Behind the recent spat between Defence Minister Richard Marles and his senior Defence advisors lies a hidden issue: are the governance arrangements for Defence’s high-level decision-making fit for purpose or do they need to be reviewed and brought up to date?

There have been many Defence ‘reviews’ over the past five decades, some more consequential than others. The Tange reforms of the early 1970s changed governance arrangements both to integrate the previously separate service and Defence departments and to ensure the implementation of the government’s new defence of Australia policies. These changes had lasting benefits.

Many of the subsequent reviews concentrated on reducing costs and increasing Defence’s reliance on industry, as well as pursuing the elusive goal of fewer errors in defence procurement.

There have been two major external reviews of the development and interpretation of policy: the 1986 review of defence capabilities, and the 2023 defence strategic review (DSR). In both cases, inadequacies of governance contributed to the need for this outsourcing.

Several post-Tange reviews have also changed governance arrangements, the most recent being the 2015 first principles review. But this work was undertaken years before there was any serious response to Australia’s deteriorating strategic circumstances, as eventually set out in the 2020 defence strategic update (DSU)  and as amplified in the 2023 DSR. This gap alone would be sufficient reason to suggest that Defence’s governance arrangements should now be re-examined.

In addition, however, there had been concerns that Defence had not been sufficiently responsive to earlier stages of the worsening of Australia’s strategic outlook—ASPI Insight paper 123 of November 2017 and Strategic and Defence Studies Centre paper of October 2018. And while the 2020 DSU showed a welcome recognition of the new strategic challenges and included important new initiatives such as long-range precision-strike missiles and remotely-operated combat platforms, subsequent implementation of the new policies has been slow, as set out in some detail in the 2023 DSR.

In brief, there are good reasons to believe that today’s Defence governance arrangements need to be improved. Let’s look more closely at some of the evidence.

The decision to drop the SSK program and to go instead for SSNs represented a major change of course. Why was the original decision so wrong as to need such disruption to a vital and costly capability?

The new plans for the Navy’s surface combatant fleet also represent a major change of direction. Again, why were the earlier decisions on this matter so evidently off the mark?

Why did the DSR conclude that it is necessary to transform the Army (para 8.28), and to reduce the number of infantry fighting vehicles from 450 to 129 (para 8.35)? Is there a structural problem with how Defence considers land-force development? If so, the problem goes back a long way, to the Tange reforms, as it was the inadequacy of Defence’s processes for reviewing the Army that contributed to the need for the 1986 defence capability review.

Why is it that the ADF as currently constituted and equipped is not fully fit for purpose (DSR page7)? Why don’t we already have the ‘sense of urgency’ that the DSR advocates (para 1.9)? Why is there this ‘surprising lack of top-down direction’ for projects entering the Integrated Investment Program (DSR para 12.2)? Why has there been ‘little material gain’ in the guided weapons program over the past two years (DSR para 8.73)?

The DSR’s terms of reference required it to outline the needs for mobilisation, yet it makes only passing reference to this in its public report. Why is this? Is it too embarrassing to be discussed in the open?

Why did the DSR need to emphasise the need for genuine whole-of-government coordination of Defence policy (page 8)? Surely this is a blinding statement of the obvious.

Each of these cases in isolation could be shrugged off, and it’s important to recognise that to seek perfection would be a fool’s errand. But taken together they show that the governance problems are serious.

So much for the symptoms. From the outside we can only speculate as to what has led to this. Are the catalysts for change too inhibited or inconsequential? Is there too much emphasis on consensus? Is robust argument actively discouraged? Is the strategic policy area just too small for the workload, or too easily ignored, especially in the vital task of providing top-down guidance for capability development? Are the military staff also overwhelmed by the workload? Is there a fear that if you rock the boat you will stunt your prospects for promotion?

It’s all too easy to criticise from the sidelines. And in any case, it’s important to acknowledge that much of what Defence does is excellent and that the 2020 DSU swept away the complacency of earlier years. Further, it’s not clear how many of the problems lie with Defence rather than with the machinery of government more generally or with ministers themselves.

