Tag Archive for: Department of Defence

Budget shows defence spending growth on track

In its 2020–21 defence budget, the government hasn’t moved away from its funding commitment in the three months since it released the 2020 defence strategic update. And why would it? If you’re looking like being $213.7 billion in the red for the coming year, stiffing the defence portfolio of a few billion isn’t going to get the budget back in the black.

Between the Department of Defence and the Australian Signals Directorate, defence funding for 2020–21 will be $42,746 million. At 2.19% of GDP, that comfortably meets the government’s commitment to grow the defence budget to 2% by 2020–21. With the hit to GDP caused by the Covid-19 pandemic, there was a possibility that the defence budget could have got to 2% already in 2019–20, but it fell just short, at 1.98%.

The defence budget has experienced a substantial increase since 2019–20 of more than $3.5 billion. That’s around 9% in nominal terms (and almost the same in real terms due to very low inflation). The nominal increases continue, with 6.7%, 8.3% and 6.2% planned for the forward years.

In fact, Defence gets a little more this year than was set out in the update. That’s because of the addition of $643 million for operations that wasn’t in the update’s funding model, including $80.7 million for the Covid-19 response. Over the next few years, however, Defence gets a little less than was provided in the update’s line. That’s because of reductions in funding to compensate for the strengthening of the Australian dollar’s buying power: the exchange rate giveth, the exchange rate taketh away.

In short, the government is delivering what it promised in the update—which is what it promised way back at the start of 2016 in the defence white paper. Considering the pain suffered by the economy and the government’s bottom line, it’s a remarkable commitment to Defence and Australia’s security.

Of course, spending that money will be challenging. One isn’t filled with optimism when Defence only managed to post its portfolio budget statements online more than 12 hours after the budget was meant to go live. Is that really what we should expect of a $1.8 billion ICT program?

The other risk is that, should the economic downturn persist, that generous funding line could be an appealing target for future governments looking to fund other priorities. In the budget papers, the government optimistically forecasts a rapid recovery, with 4.75% real GDP growth projected in 2021–22. Nevertheless, the defence budget will comfortably outstrip broader economic growth, reaching 2.38% of GDP by 2023–24. With federal debt heading towards a trillion dollars, Defence will be under great pressure to use it or lose it.

This year’s big defence news was announced in the strategic update, which ASPI examined in part 1 of this year’s The Cost of Defence, but there’s still a lot of useful information in the budget statements that we’ll unpack over the coming days as we prepare part 2. A few early observations stand out.

The government has been progressively announcing a range of Covid-19 stimulus measures in the defence portfolio. While they are no doubt appreciated by the recipients, such as local small and medium enterprises, they don’t appear to alter the shape of the portfolio’s budget. That’s because a lot of programs are underspending. The future frigate looks like it missed its 2019–20 target by around $250 million. With some programs underspending, it makes sense to move money to activities that can use it. It’s not charity; it’s simply good cash-flow management.

On shipbuilding, the ramp up in spending continues, from $1,366 million in 2019–20 to a target of $1,844 million target this year, even as the air warfare destroyer project winds down. That said, the two megaprojects, submarines and frigates, underspent against their 2019–20 targets, the frigate program in particular. No doubt the pandemic has played a role in this. Defence has strenuously denied claims the frigate program is facing delays, but if it’s not spending, it’s probably not doing the work needed to stay on schedule. It will be a big step up from last year’s $243 million to reach this year’s target of $587 million. As noted above, Defence has to show it can spend its funding. The government will want to see results for the $575 billion it is giving Defence over the decade.

The budget also contains some surprising revelations. The MRH-90 helicopters’ flying hours plummeted in 2019–20, from a planned 9,670 hours to a mere 5,168 hours—the worst result in six years, despite (or perhaps because of) their contribution to Operation Bushfire Assist. They’re probably costing well in excess of $30,000 per hour of flight time. The MRH-90 is Defence’s fourth most expensive capability and Australians should expect better value for money. If, as the government has stated, Defence will be required to increase its contributions to domestic disaster relief, it’s going to need a much more reliable and affordable helicopter.

The F-35A program continues to move a lot of cash—$1.8 billion last year and $2.4 billion planned for this one. So the aircraft are coming, but the program fell well short of its 2019–20 flying target, achieving only 3,096 hours of a planned 4,564 (around two-thirds). The fleet has to more than double its flying to get to this year’s target of 8,204 hours, and even that is still a long way from the 14,900 needed to achieve final operating capability. On the positive side, initial operating capability is still planned for the end of 2020 and the jet’s operating cost appears to have come down somewhat since last year to $32,545 per hour—an improvement, but still substantially more than the classic Hornet. The Super Hornet and Growler fleets are still perplexingly expensive to run.

Incidentally, the new ‘net cash’ presentation that Defence has adopted in this year’s budget statements is a good thing. Not only is it consistent with what other agencies do, but it allows for a clearer distinction between operating costs and capital investment. This now makes it possible to see the capital expenditure of each of Defence’s groups and services, which we’ll lay out in The Cost of Defence. The tables on page 21 that provide an easy-to-read view of the consolidated (Defence and ASD) budget and a breakdown of the big three categories of workforce, acquisition and operating costs are also a nice addition.

Refreshing Australia’s defence innovation enterprise

On 30 April, the US Office of the Director of National Intelligence declared that ‘the Covid-19 virus was not manmade or genetically modified’. This statement was issued on behalf of the 17 organisations that make up the US intelligence community, and the assessment was made by a little-known program called FELIX (Finding Engineering-Linked Indicators), run by the Intelligence Advanced Research Projects Agency in the US, the intelligence community’s version of the Defense Advanced Research Projects Agency.

What’s notable about FELIX is that funding for the program is distributed through the US university and commercial sectors. In 2018, six external research teams—from universities, commercial biofoundries and national laboratories—were funded to develop the forensic ability to identify indicators of genetic modification, such as tearing, scarring and unusual repetition in an organism’s genome. Eighteen months later, the US had a workable prototype ready for use when Covid-19 came along.

This is an interesting model to consider in the context of Robert Clark and Peter Jennings’s recent article on Five Eyes funding for university research. Australia’s defence innovation enterprise will likely always lack the scale of the US system, but it need not lack the maturity. Unfortunately, where Australia’s defence innovation effort fails is in those areas in which the US undertook major reforms through civil–military integration from the 1980s onwards.

