Tag Archive for: Budget

Small number, big signal: New Zealand finds some extra defence money

RNZAF Boeing lands at Pegasus Airfield on the Ross Ice Shelf during it's maiden flight to Antarctica.

The New Zealand government’s decision to commit an extra A$95m per year to defence for the next five years would scarcely rate a mention if the same had happened in Australia. The total of that extra investment would barely cover the up-front costs of two Joint Strike Fighters (or perhaps just one if we also include long-term costs). But in Wellington it was news enough to warrant a media release  from pleased defence minister, Dr Jonathan Coleman, ahead of the 15 May budget.

The extra amount represents about 5% of New Zealand’s annual defence expenditure. That’s hardly a revolution. But it signifies an important shift in the way that National Party-led coalition governments under John Key’s leadership have approached this portfolio. To know why this is the case, a wee bit of recent history is required.

In 2010, the first Key government issued the country’s first Defence White Paper in more than a decade. (It was the first proper one in nearly 20 years if we treat the skinny 1997 version as little more than a topping up exercise). And a well-argued document the 2010 paper was too. From a capability standpoint it spelled out the government’s core objective: find room for future administrations to retain and replace New Zealand’s big three items—maritime patrol aircraft, the heavy lift Hercules, and the frigates. Read more

The US Defense budget and the rebalance: when are the cuts too deep?

A pilot assigned to the 104th Expeditionary Fighter Squadron prepares an A-10 Thunderbolt II for a mission at Bagram Airfield Afghanistan. Known as the 'Warthog', the aircraft is being removed from service due to US military spending cuts.

The new proposed American defense budget for 2015 complies with the law that requires additional cuts in American military spending. A temporary deal reached in December would soften the planned sequestration cuts for this year and next, but the budget would continue to decline, descending to about $500 billion by mid-decade (including Department of Energy nuclear weapons costs as well as those for the Department of Defense, and modest assumed war costs at that point as well).

By one measure, this is still an enormous amount of money (and still nearly 3% of US GDP), even if it would reflect a reduction of $200 billion relative to the peak war years of a few years ago. And it still modestly exceeds the US Cold War average as well as the pre-9/11 norm. It would still represent more than twice China’s expected military spending at that point as well. Read more

Weighing above our punch? In defence of the Department

Once upon a time, in the early 1970s, the Departments of Defence, Navy, Army, Air Force and Supply employed over 51,000 civilians to support 122,000 military members (comprising 81,000 permanent ADF, 26,000 reservists, 12,000 National Servicemen, and 3,000 PNGDF).

Numbers fell over the next three decades as the five departments amalgamated; computers displaced clerical workers; construction and maintenance of military equipment were privatised to defence industry; support services, such as on-base catering, were rationalised and out-sourced; shared service arrangements were introduced to provide information technology, human resources and other administrative support across the department; and we moved to a Defence of Australia posture. Civilian staffing bottomed-out at around 16,000 in 2001–02, before starting to rise again, reaching 22,860 ongoing Australian Public Servants by mid-2012. Currently there are slightly fewer than 20,640 permanent APS employees (15,200 in the Department and 5,440 in DMO) compared to 80,840 ADF personnel (56,060 regulars and 24,780 reservists).

Read more

The Air Warfare Destroyer project – how effective is the alliance model?

Hobart class DDG (artist's impression)Of all the issues facing the new defence minister, the replacement of the Collins class submarines stands out in terms of scale, complexity and difficulty. A critical aspect of this multi-billion dollar program will be the commercial arrangements under which the boats are built. The challenge is to design a commercial framework that brings together local industry and foreign suppliers while protecting taxpayers’ interests and assuring that the Navy gets what it needs.

Fortunately, we have an experiment already underway in one of the possible options; the alliance contract being used to deliver the three-vessel $8 billion Air Warfare Destroyer (AWD) project. The new government would do well to look closely at the AWD project to see what it can learn.

