Page 26 - Australian Defence Magazine July-August 2021

26 DEFENCE BUSINESS
JULY-AUGUST 2021 | WWW.AUSTRALIANDEFENCE.COM.AU
A COMFORTABLE DEFENCE BUDGET,
BUT IT’S TIME TO MAKE THINGS
UNCOMFORTABLE FOR DEFENCE
We’ve gotten used to ‘no surprises’ defence budgets under the current government. They lay out their plans in their strategic policy documents, make their funding commitments, and let Defence get on with delivering the plan.
MARCUS HELLYER | ASPI
T
HE budget papers then confirm that those funding commitments are being met. That was the case with the budgets following the 2016 White Paper and it’s now the case with the budgets following the 2020 Defence Strategic Update.
The consolidated defence budget for the Department of Defence and the Australian Signals Directorate for 2021-22 is $44.6 billion. Once we take no-win, no-loss adjustments for foreign exchange and operations into account, it’s pretty much right on the DSU’s number for 2021-22. There’s cer- tainly a lot to be said for making commitments and deliver- ing on them. It provides planning certainty for Defence and it sends a clear, funded demand signal that industry can respond to.
It’s a nice, comfortable picture. But is comfortable really what Australia needs right now? Here’s some factors that might puncture that comfortable bubble.
The first has been said many times before, so I won’t dwell on it, but it’s the misalignment between the strategic assess- ments in the DSU and the shopping list underpinning it in the Force Structure Plan. When we no longer have warn- ing time, how does it make sense to spend $575 billion on Defence over the decade and not get a single new warship
into service in that period? If we need new long-range strike capabilities to deter a major power adversary, how does it make sense to invest $30+ billion in heavy armour that can’t be deployed around the maritime and archipelagic region that is now meant to be the focus of our attention?
There are some other factors of particular relevance to industry. The steadily growing funding increases pre- sented in the White Paper and DSU flow chiefly to Defence’s capital budget. It’s planned to grow to 40% of Defence’s total budget. That could trans- late into an annual $10 billion acquisition spend just on Australian defence industry by the end of
the decade.
But ramping up will take time. In 2020-21 De-
fence planned a $3 billion (27%) in its acquisition spending (both locally and overseas). That was always going to be a big ask, particularly in the middle of a global pandemic that was playing havoc with global sup- ply chains. To their credit, Defence and its industry part- ners got halfway there, registering a $1.6 billion increase on the previous year. That’s encouraging and shows that industry is responding to the government’s demand signal. But it does remind us that regardless of how much money is on offer, it takes time to ramp up industry capability and
capacity and time is something we don’t have a lot of.
One risk that will potentially slow that ramp up is the availability of workforce. With a cap on its public service workforce, Defence is increasingly turning to external workforce. A year ago, Defence’s external workforce was its second biggest ‘service’, behind the Army and ahead of the public service. Defence hasn’t released its most recent external workforce census, but based on conversations I’ve had with people inside Defence, external workforce is now
bigger than the Army.
That workforce is crucial to Defence’s operations, and
nobody wants to go back to the days when Defence ran its own factories or all meals on bases were prepared by uni- formed personnel. But the growing number of contractors who essentially perform roles normally done by Defence’s own personnel is a concern.
At recent Senate estimates hearings Defence stated it was spending around $2 billion a year on its public servants