As Linda Weiss notes in her book America Inc? Innovation and enterprise in the national security state, during the late 1970s and early 1980s the US nuclear weapons program was numerically inferior to the Soviet Union’s. At the same time, a competitive Japanese technology sector was disrupting the US semiconductor market. The US needed hardened semiconductors for its nuclear program and was having trouble buying them.

Once the US acknowledged the problem, it responded by undertaking a round of civil–military integration that we take for granted today. There were patent reforms, a revitalised DARPA and massive funding programs for commercialising university research so that the security community could procure next-generation technology.

The US remains one of the rare countries whose governments can buy products that haven’t been invented yet. This is a key policy for enabling start-up companies that are spun out from universities to survive contact with the public and private sectors long enough to become sustainably profitable.

US civil–military fusion played a central role in ending the Cold War and inventing the technology of the internet age. From mobile phones to social media, we carry around the legacy of President Ronald Reagan’s ‘Star Wars’ project in our pockets.

Over the past few years, the US has been gearing up to run the same techno-strategic offensive against China that it ran against the Soviets. It worked once before, and the logic is that it should work again. There’s a high level of confidence in the US that the underlying principles of the ‘third offset strategy’ will work.

Meanwhile, Australia’s research enterprise has for decades been supplemented with funding from international student fees. But as that money leaves Australia, so too will the researchers. Universities Australia has warned of up to 20,000 job losses in the sector, with an upper limit of a $4 billion loss in revenue. The true impact won’t be known until the student census is taken in the first semester of 2021.

Obviously a Five Eyes–focused defence innovation enterprise can’t cover this shortfall, nor should it, but the issue for the Australian government is clear. At the same time as our mainstay security partner is preparing to run a multidecade techno-strategic offensive, Australia is allowing its technological backbone to take its biggest hit in the nation’s history. We’re condemning ourselves to being a perpetual technology taker while willingly allowing the deterioration of our research contribution to the US–Australia alliance.

At face value, increased Five Eyes research investment makes a lot sense. However, many US defence research programs—and we’re primarily talking about US defence research investment—already allocate funding to aligned areas of Australian expertise through the Office of Naval Research, the Air Force Office of Scientific Research and many other defence research funding groups.

Unfortunately, there’s a limit to how much money Australian researchers can absorb from Five Eyes, because the amount of funding is structurally dependent on how many researchers are active in Australia in disciplines aligned with Five Eyes science and technology objectives.

Five Eyes funding will not maintain this workforce, but merely allocate project funding to it. It is Australia’s role to maintain the human element of its defence innovation enterprise, and the international students that propped up that human element are gone. Where is the money going to come from to sustain an Australian research capability?

The DARPA model has been mimicked by the US intelligence community (IARPA) and the US Department of Energy (ARPA-E). It is a proven technology-transfer mechanism, involving funding for game-changing, challenge-focused research in both public and private research organisations.

Australia’s defence innovation enterprise needs this kind of targeted, challenge-focused investment. The Defence Innovation Hub and the Next Generation Technology Fund need to be scaled up and consolidated into a long-term vehicle supporting Australian research capability and capacity.

Yet it may already be too late. The downsizing of the university sector is already underway and the window of time available for retaining talent at universities or in defence-oriented start-up ventures is narrowing.

Perhaps most importantly, Australia cannot look to its Five Eyes partners to reinforce its own sovereign defence innovation enterprise. It must do so on its own. Every research sector in the world is going through the same Covid-19-related experience. Just as Australia can no longer rely on international students to supplement domestic research capacity, neither can other countries.

This means Australia must invest much more domestically to maintain research sector capacity, let alone strategically grow it. And the sector really does need to grow for Australia to be match-fit for the emerging techno-strategic environment. The amount of public–private investment required is in the range of several billions of dollars a year.

Unless Australia scales up its own DARPA-like investment vehicles and introduces well-endowed talent-retention schemes, or other policy initiatives unique to the Australian context, our defence innovation enterprise is headed for rocky times.

It remains to be seen whether Covid-19 will result in a much-needed refresh of the country’s defence innovation enterprise. Until that refresh occurs, Australia is unlikely to develop its own FELIX program anytime soon.

Policy, Guns and Money: Covid-19 and conflict, Pacific ICT and Defence

In this episode, ASPI’s Lisa Sharland talks to International Crisis Group UN Director Richard Gowan about the centre’s recent report, Covid-19 and conflict: seven trends to watch.

Earlier this year, Bart Hogeveen of ASPI’s International Cyber Policy Centre released a report titled ICT for development in the Pacific islands. Bart speaks with ICPC colleague Louisa Bochner about the report and his work on assessing e-governance facilities in the Pacific.

Finally, the cyber centre’s Tom Uren and ASPI’s defence, strategy and national security director, Michael Shoebridge, discuss how Australia’s Defence Department has adapted to changing roles and whether the organisation’s structure and processes are fit for purpose.

Increasing Defence’s role in disaster response is essential but costly

Prime Minister Scott Morrison’s National Press Club address on Wednesday foreshadowed a major role for the Australian Defence Force in responding to natural disasters. From Operation Sovereign Borders to the Pacific ‘step-up’, the Department of Defence has long been Morrison’s go-to agency when the government needs fast responses to difficult problems.

The policy change is welcome, but no one should underestimate the salesmanship task Morrison faces to persuade state and territory governments, emergency and fires services—as well as Defence—that big change is needed.

In redesigning Australia’s response to natural disasters, Morrison will have to force cultural change on some deeply entrenched fiefdoms, well able to quote the Constitution back to the ‘feds’ about state and territory responsibilities.

One would embark on such a task only if the need were overwhelming—and indeed it is. This summer, millions of Australians are feeling the direct impact of natural disasters becoming more frequent and more devastating because of a long-term trend for the continent to become hotter and dryer.

Australia’s arrangements for dealing with natural disasters weren’t designed to face the emerging scale and ferocity of the problem. Everything about state and federal responses will have to be reconsidered.

These changes can’t wait for the findings of a royal commission, even one that is turbo-charged to deliver on an implausible deadline of six months. The government will need to start its own natural disaster response redesign effort.

