Tag Archive for: Strategic update 2020

Strategic suspicion and coronavirus consequences: the cost of Australia’s defence

The 2020 defence strategic update represents a remarkable commitment by the Australian government to sustained growth in the defence budget. Released on 1 July after months of bad economic news caused by the Covid-19 pandemic and a growing budget deficit caused by the government’s measures to mitigate the economic pain, the update nevertheless confirms the robust funding line presented in the 2016 defence white paper and extends it for a further four years. This means the defence budget will continue to grow past 2% of GDP, and indeed at a faster rate than before the Covid-19 pandemic hit. It’s planned to grow by a remarkable 87.4% over the coming decade.

Why did the government make that commitment? It’s clear from the update that the government is very concerned about Australia’s strategic circumstances, which it assesses as having deteriorated significantly in the four years since the 2016 defence white paper. It states that the region is in the middle of the most consequential strategic realignment since World War II. That brings significant uncertainty and risk.

The 2020 update marks a clear break from previous high-level strategic statements in the frank way it describes those risks and the new capabilities needed to address them. It also makes several key adjustments to strategic policy settings. One is the statement that a largely defensive force won’t deter an attack.

Instead, ‘new capabilities are needed to hold adversaries’ forces and infrastructure at risk from a greater distance. They include longer range strike weapons, cyber measures and area-denial systems.’ It also acknowledges that Australia can no longer rely on warning time, even for a conventional military attack on the mainland, and so won’t have time to ‘gradually adjust’ military capabilities.

To acquire new capabilities, the growth in the funding model in the 2020 update continues the pattern of the 2016 white paper. That means the capital component of the budget grows to 40% of the total budget and stays there. By the end of the decade, if that planned increase is achieved, the acquisition component of the budget will have grown by 148%.

Despite the broader economic and budget uncertainty, this means that Defence is in the fortunate position of being able to add some significant new capabilities to its shopping list. Perhaps the most remarkable feature of the new force structure plan is that the Australian Defence Force has entered the age of missiles with a vengeance. There’s potentially $100 billion in investment over the next two decades in missiles and guided weapons. That includes the offensive systems needed to deter and defeat an adversary from a greater distance, such as hypersonic weapons.

While the force structure plan is short on detail, the big picture it paints is pretty clear. It’s one in which the ADF continues its trajectory of steadily fielding improved capability and developing greater strategic weight. But there are risks, both in the design of the plan itself and in delivering it, that need to be managed.

The first set of risks relates to the question of whether this is the right force for our deteriorating circumstances. Despite the recognition that Australia can’t rely on warning time, much of the planned force is still a long way off. Most of the big buckets of funding for unmanned and autonomous systems are still in the late 2020s or even in the 2030s. Until then, it looks like Defence is relying on improved weapons delivered from existing platforms to provide the main capability enhancement.

Also, the force envisaged is growing increasingly broad. There are many new capabilities in the plan, but virtually none are being retired or cancelled. Similarly, the range of tasks that the force is being asked to do isn’t being reduced. In fact, the update requires greater regional engagement as well as greater capacity for domestic disaster response. But will the force be able to do all the tasks expected of it?

Related to this, our changing strategic environment seems to be pulling the force in two directions. The update states that we can’t match major-power adversaries and need to develop capabilities to deter them through strike, cyber and area-denial systems. This suggests a growing recognition of the need for asymmetric operational concepts and capabilities, yet the force is still largely being built around traditional, conventional capabilities such as expensive, multirole, manned platforms.

There’s also the question of balance between acquisition, sustainment and personnel funding. Acquisition’s share of the budget is growing rapidly. Personnel’s share is also growing but more slowly, and will decline as a percentage of the overall budget. Certainly, increased capital spending is necessary, but is a 40% acquisition/26% personnel balance feasible in the long term? There’s no point acquiring equipment you can’t crew.

Then there are a set of risks that relate to the feasibility of delivery. The first, as ever, is money. The economic future of both Australia and the world is still very uncertain. If the economic impact of Covid-19 results in prolonged economic stagnation, it’s going to take sustained resolve by this and future governments to keep increasing defence funding over the decade. Should that resolve waver and a government revert to something like 2% of GDP, that would be a huge hit to the defence budget of potentially $5–10 billion per year.