Overall, however, it’s clear that governance needs to be brought up to date. As things stand, neither the ADF nor the governance arrangements that guide and support it are capable of much more than peacetime operations. Whether the needed improvements would best come through internal or external review is open for debate. At the very least, in our new strategic circumstances, any proposals for change should keep in mind the first Recommendation of the 1997 defence efficiency review: The Defence Organisation should be organised for war and adapted for peace.

Public discussion of the defence strategic review (DSR) has focused on the announced changes to major capability programs. On that score, the statement by Defence Minister Richard Marles that the DSR is ‘the most ambitious review of Defence’s posture and structure since the Second World War’ is hard to reconcile with its recommendations, as there were few specific changes beyond those to Army which had been long expected. A few short paragraphs on the way that Australia should fundamentally change its approach to defence planning and force design, however, hint at very consequential change—and it is important that the government does not lose sight of their importance, despite them not receiving an explicit mention in the minister’s statement.

Australian defence white papers tend to consist of an engaging essay on the strategic environment in the front, and a list of capability decisions at the back. In general, the links between both are always implicit, and often only tenuous. Indeed, translation of strategic guidance in terms of priority for strategic risks, geographic focus and general tasks for the ADF into capability is the main historic weakness of Australian defence planning—going back at least to the 1970s ‘core force’ concept.

A key exception was the 1986 Dibb Review and 1987 Defence White Paper, which provided an (implicit) force structuring scenario for the defence of Australia, and explicit guidance on how the ADF would operate the ‘defence in depth’ strategy. In this framework lies the real importance of these documents, as it was internalised by Defence and government and implicitly guided defence force design until the 2000 white paper. No similarly impactful and enduring framework has replaced it.

The DSR’s reference to past planning against ‘low level and enhanced low-level threats’ (para 4.7) shows that it was conscious of this history, and seeks to provide a new framework that can have similarly lasting impact. In that sense, the most important paragraph of the DSU is that ‘the ADF needs a much more focused force structure based on net assessment, a strategy of denial, the risks inherent in the different levels of conflict, and realistic scenarios agreed to by the Government.’ What does this mean?

The use of politically, operationally and technically realistic scenarios that align with government strategic intent is key to coherent force design. Internationally, explicit political endorsement of force design scenarios are key elements of defence planning as in the United States; or the NATO defence planning process. Not so in Australia, where historically capability scenarios have only been endorsed by the Chiefs of Staff Committee. Even in white papers, ‘force structure reviews’ often preceded decisions that the government wanted Defence to achieve in the first place. Political endorsement of ADF force structuring scenarios will be crucial for government’s ability to ensure that the process which produces the capability proposals it receives from Defence actually reflects its strategic priorities.

The review’s reference to a ‘net-assessment planning process’ and rejection of a ‘balanced force’ (para 8.3) , which it understands to be designed to be able to react to a ‘range of contingencies’, provide a crucial insight into what the review wants these scenarios to entail. Net assessment as an analytical method has many applications, but the context makes clear that the review wants the ADF to be designed to meet one, extant, actual, clear and present threat (from China) rather than a range of possible or notional adversaries. Also sometimes called ‘threat-based planning’, ADF force design should in future reflect much more closely the actual shape and challenges that a conflict with China would present. As was the case for the US and NATO during the Cold War, changes in Chinese force structure and capabilities will flow much more directly and urgently into Australian capability priorities. The review’s recommendation that government direct a ‘strategy of denial’ is a consistent and necessary element of this approach, insofar as it explains how government would want the ADF to meet this threat.

As Australia is likely to operate alongside the US in such a conflict, and China’s ability to project force against Australia would depend on US action elsewhere, the review likely has set Australia onto a path towards much closer cooperation with the US in force design than has been the case since the SEATO alliance. The review’s comments about ‘recent advances’ in the bilateral and trilateral relations between the US, Japan and Australia hint at this, insofar as the review of alliance ‘roles’, ‘missions’ and ‘capabilities’ and the ‘scope’, ‘objectives’ and ‘forms’ of cooperation are part of these. NATO has always had a process for force structuring at the alliance level, and we may now be on our way to a more informal version of one.