What needs to happen? If disaster response and even handling the new coronavirus is all now part national security in the broad, and the National Security Committee of cabinet is the vehicle for managing these issues, Morrison urgently needs to beef up his own department’s capacity to drive security policy.

Climate and disaster issues impact so many government sectors there is no point arguing which bureaucratic silo to fit them in—the national security area is the one best placed to deliver effective responses.

Over the past few years the Department of the Prime Minister and Cabinet lost key national security functions to the Department of Home Affairs. But inevitably in big disasters, the prime minister steps forward to lead. Morrison should appoint a senior figure as a national security adviser—a position that faded away during the Abbott years because of bureaucratic turf wars.

If ever there was a time for rethinking a national security strategy, this is it. Generally, one should be sceptical about the value of pointy-headed strategy statements, but so much has changed since the 2016 defence white paper that the government needs to rethink fundamental policy settings.

Next, it should be clear that whatever Defence is asked to do on climate disasters, it can’t be at the expense of diverting even one dollar away from the core task of providing for the military security of Australia and our interests. In fact, more conventional military strength may be needed in the region to deal with the strategic consequences of climate-related disasters anyway.

There’s a view in parts of Defence that the organisation should avoid being drawn too heavily into natural disaster response because the military is there for high-end war-fighting. However, that’s not the public’s or the government’s expectation. Defence would be wise not to price itself out of relevance to Australia’s central strategic challenges.

But change will come with a big dollar cost. It’s true that the government is meeting ahead of time its commitment to lift defence spending to 2% of GDP, but with the region spiralling into risky disorder that money is the absolute minimum we should be prepared to spend on our military security.

There is no lazy billion or two in the defence budget available to be redirected to natural disaster response. New defence disaster response arrangements will require new money.

Next, we need to consider realities of scale. According to the Productivity Commission, in 2018–19, some 207,445 state and territory volunteer firefighters and 23,796 emergency service personnel attended 387,500 emergency incidents, including fires, storms and cyclones.

By contrast, 5,500 ADF personnel are supporting current bushfire operations. Defence can bring some immensely important qualities to counter any natural disaster, but it’s clear that the bulk of effort will remain with the states and territories.

State and territory volunteer and full-time personnel remain the heart and soul of disaster response, but it’s important to ask if this approach is still appropriate to the ferocity of the threat. There will surely be a need for massive investment in volunteer training and the technology they use.

For the ADF, the focus should be on areas where defence forces have natural strengths, including communications, logistics, command-and-control arrangements, air- and sea-lift capabilities and being able to rapidly respond to threats.

A Defence strength—now almost absent in any other part of public administration—is its long-term planning ability linked to preparing for military operations. Defence has for years prepared for a December-to-February disaster season (more like September to March these days), but always in the context that any response must be requested by the states and is drawn from military units designed for combat.

Under the Morrison mantra of ‘moving forward’ and ‘integrating’ with state efforts, I suggest the best way for Defence to proceed would be to create a specific disaster response command, much as there is today a Special Operations Command.

Under a two- or three-star general, reporting to the chief of the defence force and the government, this command would plan for and run federal responses to natural disasters. It would determine how to best use the current ADF and reserves, what new military units should be established for disaster response, how best to liaise with the states, and how to drive greater cooperation with foreign partners dealing with regional disasters.

Most of the ADF’s structure and investment planning is designed for combat operations and isn’t relevant to natural disasters. But parts of the ADF, such as engineering capability, air transport, communications, regular military units and reserves, can, at a push, be adapted to disaster response, thereby providing the reassuring presence the prime minister so admires.

It should be possible without too much expense or diversion from combat roles for some units to also be optimised for natural disaster tasks. Where that dual-tasking can sensibly be done, Defence should develop options for government.

None of this is simple. For example the air force’s transport aircraft, the C-130J, can be fitted for a containerised water-bombing system of a type being used in the United States.

But water bombing is a precise and dangerous mission needing specialist training. Likewise, military helicopters can be used for many disaster-related roles, from tracking fire fronts to rescuing people, but they are vastly more expensive to operate than civilian helicopters.

If government wants Defence to play a larger role, the disaster response command should establish new units purpose-built for the task. This could include smaller, simpler boats to shelter and move communities at risk, and lower-cost non-military helicopters and water-bombing aircraft to assist commercial operators.

What Defence will do superbly in this context will be to establish planning, training, safety, maintenance, communication and operating regimes around all of these functions.

Defence’s part-time reserve forces deserve their own consideration. It could make sense to repurpose some reserve units towards a specific disaster response role.

A specifically created disaster-ready reserve, under the disaster response command, could find an enthusiastic recruitment base from people who want to contribute to community safety without being part of a system focused on combat operations.

A disaster-ready reserve could enhance training and career options for the same pool of people who are volunteering for state fire and emergency services. A pragmatic and flexible approach should offer people the chance to build their skills while rotating through Defence and state entities.

In terms of federal–state relations, an ADF disaster response command could be a useful way to break down some of the prickly barriers that can exist when long-established, proud and effective organisations rub shoulders.

Whatever liaison arrangements are currently in place, they are clearly not eliminating sensitive rub points when crisis situations unfold. The general who heads up the disaster response command will need to have high-order diplomatic skills and see relationship management as a key part of the job.

Finally, there’s a growing international dimension. Defence is active in our region doing excellent work on disaster response and recovery. However, a new disaster response command would create an opportunity to deepen engagement with key partners like Japan, India, Indonesia and Papua New Guinea.

The command should not just respond to events but work in advance of crises to strengthen local communities to reduce and mitigate disasters once they hit. In effect, there is a year-round purpose for this new Defence function, one that will help Australians and build closer ties with our neighbours.

What will this cost? It depends on the priority the government wants to put on Defence’s role. But let’s start modestly and be prepared to scale up. A new force of several thousand defence personnel and limited investment in equipment that’s fit for purpose but not combat operations could cost around $2 billion annually—about 5% of the defence budget.

After the past few months, could anyone doubt that this is an essential investment in combating a threat that is only going to get more severe?

Defence’s strategic reassessment: squaring the circle with tied hands

Defence’s worst kept secret is now officially public. Defence Minister Linda Reynolds stated at last week’s Sea Power conference in Sydney that the Defence Department is conducting a strategic review. It may not be a white paper per se, but it involves ‘working through a re-assessment of the strategic underpinnings of the 2016 Defence White Paper’ with the outcomes to be considered by government early next year.