There’s also the very difficult question of the affordability of the force. The defence budget is growing substantially, but so is the list of capabilities Defence is acquiring and sustaining. Moreover, the acquisition cost of military capabilities grows much faster than inflation. Since 2016, several key capabilities have grown significantly in cost. The sustainment cost of key future capabilities is likely to be several times greater in real terms than the systems they’re replacing.

One of the biggest implementation risks relates to Australian industry’s ability to scale up to deliver the force. The local share of Defence’s capital equipment spend has consistently hovered around one-third of the total. Last year, that was around $2.6 billion. As the capital budget rapidly grows over the decade, local acquisition spending will have to grow to more than $7 billion per year just to maintain that one-third share. It’s clear the government wants that share to grow. It has to, if we’re going to address the supply-chain risks currently inherent in defence capability. Getting to between 40% and 50% means the local acquisition spend will need to reach around $10 billion per year.

While the basic settings of the government’s 2016 defence industry policy statement are the right ones, it’s likely that it’s going to have to do more to develop the kind of local industrial ecosystem necessary to deliver the level of sovereign capability described in the 2020 update and force structure plan.

The other risk associated with industry policy is the old one of falling into the trap of preferring industrial outcomes to military capability. That risk has already been realised. Some of the hidden costs of continuous-build programs are becoming more apparent: the 2020 plan states that the cost increase for the future frigate program was caused by the government allocating ‘additional funding to enable construction of ships at a deliberate drumbeat over a longer period of time than originally planned to achieve a continuous shipbuilding program’. That is, we’re deliberately paying more to get capability later.

The 2020 update acknowledges that we can no longer rely on warning time to be able to gradually adjust military capability, so surely now’s the time to be spending to accelerate delivery and the rate at which we ‘adjust capability’, not slow it down. If we’re willing to pay a premium to build here, let’s pay it to get more capability sooner, not later. Why are we prioritising jobs for future generations of shipbuilders over capability for current servicemen and -women who may be called upon in the near future to use it?

The launch of The cost of defence 2020–21, featuring a presentation by the author and panel discussion with ASPI Executive Director Peter Jennings and Australian Defence Magazine managing editor Katherine Ziesing, will be livestreamed from the ASPICanberra YouTube channel at 3.00 pm on Wednesday 12 August.

ASPI’s new ‘The cost of defence’ database has also gone live. This makes available much of the data relating to the cost of defence that ASPI has collected over the past 19 years. We’ll continue to add to the database and are very happy to take your suggestions on what you’d like to see there. You can access it through our website.

Labor misses opportunity to offer new perspectives on Australia’s defence policy

In a major address at the National Press Club on Tuesday, shadow defence minister Richard Marles doubled down on the Australian Labor Party’s criticisms of Australia’s troubled future submarine program.

The address was teasingly billed as a rare moment of departure from the conventional bipartisanship of Australian defence policy. In comments widely picked up by the media before the address, Marles argued that the government’s handling of the submarines project has ‘profoundly compromised’ Australia’s national security.

Those were strong words, clearly intended to pack a political punch. This was Marles’s first major speech as Labor’s deputy leader, and opposition leader Anthony Albanese watched on from the socially distanced audience. A Victorian, Marles had obtained a one-night-only health exemption to be in Canberra, a Covid-related hurdle he noted was important to jump since opposition engagement on defence issues is vital to our democracy.

Given this political investment, the speech was a lost opportunity to challenge or offer new perspectives on Australia’s strategic environment and defence policy settings.

Marles noted that Australia faces its most complex strategic circumstances since World War II, echoing Prime Minister Scott Morrison’s talking points at the July launch of the defence strategic update. But he did not use the Press Club platform to provide further reflections on the assumptions, policy shifts or future force structure outlined in that significant report.

Like the prime minister, Marles sees the Covid-19 pandemic as an ‘accelerant’ for regional instability and indeed reflected that ‘Covid has created questions to which there are no answers’. But he chose not to give guidance on what these known unknowns might be.

Instead, in the long tradition of defence policy debate by opposition politicians of all stripes, Marles chose to narrow his take on Australia’s future national security to the economics of capability acquisition (how much will it cost, when will it be built, and by whom).

