Budget Review 2022–23 Index

David Watt

The Defence budget maintains the Government’s commitment to the spending goals set out in the 2016 Defence white paper and the 2020 Strategic update, but does reflect some shifting priorities, principally around the need for increased cyber warfare resources.

Table 1 indicates a rise in Defence funding over the forward estimates of 7.4% in nominal terms and 4.3% (based on the CPI forecast for 2022–23 of 3%).

Table 1          Total Defence funding—Portfolio Budget Statements (PBS) ($ million)

	2021–22	2022–23	2023–24	2024–25	2025–26
PBS 2022–23	45,252	48,615	51,605	53,459	55,526

Note: These figures represent a combined total for the Department of Defence and the Australian Signals Directorate.

Source: Australian Government, Portfolio budget statements 2022–23: budget related paper no. 1.3A: Defence portfolio, Table 4a, 15.

Measures

If Government funding to Defence has maintained its recent trajectory, the Budget measures bring some new things to the Defence budget and reflect current priorities.

Defence’s ‘lethal and non-lethal’ military assistance to Ukraine, announced by the Prime Minister on 27 February 2022, will total $91 million, of which $70 million is additional funding (Defence will absorb the rest). This is for the current financial year. Defence will also make a contribution to the cost of purchasing thermal coal for Ukraine, but the actual amount is ‘not for publication’ (nfp) for commercial reasons.

The Government’s recent announcement about the creation of a new large vessel dry dock facility at Henderson in Western Australia is also reflected in the Budget. Budget measures: budget paper no. 2 2022–23 states that the Government will ‘invest up to $4.3 billion’ in this project and that funding for it will delivered through a ‘Commonwealth-led funding and delivery model’ with money to come from the Integrated Investment Program (p. 71).

Similarly, the 7 March 2022 announcement by the Prime Minister and the Minister for Defence that Australia would seek to build a new submarine base on the east coast is also included in the Budget measures. The media releases stated that the Department of Defence estimated that ‘more than $10 billion will be needed for facility and infrastructure requirements to transition from Collins to the future nuclear-powered submarines, including the new east coast submarine base’. This ‘transition’ includes the building of a Nuclear-Powered Submarine Construction Yard in South Australia. Budget paper no. 2 states (p. 72) that Defence will meet the cost of purchasing the land for the construction yard from existing resources but, unsurprisingly given the long time frame involved, makes no other mention of funding for submarine infrastructure.

The Defence planned expenditure by cost category is outlined in Figure 1 as follows.

Figure 1        Planned expenditure by cost category

Source: Australian Government, Portfolio budget statements 2022–23: budget related paper no. 1.3A: Defence portfolio, Table 4b, 15.

Workforce

In a media release on 10 March 2022 the Prime Minister and the Minister for Defence announced plans to expand the Defence workforce by 18,500 personnel by 2040. If successful, the Government’s plan would bring the number of total permanent Australian Defence Force (ADF) personnel to almost 80,000 by 2040. With the addition of the Australian Public Service (APS) staff, the total permanent workforce would increase to over 101,000 by 2040.

Given the long time frame for the expansion in personnel numbers it is perhaps unsurprising that this is only reflected in the planned workforce allocations across the forward estimates in the PBS in 2024–25 (see Table 2 below). Given that the estimated ADF numbers for the current financial year are slightly lower than the Budget estimate stated they would be in last year’s Budget, it looks as though Defence may face recruitment challenges in meeting the targets set by the Government.

Table 2          Workforce numbers

	2021–22	2022–23	2023–24	2024–25	2025–26
ADF PBS 2022–23	59,862	62,063	62,735	63,597	64,532
ADF PBS 2021–22	61,468	62,063	62,735	62,905
Defence APS PBS 2022–23	16,001	16,991	16,466	16,735	16,946
APS PBS 2021-23	16,405	16,439	16,456	16,447

Source: Australian Government, Portfolio budget statements 2022–23: budget related paper no. 1.3A: Defence portfolio, 20; Australian Government, Portfolio budget statements 2021–22: budget related paper no. 1.3A, Table 8, 21.

Capability

Defence has been funded to spend $16.2 billion on capability acquisition during 2022–23 (PBS, p. 16). However, the PBS shows that the Capability Acquisition program looks to be underspent on the 2021–22 Budget projection by $861 million. The Australian Strategic Policy Institute’s Marcus Hellyer has pointed out that this was true for the previous year as well and has been critical of the slow delivery of a number of major projects.

Despite the Government’s September 2021 announcement that the Attack Class submarines (SEA 1000) would no longer be acquired in favour of nuclear powered submarines acquired through the AUKUS partnership, there is ongoing expenditure for SEA 1000 in the Budget papers. Close to $500 million has been budgeted for 2022–23 and the cumulative expenditure for the project to 30 June 2022 is estimated to be $3,210 million (PBS, p. 109).

This is in addition to the $691 million budgeted for sustainment of the Collins Class submarines that currently provide Australia’s submarine capability (PBS, p. 118).

Operations

Outcome 1 in the 2022–23 PBS (pp. 25–26) lists 24 active international and domestic operations, an increase of 2 from 2020–21.

The estimated cost of major operations for 2021–23 continues the decline seen in recent years. This is primarily due to the drawdown of Australia’s presence in the Middle East region under Operations ACCORDIAN, HIGHROAD and OKRA, and the associated savings in the forward estimates.

The drawdown of overseas operations means that the two largest items in the Budget for operations during 2021–22 are Operation Flood Assist and Defence’s contribution to the COVID-19 response package ($257.9 million between them), which are both domestic operations.

Defence Cooperation Program (DCP)

The cost of the Defence Cooperation Program, through which Australia promotes defence capability in regional partners in the Pacific and Southeast Asia, has fallen from an estimated $236.3 million for 2021–22 to $227 million in 2022–23 (PBS, p. 99). This is a small drop but one that is taking place in the context of the bilateral security framework agreement between the Solomon Islands and China. In the light of this agreement, the logic of not spending more on the DCP has been questioned by the head of the ANU’s National Security College, Rory Medcalf, who is quoted in the Australian as saying that there is a case for expanding the DCP:

… there is surely a strong case to increase them. It’s hard to see the logic of reducing this effort at a time when the contest for influence is accelerating, and the strategic use of defence diplomacy has never been more important.

 

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