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.
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.
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.”
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.”
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.
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.
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.