A new year, a fresh start. How better to begin than by reviewing where the dollars are going and checking you're getting value for money? That's why budgets are vital: both at home, and in public life. They reveal choices - priorities that are seen as important.
Since COVID hit, nobody's been too worried about returning the federal budget back into balance. The government's main concern has been keeping the economy ticking over and getting re-elected. That's meant stimulus for business and squeezing money from broadly unsupportive constituencies such as higher education and the arts. The requirement for economic stimulus has been accepted, and this has given Scott Morrison a "get out of jail free" card he can wave in the face of joyless straighteners who want to bring the budget back into balance quickly.
This remaking of our economy is providing the government with a once-in-a-lifetime opportunity to fundamentally shift the foundations of spending, way out into the future. And it's seizing its chance.
Instead of researching how income support and cuts to immigration during the pandemic have kept the less well-off better integrated into society and boosted employment, the government is blindly winding back support and reopening the immigration floodgates. The need to reduce spending is also being trotted out as an excuse for slashing spending on other big-money commitments, such as the National Disability Insurance Scheme. But if there was any doubt that these moves are anything other than ideologically driven, it's worth noting that there's one area of expenditure where there's no hint of any future reduction, ever, and that's defence. The allocation of money to the forces is scheduled to keep growing as a proportion of GDP year after year, off into the future, as far as projections can stretch.
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Currently $44.6 billion a year, the amount allocated to defence has risen in real terms for the past nine years, and is scheduled to remain on this trajectory until the end of the decade. There was so much money being shovelled at the Defence Department over the past financial year that it couldn't actually spend it fast enough. It's ended up having to hand back more than a billion.
Questions need to be asked about where all this money is going.
The three big areas of defence spending are obvious: equipment, personnel, and operations. Even in the absence of war, however, it's still possible to work out what sort of value for money we're getting from our purchases.
Let's look first at money for nothing.
Back in 2016, the government and navy assured us Australia would build and operate the best conventional submarines in the world and the Chief of Navy told us these were exactly what Australia needed. Today it seems, according to a new Chief of Navy, they weren't. Instead we're coughing up a great deal more money to buy far more expensive nuclear boats that we've never operated before, with significant components manufactured overseas, specifically designed for a mission (killing ballistic missile submarines) that our vessels don't have.
Or there's the MRH-90 Taipan helicopters Defence has been struggling with after listing them as a "project of concern" more than a decade ago. In 2020, Defence Force chief Angus Campbell insisted to Senate estimates that this was an "extraordinary helicopter". He wasn't wrong. They're now being scrapped, leaving the forces scrabbling to lease commercial choppers to make up for the failure of equipment that the military happily accepted into service. Similar disaster stories surround so many other critical pieces of equipment - army battlefield communications, navy helicopters, air force Wedgetail early warning and control systems - that it's impossible to have any degree of confidence about the capacity of the forces to choose and integrate pieces of equipment effectively.
The Australian Strategic Policy Institute's Marcus Hellyer has produced and updated a terrific database titled The Cost of Defence. In a detailed, easy-to-read format, the eight significant categories of funding have been broken down into smaller, yearly datasets that show easily discernible trends that virtually never match the rhetoric accompanying the yearly budget announcements.
Although broadly positive that the government will keep its funding commitments, he does wonder about the possibility of major blow-outs on, for example, the new submarines. Specifically, Hellyer asks what sort of nuclear industry will be required to support the new submarines: "You'd have to assume it will cost a lot more to operate these [boats] than the current Collins class."
Then there's the personnel cost. Ten years ago (when Labor was in office) 79,732 regulars wore uniforms at a cost of $12.3 billion. Today we employ an extra 264 people (76,996) but the total cost has soared by $1.4 billion (to $13.7 billion). Organisations are pretty good at discovering ways to spend money, particularly when they're handed an open wallet.
That's why the succession of huge announcements (and occasionally the same one with slight changes) cataloguing a plethora of new weapons that will be used to equip the forces should cause concern. Defence Minister Peter Dutton insists we need to bolster the force with a massive $270 billion of new spending over the next decade. Just to place that in context, this sum is almost double the spending allocated to the government's much trumpeted "record $110 billion, 10-year infrastructure pipeline". It's about double the current underlying cash deficit (of $161 billion), or about 12 per cent of one year's GDP. It is, in short, huge. And a great deal of it will be headed overseas to buy equipment from foreign manufacturers rather than developing indigenous industry or expertise - even in areas where Australia is world-leading, such as in missile technology.
The point is not that these decisions are wrong, but rather that a threadbare camouflage smock is being hurriedly drawn over a pre-existing base of ideologically driven choices. If the government wants to spend money on tanks or missiles, it should simply say so. Beijing is not going to be deterred from war by a few tanks and bridge-layers.
These purchases are about something else entirely.
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Nicholas Stuart is a Canberra writer.
Nicholas Stuart is a Canberra writer.
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