Even then, he constrained his critique mainly to historical issues. A ‘negligent’ contracting process with French shipbuilder Naval Group plus cost blowouts and time delays has put Australia’s national security ‘between a rock and a hard place’. Rather than canvassing options, risks and trade-offs for charting a course through the horns of this dilemma, the address echoed the seemingly bipartisan assumption that the submarine build should continue—just over-budget, and late.

As Andrew Carr has argued for some years, Australia’s default to bipartisanship on defence matters discourages policy creativity and accountability.

We also have a national obsession with defence budgets and military kit—a focus that sees discussion about strategic means overshadow dialogue about our strategic ends and potential ways for achieving them.

Thousands of pages of reports and Hansard records examine the ins and outs of the army’s Land 400 acquisition, the tortured air force F-35 process, and the navy’s submarine and future frigate programs—to take some recent examples. But debate about the merits of these particular capabilities relative to others, and how they contribute to Defence’s mission, or indeed Australia’s broader national interests, is comparatively feeble.

The other widely reported aspect of Marles’s address was his criticism of ‘muscular language’ on China by some government MPs. This, he said, has ‘done nothing to improve Australia’s strategic circumstances’. In later clarifying that he was referring to commentary by backbenchers, rather than official statements, Marles again fell into a common pattern in Australian defence debates: playing the fringe, rather than the substance. There was no real engagement with last week’s Australia–United States ministerial consultations.

Marles’s comments on backbencher commentary also raise an important question about the role of diversity and contestability in Australian defence debates. He suggested that MPs and senators under a Labor government would sing from the same songbook on defence and foreign policy, a practice he thought previous governments of all persuasions had been better at enforcing.

But do we want public debate about defence matters to be framed only by ministerial talking points? Whatever one’s views of the ‘wolverines’ (the self-styled cross-party group Marles was critiquing), there are broader principles at stake here. At its best, parliamentary government is not a game between homogenous blocks of blue, red and green, but a genuine contest of ideas.

Indeed, particularly in complex and uncertain strategic circumstances—where adaptation, creativity and courage are important—leadership often comes from below and behind, and politicians outside the executive can lead needed change. For example, opposition politicians and backbenchers played a role in UK Prime Minister Boris Johnson’s U-turn on allowing Huawei equipment in the country’s 5G infrastructure. In both the UK and the US, bipartisan committee reports have powerfully called out the government of the day for failing to recognise and respond to Russian interference in democratic elections.

In the 21st century, defence policy issues, unlike submarines, cannot be submerged or silenced. Strategic competition between countries increasingly affects citizens, and Australians will need to be engaged in important national conversations about what we are prepared to defend, how and at what cost.

A more open and robust—if at times messy—democratic dialogue about Australia’s strategic circumstances and policy options can bring Australians along as we make choices which will have generational significance and—importantly—help ensure we get these tough decisions right.

Towards a sovereign space capability for Australia’s defence

As Australia’s defence establishment moves on from a perception of space capability as simply an adjunct to terrestrial forces, the 2020 defence strategic update and its companion force structure plan have formally recognised the domain’s importance.

That brings an appreciation that space is now central to modern joint and integrated warfighting and, with growing counter-space challenges from potential adversaries such as China and Russia, it’s a warfighting domain in its own right. It’s not a sanctuary that sits serene and untouched by geopolitical rivalries below.

Boosting our space resilience in the face of increasing challenges is crucial. The force structure plan makes clear that the government wants communications satellites and ground stations under sovereign Australian control. Defence’s Joint Project 9102 will develop the next-generation Australian defence satellite communications system. The force structure plan highlights the importance of acquiring a sovereign space-based imagery capability under Defence Project 799, phase 2. It also re-emphasises the need for ‘space domain awareness’ and notes that Australia hosts a US surveillance telescope and C-band radar at Exmouth in Western Australia.

But it goes further than the language of the 2016 white paper, noting that ‘Defence will need capabilities that directly contribute to warfighting outcomes in the space domain using terrestrial and/or space-based systems’. This is an important step, because it shows that Defence accepts that space is contested and is no longer making the assumption that it will always have access to space capabilities.

The plan states that the government intends to develop ‘options to enhance ADF space control through capabilities to counter emerging space threats to Australia’s free use of the space domain and that assure our continued access to space-based intelligence, surveillance and reconnaissance’.

