David Watt
This brief should be read in conjunction with the companion
brief on Defence capability which will deal with capability purchases and
assistance to defence industry.
As was the case last year, the 2018–19 Defence budget has
little in the way of new announcements. This is because the Government has been
announcing policy decisions and promised expenditure regularly for the last two
years.
In their media release setting out the Defence budget for
2018–19, the Minister for Defence and the Minister for Defence Industry summarised
the Government’s various Defence policy announcements in areas as diverse as
operations, the Integrated Investment Program, naval shipbuilding and
supporting local industry through investment in the extensive Defence estate.[1]
The media release focuses on how much money the Government is spending in each
of these areas and its vigorous pursuit of the goals set out in the 2016
Defence White Paper (DWP). A great deal of money is starting to flow to
Australian industry, but, nonetheless, some questions do arise.
The first of these is how well Defence is tracking to
achieve the funding priorities set out in the DWP. The following table sets out
the funding specified in the 2016 DWP and the total Defence funding in the last
two Portfolio Budget Statements.
Table 1: DWP funding projections compared with Government
funding to defence.[2]
The PBS figures represent total Defence funding minus own-source revenue.[3]
| $ billion |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
| 2018–19 PBS |
35.2 |
35.6 |
37.3 |
40.6 |
44.2 |
| 2017–18 PBS |
34.7 |
36.0 |
38.7 |
42.0 |
– |
| 2016 DWP |
34.2 |
36.8 |
39.0 |
42.4 |
45.8 |
Source: 2016
Defence White Paper, Portfolio budget statements 2017–18: budget related
paper no. 1.4A: Defence Portfolio
and Portfolio budget statements 2018–19: budget related
paper no. 1.4A: Defence Portfolio.
It is apparent that the Government will need to increase
funding to Defence still further to hit the target of 2 per cent of GDP by 2020–21.
The Government has re-profiled $500 million from the forward estimates into the
current financial year. In addition, the transfer of funding from Defence to
the Australian Signals Directorate (ASD) (see below) amounts to $3.3 billion
across the forward estimates.[4] Other fluctuations in the
budget forecast include $645 million additional funding for Defence operations
and $244 million in foreign exchange supplementation.[5]
The Portfolio Budget Statement (PBS) confidently asserts
that ‘the Defence budget, inclusive of the ASD, will grow to two per cent of
Australia’s Gross Domestic Product by 2020–21’.[6]
The Government’s own figures for expenditure indicate that 6.4
per cent of total government expenditure is on Defence.[7]
On the issue of the 2 per cent of GDP target, the Australian
Strategic Policy Institute’s Marcus Hellyer has said:
The government may be planning to get into
surplus in 2019–20, a year earlier than it looked like last year, but that
doesn’t mean it has also brought forward its commitment to increase the Defence
budget to 2% of GDP by 2020–21. That might be asking a little too much. So the
main news out of this year’s budget is that the government is standing by its
2016 Defence White Paper commitment.
So 2% is now only a hop, skip and a jump
away. The hop from last year to this was a healthy if not spectacular nominal
increase of $1.2 billion, up to $36.4 billion for Defence, which
translates into a 1.4% increase in real terms. Next year’s skip is
slightly better, but that will still leave a big jump of nearly
$3.4 billion, or a 6.2% increase in real terms, to hit the magical
2% in 2020–21.[8]
Budget measures
In addition to the budget measures mentioned above, the 2018–19
PBS contains total funding for operations of $750 million.[9]
This is not dissimilar to last year’s PBS, but with a $150 million decrease in
funding for Operation Okra being the notable feature.
There are six operations listed in the PBS, including
Operation Augury, which is Defence’s contribution to counter-terrorism operations
in the Philippines—it first featured in the 2017–18 Additional
Estimates. Funding for individual operations is usually provided in each
PBS for the relevant financial year but the amounts stated in the forward
estimates are usually much less than the actual funding. It is likely that this
is done for national security reasons, but Operation Augury takes this a step
further by marking the funding ‘not for publication’ (nfp).[10]
However, we do know something of Defence’s work in combating
terrorism in the Philippines. During 2017, Australia sent two AP-3C Orion
aircraft to provide surveillance support to the Philippines military and also provided
‘mobile training teams’ to provide urban warfare counter-terrorism training.[11]
During November 2017 the Prime Minister stated that there were 80 ADF personnel
in the Philippines.[12]
Australian Signals Directorate
One obvious change in the Defence PBS results from the
creation of the Australian Signals Directorate (ASD) as a statutory body from 1
July 2018. This change is the result of a recommendation made in the 2017
Independent Intelligence Review. Signals intelligence has been carried
out within the Department of Defence since the 1940s but this is the first time
this function has been carried out within its own agency.[13]
As a result of the change, ASD gets a section of its own in the PBS, which
indicates that funding for 2018–19 is $827.3 million.[14]
Although the PBS states that the Average Staffing Level for
ASD is ‘not for publication’, the data on staffing of agencies contained in Agency
Resourcing: Budget Paper No. 4 shows a reduction in the Defence APS full-time
workforce of 1,127 with a note that this is ‘due to machinery of government
changes and other Government decisions’.[15] It is therefore possible
that this reduction in staffing is related to ASD. The 2016 Defence White
Paper claimed that ‘enhancements to intelligence, space and cyber security
capabilities will involve 800 new APS positions’.[16]
These were to be offset by reductions elsewhere, but given ASD’s need to employ
specialised staff, presumably some of these positions will go to ASD.