The work is necessary because ‘the world itself has changed more quickly than we assessed in 2016 and so too [have] the consequential challenges’. The minister is not alone in reaching this conclusion. The strategic policy community is virtually unanimous in this view, although it’s divided over what to do about it. Admitting that we underestimated the speed of China’s rise is nothing new, although it’s perhaps surprising that this time around it has only taken three years for our analysis of China to be overtaken by events.

Some have suggested a white paper is necessary to address these changes, including ASPI’s executive director, Peter Jennings. But if the reforms recommended by the 2015 first principles review of Defence, such as a strong strategic centre, have been properly implemented (and Defence has repeatedly told the Senate they have been), the department should have a standing capability to do much of the work necessary to assess such changes and respond appropriately. A key element of that new function is an enduring force design capability that continually reviews and adjusts the integrated investment program to meet changing circumstances.

Considering that the periodic public updates (page 11) to Defence’s public integrated investment program promised by the white paper have never been delivered, even a straightforward administrative update that accounted for evolving project schedules and cost estimates would be a substantial task.

But the work Senator Reynolds envisages seems to be more fundamental than that. The navy (and presumably the other parts of Defence) has ‘conducted a deep review into its gaps and opportunities to ensure all options are investigated so the future force with be lethal, it will be sustainable and it will be affordable’. The new force structure plan needs to meet ‘new and rapidly emerging threats’ and incorporate changing technology.

So, it may not be a new white paper, but it sounds like a lot more than a tweak of the existing one. There’s a catch, though—there won’t be ‘any changes to our major capability program’. Future submarines and frigates (and presumably armoured vehicles) are locked in and not part of the capability trade space.

The minister’s statement was echoed in Sydney’s International Convention Centre. Upstairs in the lecture theatres and ballrooms, a stream of defence leaders, academics and commentators noted how rapidly the world was changing and how uncertain our strategic environment had become.

Yet downstairs, the Pacific 2019 tradeshow floor was dominated by the prime contractors selected to deliver the big shipbuilding projects, surrounded by state delegations and small and medium-sized enterprises hoping to get picked up in the megaprojects’ supply chains. A number of participants noted that the sense of urgency and excitement that had characterised previous expositions was gone. The big platforms at the heart of the future force structure have been chosen and the focus is now on delivering them.

It’s hard to argue with the minister’s statement at the conference that the navy will continue to need major platforms, and they will continue to evolve over time to integrate emerging technologies to meet new threats.

Still, as the old saying goes, no matter how good a ship is, it can only be in one place at one time. The current fleet of six submarines regularly gives the navy just one vessel deployed to key operational areas far to our north. But with the current plan, the number of submarines won’t increase from six to seven until around 2034 and won’t get beyond nine (page 18) until around 2050. Sustaining just one surface combatant on operations far offshore in the Middle East has required much of the navy’s effort over the past two decades. The current plan will only increase our 11 major surface combatants by one, in around 2030 at the earliest.

Operating small numbers of high-end platforms that readily integrate with US forces is Defence’s traditional business model. If the government is happy to continue that way, then the overall force structure plan probably only needs a bit of a polish. But since one of the key messages from the strategic uncertainty narrative is that it’s not clear what we can continue to rely on the US for and what we will need to be more self-reliant in, that business model may not be the best one for the future.

A further narrative that got a lot of time at the convention was the white-suiters’ commitment to partnership and greater cooperation. It’s right to look to develop other defence relationships. As the defence force chief Angus Campbell has said, we have never fought alone. Navy personnel are great at public diplomacy, but with over 20 of its vessels already consistently at sea, it’s hard to see how the navy can increase cooperation without more platforms. And to be blunt, cooperation and joint exercises do not mean a commitment to mutual defence.

In short, if the concept of warning time has any meaning, we are well inside it, as Paul Dibb noted. So, how do we get more capability sooner, both in terms of quantity and quality, before the 2030s to meet the risks we will likely face well before then?

Certainly, there were hints in Sydney of how to do this. In the realm of traditional capabilities, there were plenty of missiles that could add more punch to our existing ships and aircraft. Also, here and there on the tradeshow floor were small firms being trickle-fed by Defence’s innovation funds to turn good ideas in emerging technologies into prototypes.

But in contrast to the $2 billion (page 82, figure 5.7) being spent this year on local shipbuilding—likely growing to $3.5–4 billion once the megaprojects start cutting steel—Defence’s innovation funds are only around $150 million a year, less than half a percent of the defence budget. It’s going to take much more than that to transition rapidly to the capabilities of the future such as autonomous systems.

If reconsidering the megaprojects is off the table, how does Defence free up the money and that even scarcer resource—people—necessary to develop and acquire innovative and disruptive capabilities quickly? Squaring that circle is the core challenge for the defence planners conducting the strategic review.

The New and Old Testaments of Defence

Is Australia’s Department of Defence one big beast or a herd of beasts? Is the Oz military a single tribe or a bunch of tribes?

The questions matter in many ways, not least because the nature of the instrument says much about the purposes it can be used for. The means you create express the ends you intend.

The Old Testament view of Australian defence dealt in plurality. The New Testament seeks singularity. The New and Old Testament understandings both contend and combine.

The Old Testament prophet of Australian defence presided over a herd. An alliance–expeditionary culture meant different service tribes could be sent off individually to work with allied forces under foreign command.

The New Testament prophet of Australian defence united the tribes and proclaimed them one. The herd would be transformed into a single big beast to defend the land of Oz.

The Old Testament prophet was Sir Frederick Shedden, who headed the Defence Department for 19 years, from 1937 to 1956.

The New Testament prophet was Sir Arthur Tange, secretary of the Department of External Affairs from 1954 to 1965, and secretary of Defence from 1970 to 1979.

Talking the other day to a university class studying national security, I mentioned Tange. Noting a rather glazed look on students’ faces, I asked how many had ever heard of Sir Arthur. Alas, only 10% of the class knew of one of the greatest Australian public servants of the 20th century.

’Twas ever thus, but a useful reminder of the need to retell and refresh origin stories. So, last week’s column on the difficult relationship between ministers and the Defence Department leads to this meditation on the different covenants of Shedden and Tange.