The AWD Alliance involves three parties, the Defence Materiel Organisation (DMO), Raytheon Australia and the government-owned but commercially operated ASC Pty Ltd. The contracts are valued at $2.6 billion for ASC Pty Ltd and $1.7 billion for Raytheon Australia. Subcontractors to the Alliance include the US Government Foreign Military Sales program for the Aegis radar and combat system, and the Spanish shipbuilder Navantia for the design and some module fabrication. BAE Systems Australia in Williamstown, Victoria and Forgacs Engineering in Newcastle, NSW are also involved in module construction for the AWD vessels, which are being consolidated and fitted out in the ASC facility in Osborne, South Australia. Read more

Graph of the week: how ready do we need to be?

Holbrook_submarineA few months back, Mark Thomson and I wrote about eight defence challenges for the incoming government. Some of them were obvious, such as getting the budget under control, managing the future submarine project and increasing the efficiency of the Department of Defence. There’s no shortage of advice to government on those issues.

Perhaps less sexy, but no less important, is ‘being ready for the next contingency’. There’s always something of a balancing act between the readiness of the ADF today and investment in its ability to do things later. Simply put, if you have a fixed budget, any money you spend today on keeping personnel and equipment ready to move at short notice will necessarily cut into the funds you have for buying new equipment, facilities and support infrastructure in the future. Read more

There’s no perfect measure for defence spending

In a recent post, Neil James made some interesting points about defence spending metrics and the political economy of defence in a democracy. With the federal budget due in three weeks’ time, I thought I might add some observations of my own on how to measure defence spending. A response to Neil’s provocative points on the politics of defence funding will have to wait for another day.

There are four measures of defence spending in common use: dollars, growth rate, percentage of GDP and percentage of government outlays, each of which gives useful and complementary information about the financial aspects of a country’s defence effort.

The most direct measure of a country’s defence spending is what it spends measured in its own currency. But it is also the measure most beset by complications. Comparisons of defence spending within a country over time are made difficult by inflation. Although it’s routine to talk about ‘real’ dollar figures adjusted for inflation, there’s actually no unique way of doing so. What’s more, the steady introduction of new products into the economy reduces the meaningfulness of comparing the ‘value of money’ over very long time periods, even within a consistently applied methodology. Read more

Vietnam and lessons for Afghanistan and the budget

Minister for Defence Stephen Smith addresses an ASPI audience.

As a budget, a White Paper and an election crowd the calendar, Defence counts down the days to the withdrawal from Afghanistan. It’s easier for the Defence Minister to talk about Afghanistan than to say too much about the budget, the Paper or the poll. When coming calendar events make it unsafe to chat in detail about the future, history is an excellent place to turn. And history can always be turned to use in preparing for future arguments. That partly explains why Vietnam featured as a motif of Stephen Smith’s ASPI speech. (video available here)

Grappling with the hydra that stretches in so many directions from Russell means that any speech by the Minister bears diverse messages. The text must be a mixture of attack and defence that seeks both to explain and argue, to announce and ignore, to reveal and conceal. What’s unsaid offers shape and context to the words that actually emerge.

The set-piece speeches are markers in an ever-evolving conversation, always shaped by the reality that the problems never travel solo, but always in series. And the big headaches are serials that are seldom finished. Read more

Reader response: Reserves, force structure and budget cuts

The sappers demonstrated that they are as good as their regular army counter-parts by constructing ‘Patrol Base Panther’ during a major military exercise. More than 30 Reserve soldiers supported by graders and plant equipment built ‘Patrol Base Panther’ as a staging area for battle group operations during Exercise Morshead Renascent which was conducted during 3-18 July. The construction of Patrol Base Panther, which is identical to Coalition fortifications in Iraq and Afghanistan, marks a major milestone for 5 CER’s capability. The Commanding Officer of 5 CER, Lieutenant Tara Bucknall said “building Patrol Base Panther was a golden opportunity to demonstrate that 5 CER is a highly-trained Reserve Engineer unit which has the same capacity as a regular army unit; albeit with longer planning time.”

