‘With a little help from my friends’: Capitalising on opportunity at AUSMIN 2022

The annual Australia-US Ministerial Consultations have been the primary forum for bilateral engagement since 1985. The Australian Minister for Defence and Minister for Foreign Affairs will meet with their American counterparts in Washington in 2022, in the 71st year of the alliance, and it’s arguably never been so important.

The Australian Strategic Policy Institute is proud to release ‘With a little help from my friends’: Capitalising on opportunity at AUSMIN 2022, a report featuring chapters from our defence, cyber and foreign policy experts to inform and guide the Australian approach to the 2022 AUSMIN consultations.

In this report, ASPI harnesses its broad and deep policy expertise to provide AUSMIN’s principals with tangible policy recommendations to take to the US. The following chapters describe Australia’s most pressing strategic challenges. The authors offer policy recommendations for enhancing Australian and US collaboration to promote security and economic prosperity.

The collection of essays covers topics and challenges that the US and Australia must tackle together: defence capability, foreign affairs, climate change, foreign interference, rare earths, cyber, technology, the Pacific, space, integrated deterrence and coercive diplomacy. In each instance, there are opportunities for concrete, practical policy steps to ensure cohesion and stability.”

Counterterrorism Yearbook 2022

The Road from 9/11

It’s been its been over two decades since the 9/11 attacks when two planes hit the World Trade Center, one hit the Pentagon and a fourth crashed in Pennsylvania. Close to 3,000 people died and many others were injured, and even more people were traumatised by the experience and the loss of loved ones. Today’s release of the Counterterrorism (CT) yearbook 2022 coincides with the anniversary of the November 2008 Mumbai terrorist attacks and the deaths of 174 people. These and other acts of terror have left an indelible mark and shaped the years that followed.

Australia’s overall security environment is increasingly challenging to navigate. Emerging threats such as information operation campaigns, cyberattacks and climate change are increasing the complexity of the world. In 2022, major geopolitical events including Russia’s war on Ukraine and China’s continuing coercive operations and aggression, occupied a significant space in national discourse. Foreign interference and espionage have continued to rise to the forefront of intelligence agencies priorities.

Yet, terrorism prevails as a significant security concern for Australia and the wider region. These continuing challenges mean that ASPI’s 6th edition of the Counterterrorism Yearbook is as important as ever.

ASPI’s Executive Director, Justin Bassi, notes in the preface of this 6th edition of the CT Yearbook, that ‘while terrorism is no longer assessed by ASIO to be our top security threat, it hasn’t disappeared and in fact continues to be one of the predominant security concerns for Australia and the region.’

The 2022 yearbook was co-edited by Katja Theodorakis, head of ASPI’s Counterterrorism, CVE and Resilience program and Gill Savage, an ASPI senior fellow, considers CT challenges through the lens of the world context, today’s challenges and explores wider policy considerations through a range of chapters from 16 expert authors. The yearbook includes chapters on trends in terrorism, precrime policing and extremism, radicalisation of teenagers, strategic competition and CT, public trust, multiculturalism and bioterrorism and resilience.

Theodorakis notes in her introduction that:

‘For most of the past two decades, terrorism and extremism were largely seen as an external issue brought to Australia by foreign problems. Even when talking about ‘homegrown jihadists’, extremist ideological motivations were generally ascribed to global terrorist sources in faraway places.’

The presence of motivated violent extremist groups continues and are increasingly accompanied by issue-specific radicalised individuals. A key aspect of the changing environment is the use of social media by extremist groups to tap into public discord arising from Covid lockdowns and vaccination mandates as well as violence driven by divisive political agendas in democratic countries such as the White House riots in 2020.

Today’s CT environment is an increasingly complex one, the impact of which hasn’t diminished. It represents a challenge that requires governments, community and academia to continue to work together.

North of 26 degrees south and the security of Australia: Views from The Strategist, Volume 6

The Northern Australia Strategic Policy Centre’s latest report, North of 26 degrees south and the security of Australia: views from The Strategist, Volume 6, is a series of articles published in The Strategist over the last six months, building on previous volumes by identifying critical intersections of national security, nation-building and Australia’s north.

This issue, like previous volumes, includes a wide range of articles sourced from a diverse pool of expert contributors writing on topics as varied as maritime law enforcement, equatorial space launch, renewable energy infrastructure, rare earths and critical minerals, agriculture, Industry 4.0, advanced manufacturing, fuel and water security, and defence force posturing. It also features a foreword by the Honourable Madeleine King MP, Minister for Northern Australia.

Minister King writes, “Northern Australia promises boundless opportunity and potential. It is the doorway to our region and key to our future prosperity.”

The 24 articles propose concrete, real-world actions for policy-makers to facilitate the development, prosperity and security of Australia’s north. The authors share a sense that those things that make the north unique – its vast space, low population density, specific geography, and harsh investment environment – are characteristics that can be leveraged, not disadvantages.