The term ‘space control’ is important. However, Defence is yet to release an unclassified space strategy that defines key terms. The most comprehensive Defence statement on space is Australian Defence Doctrine Publication 3.18, which isn’t released to the public. Without a credible and accessible Defence space strategy, there’s an information vacuum underpinning high-level defence policy on space that needs to be addressed, particularly when terms such as ‘space control’ are used.

ADDP 3.18 talks about space control along similar lines to the US definition, with additional satellite constellations being deployed for defensive purposes as needed, and the use of many smaller, cheaper satellites for general space support.

Also important is an ability to rapidly reconstitute space capability that has been destroyed by and adversary.

So how can we best protect ourselves in space?

A likely approach would be to build resilient multi-mission space capabilities. That’s already a key focus of the Defence Science and Technology strategy 2030, and it’s one that would open up opportunities for Australia’s vibrant commercial space sector. Investing in a sovereign capability that allows us to augment existing space systems, spread our space support over large numbers of small satellites that are less vulnerable, and invest in rapid reconstitution capability are sensible steps to consider.

There’s a case for a ‘high–low’ mix, buying high-end satellites from allies, but complementing them with the ‘small, many and cheap’ approach used by commercial systems.

The building of a sovereign satellite capability is already underway. Earth-observation start-up LatConnect 60 in Western Australia, in collaboration with York Space Systems, is set to manufacture a constellation of three satellites that combine radio-frequency sensors and multispectral imaging cameras. The first is to be launched in 2021. The combination of radio-frequency detection and earth imaging would provide rapid intelligence support for both Defence and the private sector.

This example, and other projects underway across the commercial space sector, show that a rapid Space 2.0 approach based on commercial space technology support for government mission requirements can reduce the time it takes to acquire and deploy a credible space capability. The force structure plan suggests acquisition of a sovereign satellite imagery capability from 2020 through to 2040. That’s too slow.

Speed matters, and a slow, government-run acquisition process in the face of rapid development of offensive capabilities by potential adversaries—a space equivalent of the acquisition of the Attack-class submarines—is the wrong approach.

What’s needed is rapid acquisition of low-cost space capability and further investment in small satellite technologies. The LatConnect 60 and York Space Systems collaboration is a good model for Defence to embrace. More capable space technology is coming in increasingly smaller and cheaper packages. With that in mind, the government should talk to Australian commercial space start-ups about JP-9102 and DEF-799 and how they can contribute.

Of course, what’s missing from the strategic update and the force structure plan is responsive space launch. If Australia truly wants a sovereign space capability, it has to be able to replace its satellite systems, especially if it wants to ensure access in a contested space domain.

It can’t do that if it has to wait months for an overseas provider to launch satellites on its behalf. The update and the plan missed the opportunity to embrace that next step.

Had the authors been just a bit bolder, they could have strengthened the commercial sector’s confidence to pursue space access. Having Australian-built satellites launching from Australian launch vehicles on Australian launch sites to rapidly assure space capabilities for the ADF is an obvious next step forward for Defence.

Australia’s foreign policy needs a strategic update

The 2020 defence strategic update has been a welcome first step for many who see Australia’s place in the world and our region become increasingly insecure. Beijing’s recent demonstration of its willingness to leverage its economic weight to punish unwanted behaviour has contributed to existing anxieties about Chinese military expansion in the South China Sea and the wider region.

China’s rise has coincided with the apparent decline of Asia’s regional security guarantor. With the United States’ once unassailable political, economic and military power now looking like it will be seriously tested in the decades to come, the plan to upgrade Australia’s own deterrence capabilities laid out in the update seems eminently desirable, if not entirely necessary. However, there’s little point in investing heavily in the development and acquisition of those capabilities if the ‘other elements’ of national power mentioned in the update are neglected.

This leads to the question of an Australian grand strategy—an approach to policy development that ties all available elements of national power to a unified end goal. This concept is particularly relevant to our defence and foreign policies as, by their nature, they have a symbiotic relationship. Ineffective foreign policy will obfuscate military-strategic aims, and defence policy formulated in a silo runs the risk of neglecting non-military means of exercising power. The development and application of a grand strategy addresses this problem.

In the 19th and 20th centuries, the grand strategy of the Monroe Doctrine formed the basis of the US approach to defence and foreign affairs in relation to European territorial encroachment. The end result was the dominance of the US across not only the Americas, but also the Pacific as the doctrine’s geographical boundaries widened.

