Budget Review 1996-97

Detailed Portfolio Reviews

August 1996

3A DEFENCE

3A.2 Navy
3A.3 Army
3A.4 Air Force

The reduced outlay for the Navy program does not necessarily represent a reduction in its capacity to meet program objectives.

The estimated outlay for 1996-97 is derived from a complex process of summing the variations to the 1995-96 budget in three areas: changing values of prices and exchange (Price/Exchange), movement of work areas between different programs (Program Transfers), and changes in the real world activities of the RAN (Real). Comparing 1996-97 to 1995-96, these changes were:

Price/Exchange	Program Transfers	Real
$ millions	$ millions	$ millions
28.2	-1.0	-85.7⁽¹⁾

Of the real reductions, $22.5 million represents the program's contribution towards the Government's policy that $125 million per annum be redirected from the running costs of non-operational or support areas to combat forces. The three elements of largest reduction in this category were:

$11.3 million - Cash Limited Administrative Expenses and information technology from non - operational areas;

$4. 3 million - equipment and stores; and

$3. 8 million - civilian salaries.⁽²⁾

Other major reductions within the 'Real' category represent the impact of changed circumstances for Navy Program expenditure in 1996-97, the most significant being:

$29.5 million - reduced provision nearing finalisation of compensation claims from the Voyager disaster;

$15.0 million - reduced salaries and administrative expenses associated with the closure of the Naval Supply Centre at Zetland, part of the rationalisation of Defence logistics management which was a component of the efficiencies identified in the 1991 Force Structure Review;

$14.2 million - difference between forecast and actual price and exchange movements in 1995-96; and

$12.7 million - reduced provision for voluntary redundancy payments.⁽³⁾

Increased expenditure required for the introduction to RAN service of the new submarine HMAS Collins, and frigate HMAS Anzac is almost offset by reductions gained from the retirement of older naval units. In a similar process, reductions within the 'Real' category have been offset to some extent by increases such as:

$7.1 million - increased Service allowances, principally seagoing allowance;

$6.5 million - the full year effect of ADF pay structure changes; and

$5 million - increased attention to Anti Submarine warfare.⁽⁴⁾

The 1996-97 budget increases outlay on naval combat forces by almost 3% and increases the proportion of program outlay allocated to this Sub-program from 29.4% to 31.3%.⁽⁵⁾

Department of Defence, Resources and Financial Programs Division, Portfolio Budget Statements 1996-97 'Defence Portfolio', 'Program 2-Navy, Major Variations', p. 38.

ibid., 'Government Savings Initiatives-1996-97 Impact', p. 29.

ibid., 'Program 2-Navy, Major Variations', p. 38.

ibid.

ibid., 'Resources Summary', p. 86.

The estimated outlay for the Army Program in 1996-97 is derived from the process of summing the variations to the 1995-96 budget in three areas: changing values of prices and exchange (Price/Exchange), movement of work areas between different programs in the Defence portfolio (Program Transfers), and changes in the real world activities of the Army (Real). Comparing 1996-97 to 1995-96, these changes were

Price/Exchange	Program Transfers	Real
$ millions	$ millions	$ millions
46.4	6.4	-6.4⁽¹⁾

Amongst the real changes is a reduction of $39.5 millions, the Program's contribution towards the Government's policy that $125 millions per annum be directed from the running costs of non-operational areas or support areas, to combat forces. The three elements of largest reduction in this category were:

$16.104 million - Cash Limited Administrative Expenses and information technology from non-operational areas;

$11.673 million - equipment and stores; and

$5.807 million - civilian salaries.⁽²⁾

Although the net 'Real' change to the Budget of Army program is small, there have been some major movements within components. Of these, the most significant, apart from the contribution to the Government's savings target of $125 million, have been:

$35.6 million - increased funding for ammunition;

$12.6 million - anticipated variation in compensation payments;

$8.3 million - enhancement of the General Reserve;

-$18.4 million - reduced outlay due to reduction in staffing of 384, in keeping with the objectives of the 1991 Force Structure Review; and

-$11.1 million - difference between forecast and actual price and exchange movements in 1995-96.⁽³⁾

The government has implemented its policy to abolish the Ready Reserve but this cannot take effect until January, the time for induction of the annual intake. Consequently, savings from this policy will have only a part-year effect, gaining an estimated $6.5 million in 1996-97.

The 1996-97 budget increases outlay on Army combat forces by 3.6% and increases the proportion of program outlay allocated to this sub-program from 30.6% to 31.1 %.⁽⁴⁾

Department of Defence, Resources and Financial Programs Division, Portfolio Budget Statements 1996-97 'Defence Portfolio', 'Program 3-Army, Major Variations', p. 38.

ibid., 'Government Savings Initiatives-1996-97 Impact', p. 29.

ibid., 'Program 3-Army, Major Variations', p. 39.

ibid., 'Resources Summary', p. 106.

The estimated outlay for the Air Force Program in 1996-97 is derived from the process of summing the variations to the 1995-96 budget in three areas: changing values of prices and exchange (Price/Exchange), movement of work areas between different programs in the Defence portfolio (Program Transfers), and changes in the real world activities of the RAAF (Real). Comparing 1996-97 to 1995-96, these changes were

Price/Exchange	Program Transfers	Real
$ millions	$ millions	$ millions
30.0	1.6	-91.3⁽¹⁾

Amongst the real changes is a reduction of $22.6 million, the Program's contribution towards the Government's policy that $125 million per annum be directed from the running costs of non-operational areas or support areas, to combat forces. The three elements of largest reduction in this category were:

$12.128 million - Cash Limited Administrative Expenses and information technology from non-operational areas;

$4.629 million - equipment and stores; and

$3.299 million - facilities operations.⁽²⁾

Major reductions in the budget of the Air Force program, apart from the contribution to the Government's savings target of $125 million, have concerned the RAAF's on-going involvement in maintenance of the Army's Black Hawk helicopters. Other savings have resulted from efficiencies in the maintenance of facilities. Amongst these contributors to the reductions in the 'Real' category are:

$23.2 million - reduced costs of operating facilities, resulting from the maintenance review of RAAF facilities;

$22.6 million - ending of requirements involved in supporting the rectification of failings in the maintenance Army Black Hawk helicopters; and

$10.6 million - variations in the size and rank profile of the RAAF.⁽³⁾

An increase of $20.2 million is included in the program appropriation for improved F-111 commonality, enhanced F/A-18 operational capability, continuing aspects of the Black Hawk maintenance program and a Black Hawk trainer.

The 1996-97 budget increases outlay on Air Force combat forces by 0.7% and increases the proportion of program outlay allocated to this sub-program from 41.1% to 42.7%.⁽⁴⁾

Department of Defence, Resources and Financial Programs Division, Portfolio Budget Statements 1996-97 'Defence Portfolio', 'Program 4-Air Force, Major Variations', p. 40.

ibid., 'Government Savings Initiatives-1996-97 Impact', p. 29.

ibid., 'Program 4-Air Force, Major Variations', p. 39.

ibid., 'Resources Summary', p. 130.

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Budget Review 1996-97 Detailed Portfolio Reviews

August 1996 3A DEFENCE

© Commonwealth of Australia

Budget Review 1996-97

Detailed Portfolio Reviews

August 1996

3A DEFENCE