The final element is the explicit consideration of ‘levels of conflict’ (para 7.8). Since the late 1960s, the starting point of Australian defence planning guidance has been geography, as priorities and objectives were framed through geographic regions (Australia, Southwest Pacific, Southeast Asia, Northeast Asia, and the global level), variations of which dominated the table of contents of every strategic review and white paper since 1968. In contrast, the DSR takes us back to the 1950s and 1960s when Australian defence policy was last dominated by the threat of great power conflict. Then, too, defence planning was framed in terms of what level of conflict Australia should focus on—in particular, Cold War (today: competition), limited war, and global (today: major) war.  These remain meaningful distinctions today and lead to very different geographic as well as force structure and posture foci.

In competition, the ADF needs to be able to best respond to the security concerns of those countries over whose alignment we are competing by reflecting the interests in economic, resource and domestic security of South West Pacific and Southeast Asian countries. Today’s lightly armed and lightly built offshore patrol vessels are an example of a capability almost only useful for competition.

In limited conflict, by definition both sides accept that limited stakes impose limits to escalation and acceptable cost of conflict. Territorial conflict over maritime features other than Taiwan, or confrontations over incidents at sea, may today reflect such circumstances. Australia and partners would seek to manage limited conflict by deterrence through forward presence of highly capable, visible surface and air forces—including in regions such as the South China Sea where they would not be survivable in major war. Kinetic use of submarines against surface vessels would likely be subject to direct political concern about escalation, as was the case of the Belgrano sinking in the Falklands war. The main axis of ADF operations would be north-south, from Australia to the likely areas of conflict.

In major war, both sides fight to disarm and thus impose their will on the adversary. War termination will come to rest on the nuclear balance (if only in the sense that one side accepts cutting its losses rather than risk escalation). Australia’s main concern will be to secure supplies to remain in the fight, to avoid catastrophic losses, and to influence the shape of a post-war settlement in our immediate approaches. The main axis of ADF operations would thus be east-west, reflecting the crucial sea lines of communication to bring supplies across the Indian and Pacific Oceans, with US long-range strike forces operating north from the continent.

The guidance in the 2020 defence strategic update was arguably compatible with preparations for any three of these levels of conflict. While the review in its unclassified form is silent on what it would recommend government focus on, its insistence that the ADF is ‘not fit for purpose’ (para 8.2), emphasis on long-range strike, hardening of bases and fuel reserves in Australia hints at a classified recommendation to focus on major war.

The review and government have clearly internalised the need for much faster, and more robust and coherent adaptation than Defence has been able to provide. The effective admission that the post-2016 contestability agenda has failed (paras 12.2-3) shows the difficulty of reforming Defence, despite the clear efforts of Defence leadership and governments of recent years. Time will tell how long the intended biannual cycle for the new national defence strategy will survive a three-yearly electoral cycle, but it would in any case only be an outcome of the underlying defence planning framework. Hence, the review’s section on defence planning and force design is arguably not just the most brief, but also the most important, and—if implemented—would well warrant the minister’s moniker as the ‘most ambitious review’ of them all.

The debate on how best to defend Australia in a worsening strategic environment is likely to be substantially settled with the defence strategic review, due for completion in March. Deputy Prime Minister and Defence Minister Richard Marles recently emphasised the need for long-range strike capabilities, including by referring to ‘impactful projection’. He reinforced the requirement for Australia to project military effect at long range, saying: ‘We must invest in targeted capabilities that enable us to hold potential adversaries’ forces at risk at a distance and increase the calculated cost of aggression against Australia.’

Marles is being very clear that long-range strike and, by extension, intelligence, surveillance and reconnaissance (ISR) are priorities that will be reflected in the strategic review. That ISR capability has to have a targeting component based on multi-domain capabilities, notably including space-based sensors.

