Federal Politics

Defence spending boost will put $1 trillion price tag on next two decades, says expert

Malcolm Turnbull will stick to his predecessor's pledge to spend 2 per cent of GDP on defence, which, according to a leading analyst, means Australia will commit more than $1 trillion to defending itself over the next two decades.

More News Videos

Defence white paper's new priorities

Just what should we expect from the 2016 defence white paper? David Wroe provides insights into the military's thinking.

The Coalition government is tipped to release its long-awaited Defence White Paper later this week and will, Fairfax Media understands, maintain the target of spending 2 per cent of GDP by 2023.

That will take some of the steepest increases in defence spending of recent decades, said Mark Thomson, senior analyst at the Australian Strategic Policy Institute.

Lover of public transport Prime Minister Malcolm Turnbull during question time at Parliament House in Canberra on Tuesday.
Lover of public transport Prime Minister Malcolm Turnbull during question time at Parliament House in Canberra on Tuesday.  Photo: Andrew Meares

But much of it will be done through big-ticket hardware purchases the Coalition has already committed to, mostly under Tony Abbott.

"They've committed an awful lot of money out there. Even if they wanted to renege on the 2 per cent, they're probably going to come bloody close to it anyway," Dr Thomson said.


Those promises included new planes, an upgrade to the Army's Steyr rifle, new offshore combatant vessels, new frigates, a new grenade launcher, a replacement armoured vehicle fleet and initial work on the new fleet of 12 submarines.

"The [submarine] design work is going to cost a pretty penny," Dr Thomson said."You add to that the Joint Strike Fighter, the P-8 [surveillance aircraft], there's a very sizeable investment budget out there that is going to help them … ramp up towards the 2 per cent."

Dr Thomson, widely regarded as the country's leading independent defence budget expert, has calculated that the increase will push total defence spending to more than $1 trillion over the next 20 years, accounting for inflation.

He said the spending rise would likely delay reaching a budget surplus by a year or more beyond the current aim of 2020-21.

"I think it's true to say that increasing defence spending to 2 per cent of GDP is likely to push out a return to surplus by a year or so at least. You can't have it both ways."

Based on last year's budget, it would take an average of 4.5 per cent growth a year to 2023.

"That's a robust pace. That's faster than John Howard increased defence spending post-2000. And if it wasn't for that large number of approved projects you'd worry about them being able to spend it."

It is understood that the White Paper will contain detailed costings for major acquisitions that chart clearly a course to the 2 per cent target.

However, the target has many critics, including Dr Thomson, who says it is an arbitrary way to project defence spending. Former chief of army David Morrison also expressed doubt about its usefulness before he retired.

Dr Thomson said uncertainties around GDP growth rates and dollar exchange rates made such a target unreliable.

"Picking an arbitrary number like 2 per cent of GDP will almost certainly not give us the optimum allocation for preparing Australia for the raft of economic and strategic risks ahead," he said.

Follow us on Twitter



Comment are now closed