While the 2020 update has clarified what Australia’s strategic approach to defence policy will be over the next decade, we are yet to see an equivalent (and unified) strategic product from the Department of Foreign Affairs and Trade. Australia’s most recent foreign policy white paper was released in 2017 and, much like the 2016 defence white paper, was a reflection of a strategic environment very different from today’s.

In the past five years alone, Australia’s diplomats have had to navigate the challenges of an increasingly aggressive Beijing, political instability among some of our closest allies (and the trade repercussions of that instability), and now the worst global pandemic in a century. Despite these increasing challenges, the federal government hasn’t given DFAT the same amount of funding attention as Defence.

In December 2019, it was reported that since the current government was elected in 2013, Australia’s total diplomatic and development budgets have fallen from 1.5% of the federal budget to 1.3%, which stacks up poorly against comparable countries, such as Canada, which spends 1.9% of its federal budget on diplomatic and development efforts. More recent news of job losses at DFAT only weeks after the defence update was released act as a warning sign that the government has been focused on defence capability and acquisition while neglecting its diplomatic corps.

The reality is that defence capability is not the only method of power projection, nor is it always the most effective. Australia’s diplomatic efforts have projected influence across the world further and more effectively than our military capability can on its own.

In 2018, our foreign minister challenged Moscow over Russia’s involvement in the downing of Malaysia Airlines flight MH17. This year, Australia has led the international push for an independent investigation into the origins of the Covid-19 pandemic. Australia was taken seriously in these instances not because of the size or capability of our defence force, but because of the efforts and influence of our diplomatic corps.

While investing in power projection throughout the Indo-Pacific, the government must also invest in other tools of long-term influence, such as Australia’s development assistance budget, a line item long neglected, despite its strategic usefulness for building relationships with our Pacific neighbours and pushing back against the increasing financial leverage of states that do not share our values or strategic interests.

Increased expenditure on defence capability and acquisition is a positive step in the right direction for defence policy, as is the government’s overall strategic shift in the update. However, any increase in defence spending must be matched by increased funding for diplomatic efforts, including development assistance.

Policy announcements that continue to favour defence over diplomacy do not play to our strategic strengths. Without comparable attention paid to diplomacy, Australia will be left with some degree of military strength, but a reduced ability to build and maintain key partnerships in a region that we cannot win over with our relatively limited military might.

If we want to shape our strategic environment and deter aggression without a ‘great and powerful’ friend at our back, it will be through careful diplomacy and multilateralism, not through force of arms alone.

Defence update signals Australia’s waning faith in US extended deterrence

Australia’s defence strategic update is not recommended reading for the faint-hearted. It depicts a starkly divided world in which the prospects of conflict are growing. In this post, I’ll explore only one small part of the document, namely paragraph 2.22. It contains only three sentences. But those sentences carry weighty implications.

Let’s begin with the paragraph itself:

Only the nuclear and conventional capabilities of the United States can offer effective deterrence against the possibility of nuclear threats against Australia. But it is the Government’s intent that Australia take greater responsibility for our own security. It is therefore essential that the ADF grow its self-reliant ability to deliver deterrent effects.

If the first sentence sparks a sense of déjà vu, that’s because readers have—probably—seen it before. It’s a sentence lifted from the 2016 defence white paper. There it was part of paragraph 5.20, outlining the benefits which flowed to Australia from its close association with the US:

Australia’s security is underpinned by the ANZUS Treaty, United States extended deterrence and access to advanced United States technology and information. Only the nuclear and conventional military capabilities of the United States can offer effective deterrence against the possibility of nuclear threats against Australia. The presence of United States military forces plays a vital role in ensuring security across the Indo-Pacific and the global strategic and economic weight of the United States will be essential to the continued effective functioning of the rules-based global order. [Emphasis added.]

In its 2016 role, the sentence underlined the contribution made to Australia’s security by US extended nuclear deterrence.

The 2013 defence white paper, released by the Gillard Labor government, contained a similar reference, although not in exactly the same terms. Paragraph 3.41 of that document reads:

Finally, as long as nuclear weapons exist, we rely on the nuclear forces of the United States to deter nuclear attack on Australia. Australia is confident in the continuing viability of extended nuclear deterrence under the Alliance, while strongly supporting ongoing efforts towards global nuclear disarmament.

