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Getting the balance right: U.S. perspectives on Defence reform

Australia and the United States share significant defence interests, especially regarding regional security across the Indo-Pacific. However, both nations also share a similar defence dilemma: the need to maintain appropriate defence capabilities despite facing increased financial constraints. A recent report by the U.S.-based Stimson Center provided almost 30 recommendations to reduce the U.S. Defense Department’s heavy financial burden, without (theoretically) jeopardising required capability. Despite the inherent differences between the Australian and U.S. defence organisations in terms of scale and scope, could the report’s recommendations be conceptually applied to the Australian context?

Cost cutting and re-prioritisation

In contrast to the prospect of further arbitrary cuts through sequestration, the report’s authors have instead called for a more strategic approach to trimming the enormous U.S. Defense budget. Their recommendations include:
  • reducing Department of Defense personnel by 20 per cent, including cutting 58,000 civilian employees and a proportionate level of contractors
  • reducing the combat forces of Army by 33 per cent and the Marine Corps by 12 per cent
  • cancelling Army vehicle programs and consolidating infrastructure through base closures.

The authors also contrasted these cuts with recommendations to increase (or at least maintain) key areas of strategic significance, such as naval and air force assets, cyber capabilities and reservist forces for operational contingencies.

The concepts behind many of these recommendations have been previously identified in Australia’s Defence organisation, and will almost certainly inform further defence proposals in the future.

For example, the Defence Department’s most recent Strategic Reform Program (SRP) proposed cost reductions of $20 billion over a decade, through reducing waste and streamlining processes. However at the most recent Senate Estimates, the Secretary of Defence acknowledged that strained economic conditions since 2009 would prevent Defence from reaching its savings goal.

In terms of reforming personnel structures, the 2013 White Paper indicated that Defence would attempt to maintain a level of 59,000 permanent Australian Defence Force (ADF) members, while reducing its civilian workforce by over 1,700 positions. In contrast to the urgency of the Stimson report, these job cuts are likely to be incremental and delivered through natural attrition.

The new Coalition Defence Minister, Senator David Johnston, has also emphasised his focus on Australia’s strategic interests. In particular, he recently highlighted the importance of naval defence power in protecting Australia’s sovereignty and economic assets. Johnston’s call for ‘a suitable mix’ of ‘cutting-edge, cost-effective ships’ is implicitly based on the understanding that Australia’s economic imperatives rest heavily on the ability to defend our sea lanes and approaches. The need to provide stability to Australia’s ship building industry is another important factor in this equation.

Obstacles and risks

The concluding section of the Stimson report directly points to ‘significant bureaucratic and political obstacles’ in fully comprehending the current predicament in Defense, while also highlighting the ‘even greater obstacles of implementing solutions’. Again, despite our substantial differences of scale, Australia too is likely to face similar obstacles in addressing and achieving substantive reforms to Defence.

For instance, the Government has committed to funding Defence at two per cent of GDP within a decade, in attempting to pay for its required capabilities. These include a consistent level of ADF personnel, 12 submarines built in Adelaide, and an unspecified number of F-35 Joint Strike Fighters. However, according to ASPI senior analyst Mark Thomson’s calculations, achieving this spending goal would require an annual increase of over five per cent real growth in defence spending. Thomson concludes that such an increase would significantly impact the government’s budget priorities, as well as test the Defence Department’s capacity to effectively absorb these additional funds.

Furthermore, the new Minister’s emphasis on Australia’s north and north-west – while justifiable in economic and strategic terms – nonetheless remains problematic for the ADF. The ADF Posture Review, published in March 2012, highlights some specific concerns, including ‘the region’s expansive size, its relatively underdeveloped infrastructure and its substantial economic resources’. Compounding this are the dual perceptions that the ADF does not have a sufficiently visible presence in these areas, while deployment to such locations is less attractive to those ADF members based in the more urban east and southern coasts.

And finally from a procurement perspective, the Government’s desire for a ‘continuous build program’ in Australia’s shipyards is a popular concept. However, as Mark Thomson has further illustrated, this task requires managing many complex issues and undertaking objective analysis – requirements he regards as yet unfulfilled due to various vested interests.

The Coalition stated during the election campaign that it would ‘appoint a high-profile team to undertake a first-principles review of the structure of the Defence Department and all its major processes’. While a substantial task in itself, the real challenge will be in achieving substantive reforms to align Australia’s defence capabilities with its strategic interests – a feat which history shows is easier said than done.