Simply put, we need to see far to strike far. The sensor ends of that ‘kill chain’ must be resilient, even in highly contested environments, and have a sustained hemispheric gaze from Australia’s shores. Crewed aircraft such as the P-8A Poseidon or autonomous aerial vehicles such as the MQ-4B Triton are but one part of any future ISR capability for the Australian Defence Force.

The increasing ability of a major-power adversary such as China to project military force, along with uncertainty over our access to forward basing, raises the risks in sustaining these aircraft on station, distant from Australia’s air and maritime approaches. The small number of aircraft Australia operates reinforces these challenges—only six MQ-4B Tritons will be available, for example. Certainly, submarines can also play a role in tactical intelligence gathering, as can surface combatants, but we only have six ageing Collins-class diesel–electric boats, and the nuclear-powered submarines being acquired under AUKUS won’t appear until the late 2030s at best. Naval surface combatants are becoming more vulnerable inside an adversary anti-access/area-denial envelope characterised by ever more sophisticated long-range missiles and long-range surveillance systems.

Reliance on close-in surveillance that only allows us to respond to a threat within Australia’s air and maritime approaches is not sufficient. That surrenders the initiative to the adversary, which could then strike our key northern infrastructure from outside the reach of coastal defences and short-range tactical fighters. We’re recognising that our ‘strategic moat’, traditionally perceived as the sea–air gap to our north, is not so defensible in these days of precision conventional ballistic missiles, hypersonic cruise missiles, and cyber and counter-space capabilities. China has all these already and is continuing to expand and develop them.

Chinese ships can target northern Australia from within the Indonesian archipelago, and Australia is in range of Chinese land-based missiles and long-range bombers in the South China Sea. So, our gaze must penetrate far and deep across the Indo-Pacific region. Space-based ISR that is pervasive and resilient, even in the face of adversary counter-space threats, seems to be the best answer.

Last year on this forum, Daniel Molesworth highlighted the importance of building a dedicated surveillance and target acquisition capability for the Australian Army’s long-range fires, based on tactical uncrewed aerial systems. He suggested that the Defence Department re-establish Project Air 7003 to acquire remotely piloted drones such as the MQ-9B Sky Guardian. That’s a good idea, particularly in relation to the employment of shorter-range guided missiles on the US-made High Mobility Artillery Rocket System (HIMARS) that Australia will be acquiring.

However, space-based capabilities take us the next step to hemispheric surveillance and targeting for very long-range strike. Those capabilities will be essential if Australia acquires much longer-range power projection, such as that implicit in platforms like the B-21 Raider or an evolved version of the MQ-28 Ghost Bat. The nuclear submarines will also require targeting for both land-attack and anti-ship operations.

Defence is already supporting key space projects, such as the recently announced National Space Mission for Earth Observation, a civilian-oriented project led by the Australian Space Agency, CSIRO and Geoscience Australia. The satellite capability it provides will have some utility in tasks such as bushfire response, disaster relief and maritime domain awareness, but it’s not a dedicated defence capability.

Defence needs to acquire its own satellite constellation in low-earth orbit that can provide high-resolution imagery for target detection and precision tracking to support long-range strikes. Such a constellation could complement larger geospatial intelligence-gathering capabilities, such as those to be operated by the Australian Geospatial-Intelligence Organisation under Defence Project 799 Phase 2.

Last year, Australia supported two launches for the US National Reconnaissance Office, in cooperation with the Defence Department, under the ‘Antipodean Adventure’ program. Although they are US satellites, Australian involvement gives Defence valuable experience ahead of acquiring sovereign space surveillance capabilities. Also last year, Gilmour Space Technologies announced a partnership with LatConnect 60 to launch eight satellites on Gilmour’s Eris launcher from 2024 to provide commercial earth observation, including for defence applications.

These are good steps forward. But projects such as the earth observation mission and the lack of current information on Project 799 Phase 2 reinforce concerns that the traditional defence-specific requirements for space-based ISR may be subsumed under a broader, softer focus within a civil capability, where the priorities are climate change, urban planning, crop management and national resilience, rather than cueing and targeting of long-range missile systems in wartime.

