Laura Rayner and
Brooke McDonagh
Foreign Affairs, Defence and Security Section
This year s Defence Budget provides a total defence package of
$22.69 billion which is $690 million more than last year s
budget. However, the defence budget as a proportion of gross
domestic product has actually dropped from 2 per cent to 1.8 per
cent and departmental funding is actually $966 million (or 4.1 per
cent) less than the estimate for the year provided by the previous
Howard Government. In 2008 09, as part of its program to implement
efficiencies and identify savings of up to $10 billion over 10
years, Defence has redirected savings of $477 million to other
areas, such as partially offsetting the cost of Australian Defence
Force (ADF) operations.[2]
Outcomes and Outputs structure
The government says that it is implementing a new outcome and
output framework for Defence to increase the Government s and the
community s visibility of what Defence delivers .[3] Last year s Portfolio Budget
Statements 2007 08 signalled that the outcomes and outputs
arrangement against which Defence would report would be revised,
with the number of outcomes dropping from seven to three. With some
changes to outputs, this is how the structure now appears in the
Portfolio Budget Statements 2008 09. This change to
outputs reflects the current organisational arrangement and appears
to better align with Defence s internal resource allocations and
accountabilities .[4]
Time will tell whether these changes do actually make Defence
budgets more transparent.
However, transparency and clarity in
the Defence Budget is not aided by apparent inconsistencies in the
Portfolio Budget Statements 2008 09. For instance, are the
resources available within the Defence portfolio for 2008 09 really
$36 billion the total given in Table 1 Portfolio resources made
available in the Budget year ?[5] Or does this $36 billion include
intra-departmental transfers made to the Defence Materiel
Organisation (DMO) and Defence Housing Australia? Have some funds
in this table been double-counted?
Funding of operations
In the 2008 09 Defence Budget, ADF operations, such as Operation
Slipper (Afghanistan) and Operation Catalyst (Iraq), will be funded
from the defence operations reserve. This reserve will be made up
of funds taken from the Department s price indexation
supplementation ($826.5 million) and from the Savings and
Efficiency Program ($209.4 million). It would appear,
therefore, that unlike the funding provided for previous
operations, Defence will actually be paying for its military
operations from funds originally earmarked for training and
sustaining the ADF. As one analyst has suggested, the use of
inflation supplements and administrative savings to help fund
operations sits oddly with the government s claim that it has no
higher priority than defence and security . Rather, it suggests the
government s main concern is bringing defence spending under much
tighter control .[6]
The increase in the price indexation supplementation has been
described as an unprecedented billion-dollar windfall for Defence,
coming from the commodities boom.[7] If it is a windfall and outside Defence s budget
requirements should Defence be getting it? If it is not a windfall,
then Defence will have a legitimate need for the funds. The Defence
Department has a legitimate call on Treasury funds to cover known
and binding increased contract costs brought on by allowable
increases in costs (and separately, variations in foreign
exchange). It is unclear which parts of the portfolio the use of
price indexation supplementation for operations will affect. If it
includes price indexation supplementation paid to Defence to cover
contractual obligations to suppliers, Defence will presumably have
to find the money to fulfil these obligations from elsewhere in its
budget. Funding operations this way would seem to be another way of
forcing savings in the Defence Budget. However, unlike the Savings
and Efficiency Program, the origin of the operational funds taken
from price indexation supplementation is not identified within the
Defence Budget, and thus such savings are not transparently being
achieved only from non-operational areas or areas which support
operations.
Acquisitions
The Defence Materiel Organisation s (DMO) share of the 2008 09
Budget is $9.6 billion. DMO is responsible for the management of
236 major projects with a value of over $20 million each, and
more than 180 minor projects.
Once again, as in previous years, Defence has large amounts of
money for the acquisition of military hardware which it will be
unable to spend and will have to reprogram to spend in later years.
The 2008 09 Defence Budget has reprogrammed $1.066 billion of the
Approved Major Capital Program to later years because of
unanticipated contractor delays .[8]
In a
speech on 15 May 2008, the Parliamentary Secretary for Defence
Procurement, Greg Combet analysed the reasons for the delays,
attributing approximately:
- 53 per cent to industry delays including an inability to meet
contracted milestones by payment dates
- 12 per cent to DMO processes including administrative and
contracting requirements
- 28 per cent to issues related to the United States Military
Sales System
- 4 per cent to the unavailability of platforms for upgrades or
work needed , and
- 3 per cent to cost savings .[9]
Mr Combet cited industry s overestimation of its ability to meet
schedules as a cause for some of the delays, but he also pointed to
significant capacity constraints within the economy , specifically
in the area of skills and infrastructure .[10] Given that 80 per cent of the ADF s
warfighting assets will be replaced within the next decade, and
that 65 per cent of the acquisition and sustainment budget of more
than $100 billion will be spent in Australia, it is likely that
reprogramming due to contractor delays will be a feature of Defence
acquisition for the foreseeable future, as it has been in the
past.