This is a link to the previous volume 5.

The future of digital identity in Australia

What’s the problem?

Digital identity was a key part of the Australian Government’s Digital Economy Strategy: a further $161 million was committed in the 2021 mid-year budget update, bringing total investment since 2015 to more than $600 million. Over that period, the government has developed the Trusted Digital Identity Framework, established the Digital Identity System and, in late 2021, published draft legislation to govern and regulate the system. Although there’s been little apparent progress in the past 10 months, if the potential microeconomic benefits (estimated at $11 billion in the previous government’s Digital Economy Strategy) aren’t sufficient incentive, the September 2022 data breach at Optus, and the subsequent run of data breaches on companies in October should supply new impetus. This is because digital identity offers an opportunity to allow organisations to reliably validate customer identities without collecting the sort of sensitive personal information that Optus held, the loss of which has exposed more than 10 million Australians to the risk of identity theft.

Without intervention, the current scheme is on a trajectory to fail. If the government wants to revive the Digital Identity System, it will need to attract state and territory governments and commercial organisations to participate in the system as well as getting the public to sign up—aiming for a critical mass of users to create a ‘network effect’.

However, to build the trust and confidence required to achieve that outcome, the government needs to address three key areas of concern. First, governance arrangements currently give the federal government final decision-making authority on future changes to the rules of the system. Second, there are potential cybersecurity and identity-fraud risks due to gaps in the currently proposed arrangements; although the Optus data breach should help to demonstrate the need for such a system, it means that users will require reassurance of the security of any new system before they’re willing to participate in it. Third, there’s a need for better privacy protections to avoid a situation in which commercial relying parties use the Digital Identity System to build even more valuable profiles of citizens.

What’s the solution?

The Australian Government should recognise that, although its Digital Identity System is only one of many possible digital identity systems in Australia, it could become the dominant system due to network effects, spanning both the government and the private sectors. The current proposals give final decision-making authority, including over detailed technical specifications, to the relevant government minister. This report instead recommends a formal independent oversight authority governed by a board that includes representatives from all groups—the federal government, civil society, the states and territories and the private sector. The oversight authority should also create a formal public reporting mechanism for potential vulnerabilities, and transparency on how such reports have been assessed and acted on, to improve the actual and perceived security of the system.

Security measures should be mandated, the oversight authority should be funded to put in place key controls, and the Digital Transformation Agency (DTA) should work with the Department of Home Affairs to secure some of the vulnerabilities in existing non-digital identity systems upon which the digital systems will rely. Other recommended safeguards include centralised security monitoring and robust management of multiple identity risks.

Finally, privacy will be the key to public acceptance of the system, and a stronger regime is needed to ensure true informed consent to the use of digital identity data by commercial relying parties when building up and monetising profiles of their customers.

The cost of Defence ASPI defence budget brief October 2022-2023

Executive summary

Shortly before the recent election, the previous government released a defence budget that continued its record of delivering the funding it promised in the 2016 Defence White Paper (DWP) and subsequent 2020 Defence Strategic Update (DSU).

The Albanese government’s first budget was not designed to focus on Australia’s security situation or defence spending. Tasked with sharing Australia’s difficult economic situation with the Australian public, the budget has more immediate fish to fry.

For those Australians who want to see increased defence spending, this was not going to be that budget as it would have directly undercut existing defence reviews due within months. Certainly, the Prime Minister has stated that the government will do whatever is necessary to ensure Australia has the defence force it needs in these strategically uncertain times.

But this budget gives no indication of how much the government is willing to spend to do that. With the Defence Strategic Review (DSR) under Stephen Smith and Angus Houston conducting its work and not due to report until March next year, the government has stuck with the existing funding line it inherited from its predecessor. That’s an artefact of the 2016 Defence White Paper—a document developed in a different era and quickly overtaken by events.

So Defence is in a holding pattern while the government keeps its powder dry and waits for Smith and Houston (noting their interim report has recently been handed to the government). No doubt it has had conversations with the DSR leads indicating its comfort zone for additional spending, but that hasn’t been made public.

What we can say from the information set out in this budget is that any increase to defence spending will require difficult reprioritisation. While the government received a revenue windfall this year due to high commodity prices, those are forecast to return to normal. And with the government committing to deliver the tax cuts agreed by its predecessor, its income is under further pressure. At the same time, it’s facing five growing spending pressures: interest on the growing debt, the National Disability Insurance Scheme, health care, aged care, and defence—and that’s before any increase to the existing defence funding line. The result is a forecast for deficit spending for the next 10 years.