Similarly, the Rudd government’s 2009 defence white paper made clear the importance of US extended nuclear deterrence—and of its possible failure. See paragraph 6.34:

It also means that, for so long as nuclear weapons exist, we are able to rely on the nuclear forces of the United States to deter nuclear attack on Australia. Australian defence policy under successive governments has acknowledged the value to Australia of the protection afforded by extended nuclear deterrence under the US alliance. That protection provides a stable and reliable sense of assurance and has over the years removed the need for Australia to consider more significant and expensive defence options.

So the first sentence of paragraph 2.22 of the 2020 update seems to stand duty as a reference point for a long tradition of Australian acknowledgement of the importance to Australia of US extended deterrence. Remember the metric involved here: what offers ‘effective deterrence against the possibility of nuclear threats against Australia’? Unsurprisingly, only US conventional and nuclear capabilities offer such an assurance. So at this point the reader of the update might reasonably expect a form of words underlining the growing importance of US extended deterrence in more difficult times. Right?

Wrong. There’s nothing in the update about US extended deterrence—which is hard to interpret as anything other than signalling by omission. The update, in short, suggests a loss of faith in US extended deterrence among Australian policymakers. We might speculate about the causes of that. President Donald Trump’s eccentricities have undoubtedly been aggravated by a longer-term shifting global balance. But what matters is the outcome. In a document freighted with growing threats, extended deterrence is horribly absent.

Indeed, let’s go back to paragraph 2.22. The second and third sentences head off in a different direction. The second sentence even begins with the word ‘but’, one of those conjunctions that ties the subsequent thoughts to the previous judgement:

But it is the Government’s intent that Australia take greater responsibility for our own security. It is therefore essential that the ADF grow its self-reliant ability to deliver deterrent effects.

It’s hard to read those sentences as anything other than a claim for greater self-reliance in the deterrence of nuclear threats against Australia. Further, it’s hard to accept that the government believes that an Australia armed solely with conventional weapons can deter an adversarial nuclear-armed great power. After all, it has just said it doesn’t believe that even a US armed solely with conventional weapons can deter such threats: go back and read the first sentence again.

What’s the conclusion? A simple—and tempting—conclusion is that either there’s been some grievous infelicities of meaning in the drafting process, or the update is an attempt to signal the possibility of a future nuclear-armed Australia. But that conclusion places a great deal of weight on three sentences, and on what they don’t say as much as on what they do. The premise of a future Australian nuclear arsenal shouldn’t be based on words that aren’t there.

I suspect something more complex is happening. An Australian government, busily revalidating both the importance of deterrence in national strategic thinking, and the importance of offensive strike to deterrence, is probably arguing here that improving conventional technologies, allied to more capable missile defences, do offer some prospects for offsetting nuclear threats.

That’s a challenging argument to unpack—especially in circumstances where we’re uncertain about how much we can rely on US assistance. Still, those complexities seem to offer a more credible explanation for paragraph 2.22 than the simple, tempting one.

Is the money for Defence’s new force structure old or new?

The big question heading into the defence strategic update that Prime Minister Scott Morrison launched yesterday was what impact the Covid-19 crisis would have on the defence budget. The answer is none whatsoever. Ministers had said that despite the crisis, the government was committed to the funding model set out  in 2016 defence white paper. The government has now put that down on paper.

To recap, in the 2016 white paper the government provided a 10-year funding line that would not change, regardless of fluctuations in GDP. Granted, the defence budget would hit 2% of GDP in 2020–21, but it wasn’t pegged mechanically at that level beyond then. In fact, even before the double whammy of bushfires and Covid-19, it was looking like the defence budget would hit around 2.2% of GDP towards the back end of that 10-year funding model. Depending on the size and duration of the hit to the economy caused by Covid-19, the funding line could reach 2.4% of GDP even if the Defence Department didn’t get a single dollar more than the government promised in 2016.

As I’ve noted before, if the government changed its policy and pegged the budget strictly at 2% of GDP, Defence would take a massive funding cut in coming years, rendering its force structure plans unachievable.

So those who favour a robust defence force will be pleased to see that the 2020 update preserves the 2016 funding model out to 2025–26 and extends it for a further four years. As table 1, shows, the new model is virtually identical to the old one out 2025–26. If we extrapolate the old model for four more years at the same rate of growth shown in its last three years, we can see that it’s virtually identical to the additional four years provided in the update. In fact, over the 10 years, the two models are within 0.14% of each other.