Defence workforce
The Defence APS workforce will fall from 17,800 in the
current year to 16,373 in 2018–19 as a result of machinery of government
changes.[17] This is a change from
last year’s Defence PBS which forecast Defence APS staffing to be 18,200 in
2018–19. [18] Defence’s APS workforce has
fallen to the forecast level of 16,373 from 20,648 in 2010–11.
The ADF approved average funded
strength (the number the Government has agreed to fund) will rise from 58,596
for the current financial year to 59,794 in 2018–19 and is projected to reach
61,027 by 2021–22. The 2016 Defence White Paper proposed
that the ADF grow to approximately 62,400 personnel over the decade.[19]
The total Defence workforce for 2018–19 is expected to be 76,167.[20]
[1].
M Payne (Minister for Defence) and C Pyne (Minister for Defence
Industry), A
safer Australia-Budget 2018–19 Defence overview, media release,
8 May 2018.
[2].
Australian Government, 2016
Defence white paper, Department of Defence, 2016, p. 180; Australian
Government, Portfolio
budget statements 2018–19: budget related paper no. 1.4A: Defence Portfolio,
p. 19; Australian Government, Portfolio budget
statements 2017–18: budget related paper no. 1.4A: Defence Portfolio,
p. 19.
[3].
Own-source revenue is removed because it is, in essence, double
counting. If Defence derives revenue from the sale of goods that it has already
been funded to purchase, then the revenue is not new money. See The Australian
Strategic Policy Institute, The cost of Defence, ASPI Defence Budget
Brief 2017–18, 2017, p. 39.
[4].
Portfolio budget statements 2018–19: budget related paper no. 1.4A:
Defence Portfolio, op. cit., p. 20.
[5].
Ibid., pp. 19–20.
[6].
Ibid., p. 5.
[7].
Australian Government, Budget
strategy and outlook: budget paper no. 1: 2018–19, pp. 6–9.
[8].
M Hellyer, ‘2% of GDP: just a hop, skip and a jump away’, The
Strategist, blog, Australian Strategic Policy Institute, 9 May 2018.
[9].
Portfolio budget statements 2018–19: budget related paper no. 1.4A:
Defence Portfolio, op. cit., p. 21.
[10].
Ibid.
[11].
M Payne (Minister for Defence), Philippines
and Australia agree to enhanced counter-terrorism cooperation, media
release, 24 October 2017.
[12].
M Turnbull (Prime Minister), Press
conference with Senator the Hon Marise Payne, Minister for Defence and the Hon
Christopher Pyne MP, Minister for Defence Industry Canberra, ACT ,
transcript, 24 November 2017.
[13].
Background can be found in: C Barker, Intelligence Services Amendment (Establishment of the Australian
Signals Directorate) Bill 2018, Bills digest,
94, 2017–18, Parliamentary Library, Canberra, 2018.
[14].
Portfolio budget statements 2018–19: budget related paper no. 1.4A:
Defence Portfolio, op. cit., p. 164.
[15].
Australian Government, Agency
resourcing: budget paper no. 4: 2018–19, p. 185.
[16].
2016 Defence white paper, op. cit., p. 150.
[17].
Portfolio budget statements 2018–19: budget related paper no. 1.4A:
Defence Portfolio, op. cit., p. 24.
[18].
Portfolio budget statements 2017–18: budget related
paper 1.4A: Defence Portfolio, op. cit., p. 20.
[19].
Portfolio budget statements 2018–19: budget related paper no. 1.4A:
Defence Portfolio, op. cit., p. 146.
[20].
Ibid., p. 27.
All online articles accessed May 2018.
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