Defence spending will reach two per cent of Australia’s Gross Domestic Product by the 2020-21 financial year, the 2016 Defence White Paper (DWP) promises, realising a commitment first made in opposition by former Prime Minister Tony Abbott prior to the 2013 federal election.
But the document stresses that Defence funding will in fact be de-linked from the two per cent of GDP measure.
“To strengthen Defence’s long-term budget and planning certainty, the Government has decided that the 10-year funding model will not be subject to any further adjustments as a result of changes in Australia’s GDP growth estimates,” the DWP’s chapter on funding reads.
“This de-coupling from GDP forecasts will avoid the need to have to regularly adjust Defence’s force structure plans in response to fluctuations in Australia’s GDP.”
That “de-coupling” allows the White Paper to be fully costed over the promised 10-year timeframe, rising from a planned $32.2 billion in expenditure in 2016-17 to $58.7 billion in 2025-26. But a budget table accompanying the White Paper shows the increase in defence budgets won’t be linear, with the biggest spending growth coming over the 2020-21 to 2022-23 financial years. In particular the table shows an 8.5 per cent leap in funding from 2021-22 to 2022-23.
Notes the White Paper: “substantial new investment will be required in the first half of the 2020s, including for the acquisition of the future submarines and frigates, which will be major drivers of Defence expenditure. The majority of the additional funding to 2025-26 will be provided from 2019-20 to meet these requirements.”
Conversely, from the current 2015-16 financial year, where the White Paper notes the Defence budget is $32.6 billion, the 10-year funding table indicates a small cut in the Defence budget for 2016-17, to $32.2 billion.
“Over the next two years, while the First Principles Review is being implemented and reforms are being institutionalised, the Defence budget will grow gradually,” the document reads.
“After this period of reform, the rate of funding growth will increase towards the end of this decade to deliver the capabilities set out in the White Paper.”
The White Paper also stresses that the 10-year funding model has been “cost assured”. External companies were involved in cost assuring 80 per cent of the 10-year defence budget, with the balance “subject to internal cost analysis and assurance”.
“The external cost assurance process included investigating the acquisition and sustainment costs for potential new capabilities, as well as significant existing equipment, facilities and information technology projects, the Defence workforce and the cost of our enhanced program of international defence engagement,” the White Paper reads.
That cost assurance, and the 10-year funding timeframe should offer the certainty the defence industry needs to plan against capability requirements detailed in the White Paper’s accompanying Integrated Investment Program.
But the real integrity of the White Paper’s budget planning will depend on the political will of successive governments to stick to that funding roadmap.
Industry will be hoping that, to adapt a famous quote, “no [budget] battle plan ever survives first contact with the [political] enemy” doesn’t hold true.