Table 1: 2016 white paper funding model versus 2020 update funding model

2020–21 2021–22 2022–23 2023–24 2024–25 2025–26 2026–27 2027–28 2028–29 2029–30
2019–20 budget/2016 white paper (A$m) 42,151 46,037 50,182 52,877 55,733 58,742 61,914 65,257 68,781 72,496
Nominal growth rate (%) 7.2 9.2 9.0 5.4 5.4 5.4 5.4 5.4 5.4 5.4
2020 strategic update (A$m) 42,151 46,037 50,170 53,318 55,567 58,175 61,239 64,639 69,986 73,687
Nominal growth rate (%) 7.2 9.2 9.0 6.3 4.2 4.7 5.3 5.6 8.3 5.3

Note: Italicised figures represent a hypothetical projection of 2016 white paper funding model.

So, in short, despite the massive budget deficit caused by the government’s Covid-19 stimulus spending, there has been no reduction to the planned defence budget.

Does that mean there’s no ‘new money’? Well, yes and no. It’s the same funding model as before, so there’s nothing new there. But as shown in table 1, the funding line grows at a robust rate that’s highly likely to exceed inflation, so as we go through time the defence budget will grow in real terms. For example, the update confirms that the defence budget will grow in nominal terms by 7.2%, 9.2% and 9.0% over the next three years. What other portfolio can boast such largesse? Near the end of the decade, the growth isn’t as strong, but it should still comfortably exceed inflation.

The question is, will this funding be enough to afford the force outlined in the new force structure plan that accompanies the strategic update? The government appears to have realised that the best defence is a good offence, and that, to quote the update, ‘requires Defence to develop a different set of capabilities’. That means new or enhanced equipment (such as more robust long-range strike weapons and larger stocks of guided munitions).

Prioritisation is always necessary, regardless of how much money there is. In his launch speech, the prime minister noted that, in preparing the update, the government had ‘directed Defence to prioritise, to make choices [on], [the] ADF’s geographical focus on our immediate region’.

That focus and the new capabilities are the right approach for these times. But it’s hard to see how that strategic prioritisation has flowed through to the shopping list of capabilities. While there are a lot of new things on that list, there are only a few minor deletions from the previous investment plan. Defence isn’t giving any existing things up. Overall, there’s no meaningful divestment of capabilities.

Moreover, the listed cost of some very large projects appears to have gone up. The design and development estimate for the Hunter-class frigates was ‘>$30 billion’ in the 2016 investment program; that’s now $45.6 billion, apparently due to the extended build process needed to sustain continuous naval shipbuilding. LAND 400 Phase 3’s infantry fighting vehicles were ‘$10–15 billion’; they’re now $18.1–$27.1 billion. It’s not explained whether these differences result from a change in accounting approach, an increase in scope, or an actual increase in costs. But with the focus of the new strategy on Southeast Asia and the Pacific, a project acquiring 450 40-tonne vehicles would have to be a candidate for a reprioritising budget haircut, not more money.

The 2016 investment plan was already crammed full before the additions revealed in the 2020 force structure plan. The only way to acquire new things without increasing the funding model is to delay the acquisition of things that were already in the plan. And despite the update’s assessment that we can no longer rely on 10 years’ warning time, many of the key elements of the future force were already well in the future.

To acquire these capabilities, the capital budget hits around 40% of the total defence budget by the middle of the decade and then remains there. Personnel, historically the largest of the triumvirate of capital, operating and personnel, falls to 26% over the decade. I’ve suggested previously that this split may be unachievable—there’s no point acquiring equipment if you can’t crew or sustain it.

The new plan does note that there’s unfinished business in the personnel space. It acknowledges more people will be needed, but the government won’t consider exactly how many until 2021. The 800 new uniformed personnel and 250 new public servants provided in the plan are simply a stop-gap. More people may require shifting the balance of funding.

Overall, confirmation and extension of the 2016 white paper’s funding model is welcome news and demonstrates the government’s commitment to upholding Australia’s sovereignty and security in uncertain strategic and economic times. But if, as the update says, our strategic circumstances are changing much more rapidly than the 2016 white paper assessed and we can’t rely on 10 years of warning time, it hasn’t cracked the nut of how to get capability faster while so much of Defence’s funding is locked up in megaprojects with long delivery timeframes.