If Defence were to enhance its space-based ISR capabilities beyond these projects, there would be advantages in embracing the ‘small, cheap and many’ over the ‘large, expensive and few’. A mega-constellation made up of low-cost small satellites is more difficult for an opponent to attack than a few large, complex multibillion-dollar satellites.

There’s also a commercial dimension that’s important to consider. A small-satellite constellation in low-earth orbit that’s dedicated for tactical ISR and targeting would be ideally developed as a sovereign capability by the rapidly growing Australian commercial space sector. Designed, built, launched and operated from Australia, it would be a true sovereign space surveillance system that could directly support the ADF’s ISR and strike requirements, without dependence on foreign actors for access or control, but with the opportunity to work with complementary US or UK systems, perhaps under AUKUS.

It would also create a vital opportunity for Australia’s space sector to demonstrate experience in building such a capability, which could in turn reduce government risk-aversion to expanding the role of Australian small to medium enterprises in providing Defence with vital space capabilities. The greater the ongoing role for Australia’s commercial space sector, the greater the opportunity for the government to invest in Australian companies.

The lower cost of small satellites would also mean that our space-based ISR capabilities could be more regularly refreshed by new locally built satellites incorporating the latest technologies, enabling us to better exploit accelerating innovation cycles rather than wait for overseas providers. That will generate further confidence within Australia’s commercial space sector in its ability to support defence missions.

Australia needs to start thinking about building and operating a sovereign mega-constellation with a sufficient number of small satellites to ensure constant and pervasive surveillance and targeting. The ‘impactful projection’ task suggested by Marles creates a valuable opportunity to develop sovereign space-based ISR systems that enhance our ability to strike far and fast against any threat.

Artificial intelligence is changing the world we live in. It will redefine the workplace and have significant implications for everything we do, probably by the end of this decade. Some AI applications are already a part of our everyday lives, such as intelligent car navigation systems.

So, what is artificial intelligence? AI can be defined as ‘the ability of machines to perform tasks that normally require human intelligence’.

AI has in fact been around for several decades. The IBM chess-playing computer called ‘Deep Blue’ defeated world chess champion Garry Kasparov as far back as 1997. But the development of AI has been accelerating rapidly in recent years with a substantial increase in the number of real-world applications where AI is now practical.

According to the US Department of Defense’s Joint Artificial Intelligence Center, the reasons for this are more massive datasets, increased computing power, improved machine-learning algorithms, and greater access to open-source code libraries.

Let’s look at these in turn.

First, massive datasets. Today, computers, digital devices and sensors connected to the internet are constantly producing and storing large volumes of data, whether in the form of text, numbers, images, audio or other data files.

Second, increased computing power has come from graphics processing units, or GPUs, that are highly parallelised, which means they can perform large numbers of calculations at the same time. Massive parallelism is speeding up the training of AI models and running those models operationally.

Third, better algorithms have made machine-learning models more flexible, more robust and more capable of solving different types of problems.

Fourth, access to open-source code libraries now allows organisations to use and build on the advanced work of others without having to start from scratch.

In defence areas, it means that autonomous platforms could in the future operate without the need to carry a vulnerable or capability-limiting human, be they airborne or underwater systems. Platforms should still be controlled by humans for moral, ethical and legal reasons, but ‘kill’ decisions could end up being distilled down to simple ‘yes’ or ‘no’ commands.

A control problem might arise in a conflict situation where there’s difficulty in maintaining a continuous link to an autonomous platform. In those circumstances, for example, an underwater attack drone placed on the ocean bottom in the Sunda Strait could be programmed to identify enemy submarines and automatically destroy them if they pass by.

The same decision delegation could be made to long-endurance solar-powered drones programmed to eliminate key insurgents and terrorists through facial or gait recognition.

AI could mean that high-tech countries like Australia will have far fewer battle casualties, but glamourous hotshot jobs like being a fighter pilot or stealthy submariner might no longer exist. Instead, commanders and combatants would more likely be controlling robot attackers from behind computer screens in relatively safe locations.

