Australian defence minister Stephen Smith.

Australian defence minister Stephen Smith. Photo: John Mokrzycki

Discussions on defence in recent times have focused on how to adjust and respond to a shrinking budget. Defence Minister Stephen Smith has deliberately not sought to abandon capabilities required for a balanced military force; but he has defended significant cutbacks by comparing Australia's predicament with that of the United States and of Britain.

This approach has significant limitations as it does not take account of the vast differences in their respective fiscal and strategic circumstances and their forces' legacy capabilities.

Australia does not face the fiscal crisis challenging American and British, and other European governments. The federal government's attempt to return the budget to surplus is widely recognised as an arbitrary one based as much on political as economic reasoning. So, the argument that the defence budget has to experience such drastic cuts remains open to debate. Yet many commentators take it as a fait accompli and look to shape the debate around how to manage the smaller budget, rather than questioning whether it should shrink. In considering shrinkage, the regional environment must feature prominently in the calculations.

Australia does not belong to a region where security and stability are as assured as in Europe or the Americas. The recently released Asian Century white paper paints an optimistic picture of future regional relations. This is reasonable given the paper's focus on outlining a positive way ahead for Australia's multifaceted engagement in the region. But the positive perspective does not mean that conflict is not possible or can be wished away. The hot spots in east and south-east Asia are too numerous for that.

The Korean peninsula, for instance, remains on a knife edge and a conflict there would have wide regional ramifications and potentially draw in Australia as well.

Tensions also are on the rise between Japan and China for a host of domestic political and strategic reasons as China's rise butts up against the established interests of Japan, let alone South Korea and Taiwan.

China's assertiveness also affects those with competing claims over parts of the South China Sea, where there is a range of flashpoints that could destabilise the region and possibly draw in Australia. We all hope that conflict will be avoided, but hope itself is not enough. Hope is not a plan.

In planning for the future, we need to remind ourselves that no one can predict with certainty and so we need to plan for uncertainty, maintaining a range of military capabilities. Some have suggested a narrowly-focused strategy for the defence of Australia based on sea denial, emphasising submarines and aircraft above all else. But such a strategy itself would then generate a series of vulnerabilities. Putting all our ''eggs in one basket'' would have significant knock-on consequences to how we are able to engage in the region and how any potential adversary might adjust their strategy in response.

The concerns are genuine and point to the need for maintaining the Australian Defence Force with robust and broad capabilities to be prepared for a range of conceivable scenarios that could emerge with little notice. In planning for uncertainty, the ADF needs to be actively engaged in the region through bilateral and multilateral forums and exercises to mitigate the risk of conflict. But such engagement costs. That cost needs to be seen much like an insurance policy. No one likes to pay insurance but we all appreciate the benefit that accrues.

The size of the premium needs to be kept in perspective and here the comparison with Britain and the United States is instructive. Australia's defence budget has always been only a fraction of that of the United States and Britain. Britain's cutbacks, for instance, are from a far more substantial baseline. Britain's defence force consists of 220,000 troops whereas Australia has about 59,000. Britain's defence budget sits at $US62.7 billion whereas Australia's is only $24.5 billion. Even in terms of a percentage of GDP, in the year 2011-2012 Britain was at 1.9 per cent compared with Australia's 1.56 per cent.

A cynic might say that the US ''pivot'' or ''rebalancing'' to Asia, with the placement of US marines in Darwin, has been seen by the government as allowing Australia to ease off its defence spending. But Australia needs to be able to maintain its own regional engagement plans.

US fiscal vulnerability points to further uncertainty and possible force reductions ahead and to the need for Australia to increase not decrease it's self-reliance while still maintaining high levels of interoperability with Australia's strategic cousins in North America.

In considering the future, the ADF needs to look to work with its regional partners, particularly in ASEAN, to bolster security, and stability through a number of confidence building measures.

Perhaps the most significant way of building that confidence is by maintaining a spectrum of robust capabilities that can be used in engaging collaboratively with regional partners.

John Blaxland is a senior fellow at the Strategic and Defence Studies Centre at the Australian National University.