Virtually every high-level strategic document over the past two decades has admitted its predecessor underestimated the rate of change in the region. The strategic update is no different. How is Defence changing its thinking to get ahead of the curve?

If we’re sliding towards war, the money must flow

Scott Morrison’s speech at the launch of the defence strategic update and new force structure plan was fascinating. No fewer than four times he said that the ­deterioration in Indo-Pacific ­security was as concerning as the slide to global war in the 1930s.

In a comment not in his prepared notes, the prime minister said, ‘That period of the 1930s has been something I have been revisiting on a very regular basis, and when you connect both the economic challenges and the global uncertainty, it can be very haunting.’

My sense is that Morrison and Defence Minister Linda Reynolds understand just how dangerous our security situation is getting. We are heading to a potential military crisis at some point in the next year or two around the first island chain that borders the approach to the People’s Republic of China.

The biggest change in the strategic update is temporal, not geographic. The Indo-Pacific—now defined for defence planning purposes as the northeastern Indian Ocean, Southeast Asia, Timor-Leste and the Pacific islands—has been at the core of Australian strategic thinking for decades.

What is new is the realisation that the risk of conflict is upon us right now, not a comfortably distant 20 years away. In fact, the update abandons a long-held strategic view that we would have 10 years of ‘strategic warning time’ to prepare for a large-scale conflict.

This judgement will force massive change in how we produce and stockpile ammunition, fuel and critical defence supplies, and leads the strategy to say that Australia should look to manufacture our own complex guided munitions.

We should soon get more ­detail on a plan to acquire a precision-strike missile, launchable from combat aircraft and ships, adding hundreds of kilometres to the range of deployed forces. In ­effect, any major war Australia is involved in will most likely start in maritime Southeast Asia. The aim is to keep our opponents as far as possible from our landmass.

Nor will this be Australia operating alone. We are likely to be alongside a range of countries equally as worried about the PRC’s attempts to dominate the region.

Another decision adds to our over-the-horizon radar network so that the system can look east as well as northwest and north. I expect the concern here is the PRC’s relentless influence-building with the Pacific island countries, and the People’s Liberation Army’s desire to establish a naval base.

Australia has not had to worry about a security threat from the east since the battle of the Coral Sea in 1942. If you want to understand why China so consistently puts out the red carpet for Pacific island leaders in Beijing, you should read up on the Imperial Japanese Army’s Pacific War plans.

Ultimately the Chinese Communist Party wants to impede US access to the western Pacific. A strong PLA presence through the Pacific region achieves that goal. Morrison’s Pacific ‘step-up’ is as important to Washington as it is to Canberra.

The strategic update and force structure plan are a welcome and necessary reset to defence thinking, and aim to give ­Defence more hitting power and deterrent value.

Now comes the hard part: the many new equipment proposals must be paid for and delivered in strategically relevant timeframes.

The government has said that about $270 billion will be spent on defence capabilities over the next 10 years. This is not new money, but the continuation of the plan set out in the 2016 defence white paper, with five more years of spending plans (2025–2030) now ­visible.

Most of that $270 billion remains committed to existing projects like the Collins submarine life-of-type extension, the future submarines, the future frigates and the bulk of F-35 program costs. The strategic review does indeed shelve some equipment projects—there will be no more C-17 aircraft and the army’s long-suffering ‘G-Wagon’ program for non-combat vehicles is gone.

A reasonably educated guess might say that $50 billion of the $270 billion is free to be allocated to long-range missiles, hypersonic and directed-energy weapons, autonomous land, sea and air vehicles, satellite constellations, ­amphibious ships and the rest.

The government no longer wants to link defence spending to the ‘target’ of 2% of gross domestic product. Fair enough, but we should be clear that what we have here is a defence plan that, in maturity, looks more like 3.5% of GDP.

In the last Cold War, defence budgets tended to be 3.2% to 3.5% of GDP. If the 1930s-style slide to war continues, that’s where our defence spending must head too.

Morrison should now apply his strategic lens to Australia’s thin diplomatic effort in Southeast Asia. Leadership carries costs. We must work with the region to show that it’s possible to push back against PRC domination.