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Putting a price on security

Military capacity can't be turned on and off, so budget cuts to Defence mean smart choices become more important

The telephone call last Tuesday morning began well. ''It's a very well-written column, Nic,'' the senior political adviser said. But then he immediately spoilt the favourable impression I'd formed of his acumen and judgment. ''Unfortunately,'' he continued, ''it's utterly wrong.''

His comments were by no means the only criticism of my assertion that Julia Gillard has taken a scalpel to our ambition to act as an ''independent middle power''. The surprise is that some comments have revealed an astonishing lack of understanding of how grand strategy is formed. ''So what if we have to wait a few years to buy some new planes and subs?'' a normally well-informed economist asked. ''Why can't we just buy them in a few years' time, when they'll be cheaper and better? We're not about to be invaded.''

The problem is military capacity can't just be switched on and off. It takes decades to build and even then requires long-term commitment to maintain. As for the broader argument, I'm sticking to my guns. The government will be dressing its new policy up in pretty clothes next year, but the key decisions have been made. And don't think the incoming Coalition government will overturn them, either - money's just too tight. We're staying wedded to the US.

Let's start with money. As one correspondent correctly pointed out, there's absolutely no linkage between a nation's security and the amount it spends on defence. That depends on what threats it perceives and chooses to counter. Nevertheless, the percentage of GDP a nation allocates to defence is a useful tool for understanding force structure decisions and priorities. As a starting point, Kevin Rudd wanted to allocate 0.5 per cent of GDP to foreign aid and just under 3 per cent to defence.

We could, for example, develop our own independent nuclear deterrent. Israel has, because of concern about its neighbours. France did, too. That's the cost of self-importance. If we wanted to go nuclear it would cost us about 5 per cent of GDP, year after year. That's our current spending on defence and education combined. Trouble is, then you need a way to deliver the bomb to its target. As North Korea is demonstrating, getting missiles to work can be as problematic as developing the bomb itself, so add another 5 per cent. That's way more than we could spend, without getting rid of our health system.

That's why you cut your cloth (aspirations) to match your means (budget). Paul Dibb was the first to link our spending on the military to GDP in his '87 Defence White Paper. Since then both sides of politics have, at different times, ''pledged'' to increase Defence's allocation to about 3 per cent of GDP. Neither has managed it.

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That's the starting point. Reality. Ignore the rhetoric; follow the money. This government has demonstrated that 2 per cent of GDP is the upper limit it's prepared to spend on defence. There's nothing wrong with that: you can have a very good Defence Force for that sort of money. But you've got to start making choices and foregoing capacity.

What's been shaved off is the high-end stuff - an independent submarine industry and cutting back on the Joint Strike Fighter. We can postpone the purchase of Joint Strike Fighters because they're made in the US. In fact, it looks as if this decision is more about creative accounting, shifting purchases from one financial year to another, so it's probably best to ignore it's strategic effect.

But the sub's different. No other nation builds exactly what we want; a long-range, conventional boat. But, as the Collins has demonstrated, there are massive additional costs and problems if you want to retain your own indigenous capacity. On the other hand, we can buy perfectly good designs (optimised for Baltic waters) or (possibly) lease some US nuclear-powered vessels. Neither would be our first choice, however, you only get to spend money once.

Here, lead-time is critical. And that's why the decision not to bite the bullet and proceed with building our own submarine has acted like a kick in the guts to our industry. The repository of knowledge and expertise that finally got the Collins working is already dissipating. Now it will disappear. Advanced industrial skills can't just be switched on and off at will. It's easier and cheaper to copy the design of a German U-boat - which is what we'll probably end up doing - but that's not the same as obtaining a vessel that matches our specific requirements; although it will be a heck of a lot cheaper.

It's the difference between spending 2.5 per cent of GDP and 2 per cent. And no matter how emphatically Tony Abbott privileges Defence procurement, it's difficult to believe that an incoming Coalition government wouldn't be able to find something better to spend the money on rather than supporting a submarine industry.

It's about trade-off's and prioritising. It seems a reasonable assumption that the US nuclear umbrella will protect us for as long as there are American boots on the ground in Darwin. While that remains the case we have a great deal of flexibility … but it's wrong to pretend we're retaining a military with the sort of capacity it had in the past.

Focusing on the forces, as this column does, is, however, no alternative to a well thought out national security strategy.

Rudd's biggest failure as an internationally-focused PM was his inability to co-ordinate the multiplicity of government agencies acting in this space. Outrageously, this is still the case. Defence does one thing, the Australian Federal Police another.

Treasury's excellent program sending young officials to work intimately with Indonesia is criticised for wasting money while we open an expensive embassy in West Africa for dubious benefits.

Where's the logic? Where's the overall co-ordination?

National security is about much more than just the maintenance of a submarine industry or jet fighters. Labor needs to weld the different agencies together with a coherent approach. Until then it's difficult not to conclude that they're just in a desperate scramble to save money.This is a job for Bob Carr.

Nicholas Stuart is a Canberra writer.