The ‘risk to blue force’ factor will of course depend on the nature of the enemy—whether it’s a low-tech insurgent group like al-Shabaab or a high-tech nation-state like China.

The most practical areas to invest in military AI—at least in the short term—are those that are relevant to technologically uncontested domains, like Afghanistan. In state-versus-state conflict we must assume that potential adversaries are a match for us in AI—if not more advanced in the case of China—and will attempt to manipulate our AI systems or destroy them kinetically.

For the time being at least, AI is still short of human achievement when it comes to multitasking. A soldier can identify an enemy target, decide on a weapon system to employ against it, predict its path, and engage it. AI cannot currently accomplish that simple set of related tasks.

Potential AI problems can also arise from biased data and context misunderstanding. AI systems have problems distinguishing between correlation and causation. (One example is the correlation between drowning deaths and ice-cream sales. An AI system fed with data about these two outcomes would not be aware that the two correlate because they are a function of warmer weather. AI might conclude that to prevent drowning deaths, we should restrict ice-cream sales.)

However, AI is rapidly overcoming these basic limitations and we could see a much more comprehensive range of AI capabilities by 2030, particularly in the defence sector.

In the interim, we are likely to see an exponential increase in the use of AI in crewed platforms to allow humans to concentrate on the tasks that humans do better.

In the longer term, removing humans from combat platforms is a logical and likely progression. The US Air Force’s next-generation air superiority fighter is expected to include optional unmanned autonomous operation. And autonomous unmanned underwater attack platforms are expected to be in service with China’s navy long before Australia gets its first Attack-class submarine in the mid-2030s.

The Australian government has released its mid-year budget update in the form of the portfolio additional estimates statements. If you’re looking for screaming headline material in the defence portfolio’s PAES you may be disappointed. But the fact that there’s been little change since the portfolio budget statements were released in October, several months later than normal due to the Covid-19 pandemic, is in itself newsworthy.

Let’s take a step back. The big new news in the past 12 months in the defence budget realm is that the government reaffirmed its 2016 defence white paper commitment to increased defence spending, despite the hit to GDP and the government’s bottom line caused by the pandemic. July’s defence strategic update confirmed the steady increase to funding first presented in the white paper and extended it for a further four years out to 2029–30.

The bulk of that increased funding flows to the Defence Department’s acquisition budget to pay for the government’s ambitious capability program. Over the next few years, the acquisition budget’s share grows to around 40% of the total. To get there, Defence and its industry partners will have to climb some steep steps; the PBS stated that Defence’s planned acquisition spend for 2020–21 is around 27% more than last year, up from $11.2 billion to $14.3 billion. Considering that Defence has only managed annual increases of 5% on average over the past few years, and that Covid-19 is disrupting the global supply chains that feed defence industry both here and abroad, one could be forgiven for thinking that spending that money was going to be a challenge.

So how is Defence going at hitting that number? According to the PAES, it’s on track. The budget top line is virtually unchanged. The PBS estimate for 2020–21 was $41,715 million. That’s decreased by $291 million in the PAES to $41,424 million.

The adjustment can largely be accounted for by three things. The first is a foreign exchange adjustment of $287 million—since the Aussie dollar has recovered marginally against the US dollar and euro, Defence needs less money to buy equipment from overseas. The second is an additional $55.5 million for pay for Operation Covid-19 Assist. And the third is a $32 million decrease in funding for Operation Manitou, Australia’s contribution to maritime security in the Middle East, which the government decided to reduce in October in order to refocus on the near region.

When we dig one level deeper, spending in the three big subcategories of acquisition, sustainment and workforce is largely on track as well. The capital acquisition program is anticipating a reduction of $376.3 million, but a lot of that can be accounted for through the foreign exchange adjustment.