Shedden was a tough, shrewd operator who spent his whole career at Victoria barracks in Melbourne (refusing to move to Canberra). Shedden’s biographer, David Horner, cites a description of Shedden as a powerful personality who was ‘ruthless with those who crossed him, and devastating with those … who could not rise to his exceptional standards of performance’.

Exactly the same description applied to Tange. These prophets both had steel at their core, fine administrators always ready for a turf war.

As a superb bureaucrat, Shedden recorded his life on paper. Horner was able to write Defence supremo based on Shedden’s files (2,400 boxes of material) and the 2,400 typed pages of Shedden’s unpublished history of Australian defence policy from 1901 to 1945.

Away from his desk, Shedden was adrift.

John Edwards describes Shedden’s ill humour when sailing with Prime Minister John Curtin to the US in 1944:

The voyage across the Pacific to San Francisco took two weeks. Separated from his files, from his department, from his independence and authority as the bureaucratic overlord of the national war effort, Shedden was morose. Files were knowledge, and knowledge was power. A habitual note taker, he was suddenly bereft of content.

As a fine example of his times, Shedden was a British Empire man. Dividing the Oz defence tribes wasn’t merely a means for him to rule, but preparation for the dispatch of individual elements to serve under British command. Even after the turn to the US in World War II, Shedden’ s vision was to bring back the Brits—even resurrect a naval strategy based on Singapore.

By the end of Shedden’s reign, as Horner writes, Prime Minister Robert Menzies thought that the problem with defence was ‘the dead hand of Fred Shedden’.

Arthur Tange’s New Testament overthrew much Shedden had made and carefully minuted.

Tange killed off four separate institutions, the departments of Army, Navy, Air Force and Supply (each with a separate minister), and merged them into a single defence department; he created the diarchy and resurrected the term Australian Defence Force.

Shedden’s military world was the AIF (Australian Imperial Force). Tange brought forth the ADF, recalling:

I took the opportunity to employ symbolism to reflect the concept that a common purpose must govern the activities of the three Services. I restored to usage the compendious title ‘Australian Defence Force’ which the 1915 Defence Act had declared to be composed of ‘three arms’ … In due course (after my time) the commander had his title changed to the unambiguous ‘Chief of the Defence Force’.

In criticising the three services, the word Tange used a couple of times was ‘tribalism’. Shedden sought to control the tribes; Tange wanted to make them one.

Tange made a new structure for a new strategy. In seeking to turn the herd into a single beast, Tange aimed to remake policy, as Peter Edwards notes:

He strongly endorsed, and possibly coined, ‘self reliance’ as the concept to replace ‘forward defence’, and he supported the idea of defence focused on the continent and its approaches. But that didn’t mean a wholesale rejection of the US alliance—an issue on which he sparred in his later years with his friend and admirer Malcolm Fraser. Tange’s subtle balance between robust independence and alliance confused many.

Tange remade structure, but elements of the Old Testament still pulse through the system. Heresy still happens.

The only man to have emulated Tange, in heading both Foreign Affairs and Defence, Dennis Richardson, confessed that four decades after Tange, he was still waging the struggle to create a single beast and unite the tribes.

In Defence, Richardson said he had ‘a very strong philosophy to make Defence more of a unitary state rather than a federation, and a loose federation at that’.

Unitary state versus loose federation! The testaments still contend.

The big beast that is the Defence Department

All Australian governments come to office with a deep admiration for the Oz military and some apprehension about the Department of Defence.

Politicians embrace the uniform but worry about the organisation. After some time in office, the mystique of the slouch hat is confirmed; the men and women who salute are as impressive as their reputation.

The Defence Department, though, is a big beast that doesn’t become more lovable by close association. Apprehension shifts towards frustration and even anger.

The big beast is tasked with doing many things that are expensive, tough and complex. Big dollars. Big degree of difficulty.

Ministers are in the power game; they’re in it to make things happen, not have things happen to them—or happen extremely slowly, if at all. Ministers push and pull at the beast and coax and cajole, yet not much seems to shift.

Another dimension of this is that Defence’s mission is to see that catastrophic things don’t happen. The beast gets fed huge amounts of cash, and what happens?

No war on our shores. Tick. National security. Tick. Trouble is, Australian voters tick defence as a given—a core mission that’s a minimum competency. Defence is what any government is expected to deliver while voters get on with their lives.

If Defence does its job, nothing happens. And governments know they don’t get much credit from voters for what doesn’t happen. Ministers have to tend and feed the beast, but fret about what they get in return.

The politics of this is delicate. Cabinet can’t be seen to be mean to the Defence Department, for fear of accusations about mistreating the military and risking national security. The slouch hat is a potent symbol that provides much bureaucratic cover.

Mostly, the beastly frustrations are muted. When a minister does roar (usually after leaving office), the steam and smoke can be impressive. A notable vent was by Australia’s longest serving treasurer, Peter Costello, who was in office from 1996 to 2007. All those years feeding dollars to the beast gave Costello an intimate knowledge of its foibles and temperament. He was not impressed.

Costello devoted a page of his memoirs to denouncing Defence as the despair of the cabinet’s expenditure review committee. Costello wrote that Defence planners had such a poor grip on their budget submissions they could not explain the details to their own ministers.

When I first became Treasurer, Defence would not even itemise its Budget submissions or state where the funds were being spent. It used to insist on a global budget which, if the Government agreed to it, would enable the department to allocate funds between projects as it saw fit.

In listing projects for capital acquisition, he says, Defence never allowed for depreciation or, in some cases, for repairs. The problem was compounded by the five defence ministers who served during the Howard era. ‘They did not have time to really get on top of all the ins and outs.’ The shuffles at the top mirrored the military custom of having officers change chairs every couple of years.

There is a high turnover of people in the various Defence hierarchies. All the services protect their own areas. Every step in achieving more efficiency involved a tussle over whether or not the central Government was entitled to a line-by-line disclosure of how Defence spent its budget.

Costello writes that his longevity meant that he had a better recall of the history of some acquisitions than those who turned up to make submissions.

Defence is now making disclosures on a scale it has never done previously. After eleven and a half years I had a handle on all this simply because I had been involved in these decisions for longer than any of the Defence chiefs. I could actually remember the reasons why we had decided on certain acquisitions. They had to rely on the oral traditions passed down the chain of command. I was able to remind the Defence chiefs of previous undertakings they had given about containing costs.

