that helps participants foster and sustain the cooperative relationships that are critical to ensuring the safety of sea lanes and security on the world’s oceans. RIMPAC 2014 is the 24th exercise in the series that began in 1971. (U.S. Navy photo by Mass Communication Specialist 1st Class Shannon Renfroe/Not Released)

Additionally, $396 million of almost $2 billion will be spent on the first of 1100 planned Hawkei Protected Mobility Vehicles and 1058 companion trailers. These are being constructed by Thales in Bendigo, with reliability testing to continue in parallel with low rate initial production.

An Australian Army Hawkei protected mobility vehicle, one of the Army's new generation of combat vehciles, during Exercise Predator's Gallop in Cultana training area, South Australia, on 12 March 2016.

A more comprehensive analysis of the 2018/19 Defence budget will appear in the May-June issue of ADBR.