That’s not a good situation for the DSR leads. They’re tasked with delivering new military acquisitions faster in the next decade, but the existing acquisition plan is probably already unaffordable (without increased spending), with many entirely new capabilities or expensive replacement projects. And with nuclear-powered submarines and frigates on the untouchable list, the challenge of delivering more sooner gets even harder, as those two programs will consume tens of billions of dollars over the coming decade even before they deliver their first vessels.

Moreover, inflation is rapidly eroding Defence’s buying power by billions of dollars every year. By the end of the forward estimates, Defence may have lost around $18 billion in buying power even if inflation rapidly returns to the Reserve Bank of Australia’s target rate. That’s the budget papers’ predictions, but those predictions haven’t been very accurate in recent years.

This year, despite nominal growth of over 7% in defence spending, real growth is under 1% once inflation is taken into account (although, with inflation difficult to predict, it’s also difficult to reliably quantify real growth). It’s hard to see Defence affording its ambitious acquisition program with a budget that’s essentially static in real terms.

Inflation is also driving nominal GDP growth at a predicted 8% this year. That means that defence spending is falling as a percentage of GDP for the second year in a row despite the government delivering the funding set out in the 2016 Defence White Paper and 2020 Defence Strategic Update. Predicted defence spending has also fallen significantly just since the March budget, from 2.11% to 1.96%, despite the funding line remaining fundamentally unchanged.

In summary, there is no pot of gold available to cover increased defence spending. That doesn’t mean the government can’t or won’t increase defence spending, but any increase will require either higher taxes (which appears unlikely, since the government is proceeding with its predecessor’s planned tax cuts), greater borrowing (accelerating the vicious cycle of debts and deficits), or cuts to other priorities that have constituencies of their own.

When we look at Defence’s big three areas of spending—capital acquisitions, people and sustainment—there have been no significant changes since the March budget. With the Australian dollar at a 20-year low against the US dollar, the Defence budget has received a large automatic top-up to maintain its purchasing, but there’s no adjustment to compensate for inflation.

There are a few changes to spending, but they’re broadly consistent with what we would see in a mid-year budget update. For those who follow capability, the top 30 acquisition projects and sustainment products hold some interesting information, but the lists are quite consistent with previous plans. We’ll have to wait for the outcomes of the DSR to see anything new.

Similarly there’s been no adjustment to Defence’s personnel allocation since March. But that still means the ADF needs to find roughly 13,000 more people this decade to operate the capabilities on its shopping list, even though it’s only managed to grow by an average of 300 per year since the 2016 White Paper. Smith and Houston may need to consider whether it makes sense to acquire capabilities that the ADF can’t crew, or at least how the ADF can maximise its combat power without many additional people. Of course, another HR strategy is one based on ‘if you build it, they will come.’

The situation is also difficult with Defence’s civilian and external workforce. To deliver its ambitious capability program, Defence has relied on growing numbers of contractors. They’ve helped Defence spend record amounts in its acquisition programs in recent years, despite the impact of Covid-19; however, they come at a cost. That growth may be over; in the October budget, the government is seeking $144.6 million in ‘savings from external labour and savings from advertising, travel and legal expenses’. That’s not a large percentage of Defence’s total budget but, if it means the organisation can’t hire the people it needs to manage the acquisition program, it’s hard to see how Defence will deliver more capability sooner.

Overall, while there were no surprises, the October budget hasn’t made the job any easier for Smith and Houston.

The 2022 US midterm elections and what they might mean for Australia

On 8 November, Americans will vote in midterm congressional elections to determine all 435 voting seats in the House of Representatives and one-third of the 100 seats in the Senate. This ASPI commentary outlines what the midterm election outcomes could mean for Australia’s strategic interests by examining the role of congressional committees in US foreign, security and defence policymaking. While most core elements of the Australia–US relationship are bipartisan and enduring, changes to the congressional committees can influence policy areas that overlap with or are vital to Australian interests. Even small changes in the way Congress works could determine how much priority Australian strategic interests receive. Canberra should therefore be highly attuned to the changes in committee structure and membership. 
 
Once the new Congress settles in, the Australian Government will have a brief window of opportunity to feed into and influence outcomes in US foreign, security and defence policymaking. After that point, campaigning will consume Congress, making it harder for Australian diplomats, politicians and other officials to be heard leading up to the 2024 US presidential election. AUSMIN in December 2022, the outcomes of the Defence Strategic Review and AUKUS pathway review (both expected March 2023) along with major Quad meetings held in the first half of 2023, all fall within this window and provide opportunities for senior Australian Government representatives visiting Washington to engage with both their Administration counterparts and with members of Congress including, for example, the strong friends of Australia in the AUKUS Working Group. 
 
This analysis of the midterms and their implications for Australia is informed by a series of meetings with congressional committee staff members (policy analysts and researchers). Those individuals serve both Democratic and Republican members of Congress and work in both the House of Representatives and the Senate.