Usually, as Costello notes, it’s governments and ministers that don’t remember past problems and solutions. The big beast is supposed to have the advantage of a long memory.

A few things have shifted, but beasts are slow to change their nature, much less their spots. Consider the simple question of whether Defence has even evolved to be one beast, or is still just a herd of them. This is a Canberra conundrum that’s galloped around the parliamentary triangle for decades.

To be continued …

Balancing secrecy and openness: getting it right and getting it wrong

Balancing the protection of sensitive information against openness is a perennial challenge for governments and their national security agencies. Too little disclosure can destroy public trust in institutions. Too much can undercut important capabilities that keep Australians safe.

The Australian defence organisation has struck this balance differently at different times over its history. Since the first principles review in 2016, Defence has come to view disclosure of information about its operations, policies, projects and directions as just creating risk, and so is reluctant to release anything not required by law.

A high point of this is the recent quarterly performance report of the acquisition part of Defence—which uses so much black ink to censor the text that a toner warning and reorder form should accompany the link to the document.

I suspect that much of the inked-out material on project implementation challenges and issues would be provided publicly in answers by Defence officials to senators’ questions at any estimates committee hearing. But it seems none of this can be provided to the public through an FOI process—an odd and telling indicator of the risk-averse mindset now governing Defence’s public engagement.

No doubt a lot of very similar information to that behind the wall of black ink will be in the next major projects report from the Australian National Audit Office. Defence must comply with the ANAO’s requests for information—and has less discretion to say no than it does when dealing with a member of the public or a journalist.

It’s now almost routine that we learn more about Australian defence matters through the US than from our own defence organisation—whether weapon system acquisitions or, even more recently, potential US military infrastructure plans for northern Australia. That’s embarrassing and wrong given our liberal democratic system of government.

Which makes what the Australian Signals Directorate did quietly back in March—without anyone outside the tech community seeming to notice—even more surprising than it would be on its own. ASD put a three-page description on its website of how it tangles with the enormously sensitive issue of whether to keep a software or system vulnerability it finds secret or to reveal it to vendors to get it fixed. The document sets out what ASD calls its ‘Responsible release principles for cyber security vulnerabilities’. It’s a welcome example of an agency disclosing how an activity of high public interest is conducted while also protecting sensitive classified information.

ASD is the Australian foreign intelligence agency charged with getting hold of others’ electronic signals and information when it can benefit Australia’s national security. But as Australia’s cybersecurity agency, ASD also has the role of providing advice to Australian government agencies, Australian businesses and people on how they can protect their electronic systems and information.

That means ASD is both the poacher and gamekeeper when it comes to the vulnerability of computers and other electronic devices, communications systems and networks—and all the software that operates on them.

How it balances these twin responsibilities when it comes to discovering software vulnerabilities is now clear—because that’s what the document on ASD’s website describes.

It’s a very readable, coherent set of principles, accompanied by two pages of decision flowcharts. It’s even written in plain English that people outside the cyber world can understand.

The publication of the principles is a bit of a contrast to the tech community’s experience with the introduction of the Telecommunications and Other Legislation Amendment (Assistance and Access) Act 2018—dubbed the anti-encryption law in commentary.

The fact that the powers in the act relate to serious criminal offences punishable by three or more years’ jail time, and are focused on access to particular persons’ communications, not systemic weaknesses, is still not well understood.

That’s primarily because, in the absence of solid public disclosure up front, the public narrative about the powers was led by understandably anxious and energised critics. That left the scope and intent of the act unclear, and Australia’s tech companies saw it as a risk to their businesses—including their exports.

In contrast, we know up front that when it comes to software bugs the ASD discovers, its ‘default position is to release information on vulnerabilities when [it] become[s] aware of them’, because one part of its mission is ‘making Australia the safest place to connect online’.

ASD will ‘retain a vulnerability’—that means not make it known to the relevant vendor—‘if the national interest in keeping it strongly outweighs the national interest in disclosing it’. That could be the case, ASD explains, if, for example, the information ‘can be used to gather foreign intelligence to prevent a terrorist attack’.

If it’s likely that a malicious actor (read state or non-state) could discover and exploit the vulnerability, ASD commits to disclose the vulnerability so it can be fixed.

When it decides not to tell the vendor about a vulnerability, ASD takes steps to protect Australian systems from being exploited—including by ‘releasing security advice that mitigates the weakness’. These ‘vulnerability decisions’ are subject to review by Australia’s inspector-general of intelligence and security, an official with the powers of a standing royal commission.

All of this adds up to a well-thought-through approach to assessing risks, and a strong bias towards protecting Australian systems operated by government, businesses and families. The fact that ASD has released the detail of how it makes these decisions is a positive step in building trust in this newly independent government agency.

This kind of disclosure, made outside the heat and light of a crisis or other event that spotlights the issue, shows a strong culture of accountability and an understanding that—at a time of declining trust in public institutions—demonstrated compliance with laws and ethics is necessary to retain the public’s support.

Maybe this culture of openness and disclosure can spread to other parts of Australia’s national security apparatus. A more informed and more supportive Australian public would be the result.

Defence’s journey: remembering to bring Australians along

This essay is from ASPI’s election special, Agenda for change 2019: Strategic choices for the next government. The report contains 30 short essays by leading thinkers covering key strategic, defence and security challenges, and offers short- and long-term policy recommendations as well as outside-the-box ideas that break the traditional rules.

The challenge

Restrictions imposed by a succession of governments have significantly reduced the ability of the ADF and the broader Defence organisation to tell its story to the Australian people. That has important implications for the incoming government’s ability to bring the public along with it as it spends $36 billion-plus annually running Defence—and $200 billion on equipment in the decades to come.

Progressive changes and excessive control have made it harder for the ADF to build a coherent narrative around its activities. That will affect areas such as recruitment. If the ADF is to maintain the strong public profile that it will need to crew new surface warships, submarines and aircraft and to maintain the strength of the army, this stranglehold on information must be loosened.

Allegations of crimes by a small number of soldiers in Afghanistan highlight the need for transparency and accountability. And the enormous spend of public money on defence requires transparency both to increase the likelihood of success and to sustain public support on an issue they have yet to be briefed on.

