Australia’s capability to conduct offensive and defensive cyber operations will vastly increase with a near $10 billion increase in funding to the Australian Signals Directorate (ASD) over the next decade.

But most of that isn’t new money in the 2022-23 Defence Budget announced tonight. The majority will come from within the existing budget, most likely from funding for new equipment.

A comparison of defence budget documents for 2021-22 and this year shows marked reductions in the capability acquisition program – new equipment – over the forward estimates period.

For example the 2021-22 Defence Portfolio Budget Statement (PBS) shows a total estimated budget of $20.128 billion for new capability for 2024-25, while the PBS for 2022-23 shows estimated spending on new equipment of $18.424 billion for 2024-25. That’s a reduction of $1.7 billion in that year alone.

Does this reflect a higher priority to cyber, coupled with slow spending on other major capital equipment projects? A defence official would only say that the money was coming from within the Defence Integrated Investment Plan (IIP), with reprioritisation conducted biannually .

In his budget speech, Treasurer Josh Frydenberg gave every indication that security matters were a looming focus. “Tonight, as we gather, war rages in Europe,” he said, adding that the global pandemic wasn’t over and devastating floods had battered our communities. “We live in uncertain times, this is not a time to change course.”

The single big ticket item announced by the Treasurer was $9.9 billion for offensive and defensive cyber capabilities, termed REDSPICE – Resilience, Effects, Defence, Space, Intelligence, Cyber, and Enablers.

“REDSPICE will triple ASD’s offensive cyber capabilities and double its cyber hunt and response activities, preserving ASD’s capability edge and delivering strategic advantage for Australia over the coming decade and beyond,” the budget papers say. “The package will help ASD to keep pace with the rapid growth of cyber capabilities of potential adversaries as well as being able to counter-attack and protect our most critical systems.”

This will offer significant opportunities for industry and educational institutions. But this is mostly not new money – of the $4.2 billion to ASD over the four years of the forward estimates, $3.62 billion will come out of Defence.

In the space of a year, ASD funding goes from $1.165 billion (2021-22) to $1.664 billion (2022-23) and $2.277 billion (2023-24). This very significant increase in funding raises the obvious question as to how it will manage to spend the money.

Overall, despite the global pandemic the Australian economy appears to be in pretty good shape. The Treasurer said the budget was $100 billion better off than a year ago, allowing the government to temporarily reduce fuel excises and splash some cash on handouts and income tax concessions.

It has also allowed the government to maintain its trajectory on defence spending in line with its undertaking to lift the defence budget to more than two per cent of Gross Domestic Product (GDP).

Total defence funding for 2022-23 reaches $48.615 billion, up from $44.619 billion in 2021-22 – that’s 2.11 per cent of GDP for 2022-23 with funding predicted to reach 2.18 per cent 2023-24. However the improving economy meant that the funding for the current year 2021-22 actually dipped below the magic two per cent of GDP, down from 2.09 per cent to 1.98 per cent.

Australian Strategic Policy Institute (ASPI) senior analyst Marcus Hellyer told ADBR this was in the same funding envelope the government laid out in the 2016 White Paper and reaffirmed in the 2020 Defence Strategic Update.

“On the one hand you could say that is good because it hasn’t been eaten into by Covid,” Hellyer told us. “On the other hand  you could say it’s bad because it doesn’t reflect the broader changes in the world and our deteriorating security environment.

“The money is progressively going up, but it’s going up at the same rate that was set out over six years ago,” he added. “Times have changed, but the budget hasn’t.”

The government preceded the budget in recent weeks with some major announcements, such as its plan to grow Defence numbers by 18,500 – around 30 per cent – by 2040.

Budget papers show the first anticipated increase in numbers – in 2023-24, uniformed personnel numbers will reach an estimated 63,597, an increase of 862 on the estimate of 62,735 in last year’s budget.

With China’s interest in the region becoming more pronounced, the budget papers show rising spending on Defence Cooperation Program (DCP) activities in the South Pacific (up $10 million to $125.8 million) and South East Asia (up more than $3 million to $34.4 million). But spending on PNG falls noticeably from $54.1 million to $49.6 million.

Australian defence activities in the Middle East have dwindled. Operation Accordion – a compilation of the remaining missions in the Persian Gulf – falls to $104 million in 2022-23, just $900,000 in 2023-24 and, barring renewed deployments, nothing the following year.

Defence assistance to the community in response to the Covid 19 pandemic and floods cost $257 million in 2021-22.