Budget Review 2014–15 Index

David Watt

Following on from last year’s Department of Defence (Defence) budget, which partially reversed the reprogramming and cuts made over previous years, the 2014–15 Budget contains sharply increased spending on Defence. Total defence funding for 2014–15 will be $29.3 billion. This is a rise of 8.1 per cent (or 5.7 per cent in real terms) and is 12.6 per cent higher than the 2013–14 budget forecast for defence expenditure for that year.

Table 1 below compares the total defence funding from the forward estimates in the 2013–14 and 2014–15 Portfolio Budget Statements, allowing a comparison of the funding provided by the Labor Government in its last budget and the Coalition Government in its first budget.

Table 1: Total defence funding ($ billion)[1]

It should be noted that much of the rise in defence expenditure for 2014–15 is the result of the Government’s decision to reverse the previous Labor Government’s tendency to push expenditure from the budget year further into the forward estimates. In contrast, the 2014–15 Budget brings forward $1.5 billion from 2017–18 into the current year and the following three years (see below under budget measures for more detail).  

The Minister for Defence, David Johnston, has asserted that the Budget sets the Government firmly on its way to achieving its stated target of spending 2 per cent of GDP on defence:

The Abbott Government is committed to growing the defence budget to two per cent of GDP within a decade. We will lay down a credible path to achieving our target following completion of the 2015 White Paper and the associated comprehensive force structure review.[2]

In response, the Australian Strategic Policy Institute’s (ASPI) Mark Thomson has stated that ‘in the current fiscal environment it was a surprisingly good budget for defence’.[3] However, Dr Thomson also acknowledged that the next three years of defence spending, as revealed in the Budget, is ‘likely to remain static in real terms’ and will have to rise by an average of 5.3 per cent per year for the six years following the forward estimates period for the 2 per cent of GDP target to be reached by 2023–24.[4] The Abbott Government, like its predecessor, still has a significant challenge in providing defence funding which is adequate to fulfil the ADF personnel and capability goals it has set for itself and in turn, for defence to spend the money that it is given.

Budget measures and operations

As Table 2 shows, the most striking feature of  the budget measures is the change to the ‘funding profile’ in which money is taken from the forward estimates for 2017–18 and allocated across the earlier years.

Table 2: Defence funding profile changes ($ million)[5]

The Government has justified bringing forward this funding largely through the need to pay for capability development and acquisitions:

Funding of the Approved Major Capital Investment Programme and important capabilities to support networked operations will be accelerated to reduce the risk of capability gaps…Bringing forward $500 million to 2013-14 will assist defence to fund priority foreign military asset purchases, including the Growler electronic attack aircraft, the Romeo Naval anti-submarine combat helicopter and the upgrade to the Naval Standard Missile-2 long range anti-aircraft missile.[6]

Other notable budget measures include $436.8 million for ADF operations.[7] Operation Slipper will continue in Afghanistan ($240.8 million), Operation Manitou will encompass maritime security and anti-piracy in the Middle East Area of Operations (MEAO) ($52 million) and Operation Accordion will cover supporting functions in the Gulf States ($57 million). Information about funding for Operation Resolute, Defence’s contribution to the whole-of-government maritime surveillance can be found in the Parliamentary Library Budget Review article Counter-people smuggling measures.

The newly launched ADF Gap Year will receive funding of $191.8 million over four years—see the Parliamentary Library Budget Review article Defence personnel for further details. The Government is also establishing a new accumulation scheme for new members of the ADF—see the Parliamentary Library Budget Review article ADF Super: a new military superannuation scheme .

Defence will be allowed to retain the proceeds of planned property sales. Although there is no indication which parts of the extensive defence estate will be sold, the budget papers estimate that this will be worth $156.2 million across the forward estimates.[8]

A further point of interest is that Defence will absorb the cost of the development of infrastructure in Darwin which is needed to allow the ongoing rotations of forces from the United States Marine Corps. Negotiations over the financial arrangements are ongoing and the cost is ‘not for publication due to the commercial-in-confidence nature of the tender process involved’.[9]

Defence will be required to find savings of $1.2 billion across the next four years but will be allowed to invest this money in capability.[10]

National Commission of Audit

The Abbott Government’s National Commission of Audit made a number of recommendations about defence issues which have fed into the Budget. These included recommendations about reducing staffing levels to 1998 levels (including senior executives), introducing a new military superannuation scheme, re-integrating the Defence Materiel Organisation back into the Department of Defence and selling the Australian Submarine Corporation.[11] The Government has already acted on some of these recommendations but will only properly consider many more as part of the process leading into the 2015 Defence White Paper. This suggests that the 2014–15 Budget is only the beginning of a process of significant change and development for defence.

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