With notable exceptions, a long line of ministers has overseen an accelerating process of change, which has handed more control over information to politicians and their staff while limiting the military’s ability to speak.

This has had little to do with operational security and a lot to do with avoiding the possibility of a minister being caught out or embarrassed by enquiries from the media or questions in Senate hearings.

Contact with the media has been moved away from the uniformed side of Defence and placed in the organisation’s ‘strategic centre’. Some of the most experienced liaison officers have been ‘let go’.

Long-term communications advisers to senior officers who had built strong professional relationships over many years—to Defence’s benefit—have been told they’re not to talk to journalists or ministerial staff.

The system has built into it a very high level of risk aversion, which means some media requests are actively blocked.

Restricting or shutting down the flow of information from and about Defence is likely to reduce contestability and the fluency of discussion and debate, not just publicly but within the organisation. These are key elements of the intellectual culture and contest of ideas that a modern military needs to grasp advantages in a dangerous and technically competitive world.

And it limits the amount of open-source material available to academics and other researchers who play important roles in informing decision-makers and the public debate.

Defence personnel, uniformed and civilian, are increasingly telling any journalist who approaches them that the journalist must send a formal request to Defence Media and that ‘You’re probably wasting your time.’

Control has been tightened progressively, despite strong advice that the public needed to be much better informed about the ADF.

When the government launched the process that produced the 2016 defence white paper, it set up an expert panel that led public consultation.

The panel’s report, Guarding against uncertainty: Australian attitudes to defence, warned that, while there was goodwill towards the military, the public didn’t have a strong understanding of the ADF. ‘The consultations revealed a clear need for enhanced efforts to raise public awareness of Defence roles and missions, how it performs these tasks and the underlying policy rationale’, the panel said.

There was a sense that information was too controlled and a general view that Defence personnel were unable to communicate with the public on matters of fact or routine activity or to promote positive stories. Many people told the panel that they wanted to see personnel engaging more directly with their communities, for example through open days at bases, public talks or university lectures.

Defence needed to be less risk averse and more proactive in its public communications, including through the use of social media, the panel’s report said.

Basically, the public has said it wants more and better information out of Defence. Since then, policy and operational changes within Defence have made things worse.

Members of the media are increasingly being painted within Defence as the enemy, and personnel have been told that if they talk to a journalist without reporting the contact then they’ll be disciplined.

This makes it much harder for journalists to do their job. Under deadline pressure, they’ll find other ways to get information. Editors, seeing delays as unnecessary, bureaucratic and political, will opt to run a story without a Defence response if the response doesn’t arrive in time. If the story is inaccurate, then the damage has been done.

If forced to operate in an information vacuum, the media will find something to fill it. Those stories won’t necessarily come from smart and well-informed generals, admirals, air marshals or departmental secretaries. Some will be accurate and painstakingly assembled by conscientious journalists. Others will come from aggrieved personnel or from someone who thinks they overheard something on a bus.

The journalists most disadvantaged by the way things are set up at present are those who do their checks and try to get the story right.

A disturbing number of innocuous stories have been referred by Defence to the Australian Federal Police for leak investigations, not because national security has been placed at risk but because the issue raised might be politically embarrassing.

The process that’s stifling control of the Defence message may be an unintended consequence of the First Principles Review’s key recommendation that to create ‘one Defence’ it would be necessary to establish a ‘strong strategic centre’. Talk of this strategic centre was thrown around a lot when Defence communications personnel were told about the changing structure and restrictions on who could deal with the media. That’s bizarre, given that one of the underpinnings of the review was a need for Defence to engage more positively with risk.

A dissenting view isn’t a mutiny. A force designed to defend the nation should be able to live with—and we hope take note of—some debate and dissention.

Quick wins

The incoming government should acknowledge that the public wants and deserves better transparency and that to develop the future force requires ‘bringing the public on the journey’.

The government and/or Defence should also:

  • acknowledge that greater transparency is also consistent with key reviews, such as the First Principles Review
  • announce that Defence will reset its communications culture and is committed to building a more effective working relationship with the media
  • investigate how to work better with journalists in a way that recognises the media’s independence, Defence’s need to protect classified information and the public’s right to transparency
  • return the freedom to interact with the media to the uniformed ADF and to a wider number of people—military and civilian—across the Defence organisation; the organisation’s own complexity, along with that of the environment it operates within, demand this type of delegated, agile response within concise strategic direction
  • free up ADF officers commanding units and institutions to talk to the media on matters of fact
  • ensure regular, detailed and attributable media briefings on ADF operations and major projects.

The hard yards

Defence, and the incoming government, need to address what appears to be an inbuilt fear of the media within the Defence establishment and build in much greater tolerance for spirited academic or intellectual exchange, as has typically been seen in the US—at least before the arrival of the Trump administration. To be fair, this fear of the media is, in part, a reaction to examples of ‘gotcha!’ and poorly informed reporting. Defence already has a system in place for correcting inaccurate stories.

The government and/or Defence should also:

  • reverse the changes in procedure that are stifling the ADF’s ability to communicate and to respond to media enquiries
  • provide the political leadership and courage to break down a Defence culture that’s wary and risk averse about getting its message out. Accept risk. Accept that in the short term bad-news stories create negative headlines, but in the longer term openness builds trust and understanding
  • relax the rigid controls on contact with the media. It’s rare to find any member of the ADF, or the broader Defence organisation, who’s other than completely loyal to the organisation
  • ensure the public has better access to information about conflicts where ADF members are sent into harm’s way
  • encourage senior uniformed officers to speak publicly about what they and their services are doing, with ministers who back them and see more diverse voices as helpful in dealing with complex challenges
  • promote essay competitions among young officers to get them used to offering ideas.

Breaking the rules

Defence should re-establish the position of a dedicated media spokesperson, with an empowered staff across Defence, who can interact freely with journalists.

It should also increase the number of ‘embeds’ in operational areas for members of the media. Countries such as the US and Canada have long accepted that visits to their camps by journalists are normal. So should we.

All shipshape? Defence’s budget update

At first blush, the central narrative of the Defence Department’s 2018–19 budget, as presented in the Portfolio Additional Estimates Statements (PAES), appears to be about the falling Australian dollar.

