Tag Archive for: Budget

Defence: is it really all about the money?

Defence: Is it really all about the money? Image courtesy of Flickr user Krug6.

There is a tendency by many commentators to see defence as just being all about money. A cut is intrinsically bad, growth naturally good. For some, the size of the defence budget is held as a real measure of the defence credentials of a government or nation. Hugh White’s latest missive is a good example of this, although I’m sure unintentionally.

At its core the focus on money is derived from considering defence as an insurance policy against the risk that bad things might happen. This was the case with the 2009 White Paper which saw that the key problem in defence planning was strategic risks. This kind of approach addresses risks through building and sustaining the necessary defence (and other national) capabilities such that these risks might be controlled to tolerable levels. This costs money. So the more money you spend, the more risks that can be handled and/or the less damage that these risks if they occur might inflict.

There are some issues with this seemingly reasonable approach when it is translated into the arcane art of budgeting. Firstly, only some risks can be addressed while most are ignored. As US Defense Secretary Bob Gates warned: ‘Nobody lives in that world…you are never going to get to zero threat. You could spend $2 trillion and you’d never get to zero threat.’ Read more

Sold the dummy on the Defence budget?

Have we been sold a dummy pass on the impact of the defence budget cuts?

Statements by the Defence Minister that that future plans are merely delayed may seem reasonable when money is tight and claims that ‘we are not going to allow our fiscal restraint to adversely impact on our overseas operations’ indicate that in the short term, capability is not affected.

The Minister’s claim however is a bit like saying that we will support our Olympic Team in London with everything they need, while behind the scenes cutting funding to the Australian Institute of Sport and sports development programs around the country. To then claim that our performance at the next Olympic Games will be at least as good if not better than the current standard is to defy credibility.

It is important in this debate to understand the consequences of large overseas operations being funded through ‘Operational Supplementation’, which is provided by Government over and above the normal appropriation for Defence. As a result of supplementation, Australian forces in Afghanistan do in fact have world’s best practice and equipment, significant parts of which have been purchased as an ‘urgent operational requirement’. That means, however, that forces remaining in Australia do not necessarily have access to such high-end equipment. It also means that after the draw down in Afghanistan, those capabilities will not necessarily be transferred back to Australia as the supplementation ends and there is no budget established to support them here. Read more

Reader response: the cupboards aren’t bare for Defence

Andrew Davies has a good stab at the nexus between government revenues and the defence budget in his recent post, but I think he might be giving the government a bit too much latitude. The government’s story at the moment, and that of most of the commentators, is ‘we would love to fund defence but unfortunately, the cupboard is bare’. But the cupboard is bare because the government has made its spending choices and defence wasn’t among the things it considered important.

Consider the carbon tax. This was projected to raise some $25 billion over the forward estimates. Of that $25 billion, $15 billion is being applied to ‘household assistance measures’, including $8 billion in income tax cuts, another $10 billion is going to ‘support for business’, while some $5 billion is being spent on various green measures.

But had defence been a high priority, there is no reason that spending could not have been on defence. Read more

Graph(s) of the week: revenues and defence spending

Regular contributor Peter Layton drew my attention to the final chart in the ‘Tax Chartacular’ at the Mark the Graph blog. It shows Australia’s total taxation burden 1959–2011 as a proportion of the nominal GDP. It shows a steep decline in the total tax take over the past few years, suggesting that governments face some tough choice when setting spending priorities.

The data used to produce that chart was total taxation, which includes state revenues which aren’t available for defence. A better measure is to look at the total revenue received by the Federal Government (below, click to enlarge).

Government receipts as % of GDPSources: Australian Bureau of Statistics data set 5206 for GDP, budget 2012–13 for receipts.

This graph shows very clearly the conundrum facing the government (and thus Defence) at the moment. During the period between the 2000 Defence white paper and the GFC in late 2008, Federal Government revenues averaged 25.4% of GDP. Since then the average has been 22.4%, a figure not seen since the first half of the 1990s. Read more