In a recent post on force structure, Peter Layton dramatically highlighted the continuing tension between future capabilities and existing requirements. The problem is, of course, (as Andrew Davies likes to say) that there are a limited number of dollars, and each of them can only be spent once. This is a particular problem when it’s necessary to decide what equipment should be purchased. Similar considerations are also relevant when considering personnel.

It has been a long time (71 years) since Australia faced the prospect of being invaded, and this helps to go some way towards explaining the current structure of the forces.

It’s clear today that the prospect of Japanese invasion was more remote than was appreciated at the time—the Japanese discussed the possibility but the Army wasn’t at all keen on the idea. Nevertheless it was this ‘total war’ situation, together with the prospect of fighting island campaigns in the jungles of the Pacific, resulting in an enormous mobilisation. By 1943 the Army had swelled to more than a dozen divisions (11 infantry and 3 ‘armoured’); nearly 500,000 men, or more than ten times the size of today’s Army. As it turned out, there were far more people in uniform than the country could support. Additionally, manpower was needed for other vital tasks, such as growing food and supporting the general Allied war effort. That’s why, within a year, a decision was taken to significantly reduce the size of the armed forces in general and the Army in particular. Read more

Policy talks the way money walks

Show me the money! Photo credit: Natalie Sambhi

A Pentagon rubric promises, ‘Show me your budget and I’ll describe your strategy.’ It mirrors the dictum Arthur Tange made famous in Canberra, ‘Until you’re talking dollars, you’re not talking strategy’. US Vice President Joe Biden has a version used by his Dad: ‘Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.’ (A point made on The Strategist by Henry Ergas in an earlier post.) Or we can reduce it to basics, as taught by that famous philosopher Jerry Maguire: ‘Show me the money!’

Jerry, Tange, Biden and the Pentagon all agree on a hard truth: sometimes promises and policy are no more than gossamer of aspiration, ambition and posturing; to find the reality, see where the money is walking. The ‘dollar test’ is useful in measuring the distance between declared policy and real policy. Applying it to Canberra, what do the budgets say about the real strategy being followed in foreign affairs, national security and defence?

First, consider the long-term and debilitating budget decline of the Department of Foreign Affairs and Trade. DFAT has been doing more with less for so long that bureaucratic starvation has become the default diet in the Casey Building. The Parliament’s Joint Foreign Affairs Committee has just identified what it calls ‘chronic underfunding of DFAT over the last three decades.’

DFAT’s chronic state was even more obvious over the 9/11 decade because of the big increase in the dollars being fed into the aid budget as well as the hyper-expansion of the national security agencies. DFAT is in the strange position of overseeing an AusAID which is now several multiples richer than the parent department. Read more

Show me the money

A slice of pie for Defence?

In the film Jerry Maguire, Tom Cruise’s client Rod Tidwell believes that the only way a team can ever really demonstrate that they value him is to pay him more—leading to the famous ‘show me the money!’ scene. Of course it’s not strictly true that everything can be reduced to money. The moral of the movie is that love, happiness and friendship are also vital. Nevertheless, it’s the $11.2 million contract that Jerry eventually wins for Rod that makes the happy ending possible.

A recent column by Peter Layton questioned the tendency of many commentators to see Defence as being ‘all about the money’. He correctly points out that this runs close to assuming that the allocation to the three services is little more than risk management. But then Layton suggests that a ‘simple focus on money can distract from other matters that might be equally or even more important’.

No one can quibble with his argument. After all, it’s the way money’s spent or used to support a particular strategy that provides a far better measure of effectiveness than the simple quantum of funds allocated to Defence. But that doesn’t mean the bottom-line figure is irrelevant. In fact, rather the reverse. Read more