Defence’s estimated appropriation for 2018–19 has increased by $449.6 million since the Portfolio Budget Statements (PBS) were published in May 2018 (table 1, serial 4; tables and pages in this post refer to the PAES unless otherwise noted). This is largely due to a foreign exchange adjustment of $476.6 million, as shown in table 6.

Defence is supplemented for exchange rate fluctuations on a no-win, no-loss basis. If the Australian dollar falls against the US dollar and reduces the department’s buying power, Defence doesn’t reduce the number of F-35 jets, say, that the government has agreed to buy. Instead, the government tops up Defence’s funding.

Such adjustments can be substantial. This year it’s $476.6 million, but by the back end of the forward estimates in 2021–22 foreign exchange adjustments are predicted to require an additional $941.5 million in funding (table 6).

It’s not surprising that the numbers are so big; with around 65% of Defence’s capital equipment acquisition budget currently going overseas, declines against the US dollar and euro have a big impact (ASPI’s The cost of Defence, table 5.1). For example, the F-35, Defence’s most expensive project for 2018–19, has gone from $1.821 billion to $1.933 billion, an increase of $112 million, with ‘the forecast variation primarily attributable to foreign exchange updates’ (table 63, page 81). A number of sustainment activities also attribute increases in spending to exchange rate variations (table 64).

But what’s surprising in light of those adjustments is that the department’s estimated overall capital spend on equipment, ICT and facilities has actually decreased by $434.9 million since the PBS (table 8, serial 6). At a rough estimate, around two-thirds of the increased cash requirement due to exchange rate variations can be attributed to the capital program. So the capital spend should have gone up, not down, because Defence needs to spend more Australian dollars to deliver the same capability. Yet once we add in, say, $300 million to account for exchange rate variations, the capital spend will miss its PBS prediction by more than $700 million.

In fact, compared to last year’s overall capital investment, we’ve actually gone down by $200 million this year, from $10.8 billion (PAES 2017–18, table 8) to $10.6 billion—even after including the extra money that’s required to compensate for the declining Australian dollar. (Defence doesn’t publish actual achieved capital expenditure for the previous year, so it’s only possible to compare with the previous year’s PAES prediction, not with actual achievement. So the 2017–18 figure may have been more or less than $10.8 billion.)

So how do we account for this? As always, it’s hard, if not impossible, on the basis of public information to determine what is at work. There are generally three suspects.

First, funds have been moved from acquisition to sustainment. And indeed, the sustainment budget has increased by $455.4 million (table 9). Some of this is due to exchange rate variations, but two big elements are an increase of $208.9 million in Chief Information Officer Group sustainment and $196.7 million in Joint Capabilities Group sustainment. Since these are the two groups essentially responsible for Defence’s ICT and ISR (intelligence, surveillance and reconnaissance) backbone, it would appear that keeping Defence’s core information systems functioning is costing more than expected.

Second, acquisition projects under-delivered against expectations. This can be unplanned—for example, in the case of LAND 121 Phase 4 (Hawkei protected mobility vehicle—light), which will spend only $203 million of a planned $396 million ‘primarily due to ongoing vehicle reliability issues, which is expected to delay the commencement of full rate production’ (table 63, page 84).

But it can also be planned, in order to manage cash flow pressures—for example, in the case of AIR 7000 Phase 2 (P-8A maritime patrol aircraft), which is reducing its spend by $183 million to ‘re-align payments with available budget’ (table 63, page 81). Another adjustment is a decrease of $150 million to the air warfare destroyer program due to ‘reprogramming’ of costs.

And the third possibility is that unapproved projects are being delayed to manage cash flow pressures. When the department is facing cash shortages, delaying approval of new projects is generally its first response. As we have argued previously, since Defence had to move $6.9 billion forward to pay for the ramp-up of the construction of the future submarines (page 49), it’s likely it has had to delay other projects to free up the cash.

What’s the evidence that this has happened? The bottom line in the PAES capital investment program table (table 8, which includes equipment, ICT and facilities) also includes unapproved projects (those that haven’t received second-pass approval to commence delivery), but they’re not broken out as a separate line so there’s no smoking gun that new project approvals are being delayed.

But if we examine the capital equipment program more closely, the evidence is a little more suggestive. Table 63 states that the cash flow required this year for the approved capital equipment program has increased by $107 million since the PBS (table 63, page 86). But table 8 states that the cash flow required for the total major capital equipment program (both approved and unapproved equipment projects) has gone down by $363.2 million since the PBS (table 8, serial 1).

So, if spending for approved equipment projects has gone up by $107 million while total spending on equipment projects has gone down by $363.2 million, it seems that delays to new equipment projects originally scheduled for approval this year are about the only thing that can account for the decline in capital equipment spending since the PBS.

Since there hasn’t been an update to the public Defence Integrated Investment Program in nearly three years, there’s no hard evidence to confirm that project approvals have been delayed. The government and Defence are claiming record numbers of project approvals, but there’s no comprehensive list of what the project approvals actually are, so it’s hard to know whether the IIP is being approved on schedule. But the PAES numbers give cause for concern.

Overall, the naval shipbuilding program is getting money out the door. Granted, SEA 1180 (offshore patrol vessels) will miss its $274 million prediction for 2018–19 by $53 million due to ‘delays in contract signature’, but at least it’s in contract and steel has been cut on the first ship (table 63, page 85). SEA 1000 (future submarines) will require $38 million more this year than its original PBS prediction of $418 million, suggesting spending is now ramping up apace (table 63, page 84). And with government approval for the design and production phase of SEA 5000 (future frigates) secured, its estimated spend for this year has gone to $222 million (table 63, page 85). The submarines and frigates are showing a healthy increase of 47% and 55%, respectively, in spending over last year.

Also on the subject of shipbuilding, there’s a tantalising line in table 6 (which lists variations to Defence funding since the PBS) called ‘Australian Naval Infrastructure Pty Ltd—additional equity’. Since ANI is the former arm of ASC that was hived off to build and operate the naval shipyards, this suggests that the construction of shipyards could be costing more than expected. But no numbers are provided ‘due to commercial sensitivities’.

It’s always hard to develop a reliable narrative based on a few data points, but the story seems to look like this: The government and Defence are continuing to pump what funds are necessary to ramp up shipbuilding. But that, combined with greater than expected costs to operate Defence’s dated and broken ICT backbone, is putting the squeeze on the rest of the capital program.