Within that, the military equipment program is looking like it could end up underachieving by $200 million even after that exchange adjustment is factored in, but that’s not bad against a $10.7 billion target, particularly in the middle of a global pandemic. Overall, according to the picture in the PAES, Defence is going to come pretty close to achieving the big increase in acquisition spending set out in the PBS.

That may seem a little counterintuitive when you look at the individual projects in the PAES’ top 30 acquisition projects table (table 66), which states that many of them are going to underachieve, some by a lot. Cumulatively, they amount to a $748 million underspend.

So why isn’t that showing up in the top line? Because Defence always plans on underachieving in its capital program. In Defence’s terminology, it’s called slippage and accounts for the real-world phenomenon that projects never perform as well as their managers hope. In the PBS, Defence built in a margin of $1.2 billion in slippage (page 93). Or, put another way, it budgeted to spend $1.2 billion more than it has on the reasonable assumption that in a $10-billion-plus equipment program, a lot of projects will underspend to the tune of around $1.2 billion and it will all net out. So the $748 million spending shortfall in the top 30 is covered by that. Defence could still underachieve by another half billion or so in the remainder of the financial year and it wouldn’t show up in the top line. You can call it planning for failure, or you can call it astute risk management.

There’s another element that seems counterintuitive. Covid-19 has had a major impact on the air force’s and navy’s flying hours. Cumulatively, their aircraft are predicted to miss their flying-hour targets by more than 17,000 hours, or 17% (page 47). The F-35A fleet is one of the worst hit, predicted to achieve only 5,250 hours—better than last year’s 3,097, but far short of the planned 8,204.

But when we look at sustainment spending on aircraft in the top 30 sustainment products (table 67), Defence is only anticipating a 2.3% reduction in costs despite the big fall in flying hours. Granted, a large part of sustainment budgets is tied up in fixed costs, and you certainly don’t want to lay off a highly skilled maintenance workforce because of a temporary blip in flying tempo. But when the flying hours of the C-27J Spartan fall by over 50%, from a planned 7,500 hours to only 3,360 hours, but its sustainment budget decreases by only 1.2%, from $84 million to $83 million, you wonder whether Defence could structure its sustainment contracts better.

There are the usual ‘the more things change, the more they stay the same’ stories. The recent announcement that Defence would acquire the Apache attack helicopter to replace the Tiger armed reconnaissance helicopter hasn’t solved all of the army’s aviation woes. You wouldn’t know it by looking at the flying hours in the PAES, which says that the army is still planning on flying every one of the 16,550 hours predicted in the PBS for its fleets, including all 7,950 for the MRH-90 utility helicopter and all 4,500 for the Tiger that was so unreliable it had to be replaced ASAP (page 45). That’s hardly credible in light of the air force’s adjusted targets.

In fact, the PAES confirms the MRH-90 is still struggling. Its entry in table 67 says it will underachieve against the target rate of effort and explains that ‘The reduced rate of effort is the result of low availability of serviceable aircraft due to delays in the return of repair parts from European vendors, a complex maintenance system and a lack of responsiveness in engineering support’. That’s a damning assessment of a supply chain that’s had well over a decade to sort out its teething troubles.

And it’s not just sustainment; 16 years after getting second-pass approval in 2004, the original acquisition project still isn’t finished and is planning to spend $100 million this year. It has never been clear to me why the army pushed to replace the Tiger even though most of the effects it sought from it can be delivered either by the Tiger itself or by other, complementary systems, yet it clings on to the MRH-90 despite its underperformance and the lack of other systems that can take up the slack.

That aside, the main takeaway from the numbers presented in the PAES is that Defence is hitting the ambitious numbers in the government’s acquisition program. That should mean that defence industry is absorbing the spend and delivering capability. What we can’t see in the PAES, however, is how much of that is being spent locally and how much overseas.

Despite the government’s defence industry policy, which aims to develop a more robust, sovereign Australian defence industry, the portion of the equipment budget that is spent locally has remained stubbornly stuck at around a third of the total. After seven years of budget certainty, sustained investment increases and substantial policy and spending measures to develop local industry, it would be nice to see whether that share is starting to grow.