Delayed projects
The government has singled out four projects of concern which
have been experiencing industry delays.[11]
Wedgetail (Project AIR 5077 Airborne Early Warning and
Control)
Project Wedgetail involves the acquisition and introduction into
service of six aircraft, designed as the
cornerstone of Australia s surveillance, early warning and
detection capability. It was considered to have been
a model acquisition project until the Howard Government became
aware in 2006 that it was
behind schedule. A contract was signed with Boeing in December
2000, and the first aircraft was to be in-service by early 2007.
Boeing has attributed the delay to difficulties in integrating
complex onboard electronics. DMO s
Annual Report 2006 07 stated that the delay had escalated to
over two years. In June 2006, the Howard Government
announced that it would reserve its contractual rights in
regard to liquidated damages. In February 2007 Boeing announced
that the program had slipped two years. The new Labor Government
has warned Boeing and other Wedgetail contractors that they need to
meet production and cost deadlines.[12] In the Defence Portfolio Budget
Statements 2008 09, DMO has signalled that there is still
residual technical and schedule risk which could threaten Boeing s
current plans to deliver the first aircraft in March 2009.[13]
Tiger Armed Reconnaissance Helicopters (Project AIR 87)
Twenty-two Tiger Armed Reconnaissance Helicopters with
associated support facilities are being acquired for the Australian
Army from Australian Aerospace, a subsidiary of Eurocopter.
Operational capability has slipped by two years, due to delays in
the parent Franco-German program. On 1 June 2007, DMO
stopped payment to Australian Aerospace, and Defence has also
claimed more than $10 million in
liquidated damages for the
late delivery of training devices. The Defence Portfolio
Budget Statements 2008 09 report that as at 21 April 2008,
eleven helicopters and some associated facilities and systems had
been accepted by the Commonwealth. The Commonwealth and the
contractor, Australian Aerospace, entered into a formal dispute
resolution process in October 2007 which is expected to achieve a
resolution through a Contract Change Proposal and the resumption of
payments by July 2008.[14] On 22 May 2008, Mr Combet announced that a Deed of
Agreement had been signed, resolving contractual issues between the
Commonwealth and the contractor. This new Deed of Agreement
contains the basis for a Contract Change Proposal that transitions
the current support contract to a performance based structure, to
reduce cost of ownership to the Commonwealth over time .[15] All deliveries should
be complete by the end of 2009.
In December 2005 the then Minister for Defence, Senator Robert
Hill, announced
that Boeing Australia had been selected as the preferred tenderer
to provide the IAI (Israeli Aircraft Industries) I-View 250 UAVs
(Unmanned Aerial Vehicles) because it offered the best value for
money . In mid-2006, the project reported that the in-service date
was to be the latter half of
2008 . The
contract was signed in December 2006. The $145 million project
will provide two Tactical UAV (TUAV) systems each of which comprise
four I-View 250 UAVs, two ground control stations, four remote
video terminals and associated tactical support system .[16] The initial operating
capability for the first TUAV is now planned for 2011.[17] The project is now
reportedly two years behind schedule and it has been suggested that
a deadline has been set of the end of next month [June 2008] for
the problems to be addressed, otherwise the project will be
scrapped .[18]
Guided Missile Frigate upgrade (Project SEA 1390 - FFG UP)
The original scope of the FFG
project was to upgrade all six FFG-7 Adelaide Class frigates. In
mid 2006 the scope of the original 1999 contract was reduced from
six ships to four. The project was the subject of a
critical report by the
Australian National Audit Office (ANAO) in October 2007 which
estimated that the delivery of the last ship will be delayed by
four and a half years, until June 2009. The ANAO report highlighted
the ongoing difficulties caused by a prime contract which has
limited the technical involvement of the Project Authority [DMO]
and failed to sufficiently specify test procedures .[19]
Major Projects Report
DMO will produce the first of it planned annual Major Projects
Reports at the end of 2008. These reports will contain data and
analysis on the schedule, cost and capability of up to
30 major defence equipment projects .[20] The first report will be limited to
nine selected projects, hopefully those of greatest concern. The
Portfolio Budget Statements do not specify whether the
projects will be assessed before or after final government approval
( second pass ). In some cases, analysis of a project by ANAO
before government makes its final decision might be quite useful.
The production of a Major Projects Report on Australian projects is
very similar to the United Kingdom (UK)
Government s approach, where the Ministry of Defence provides
project summary sheets on 20 of the top approved defence equipment
projects and the ten largest projects which are still in their
assessment phases. These projects are then analysed by the UK
National Audit Office on the basis of cost, time and
performance.
Recruitment and retention
Targeted recruitment
Defence is facing continuing shortages of skilled military
personnel who are being lost to the private sector, especially the
booming mining and resources industry.[21] ADF enlistment needs to increase from
approximately 4670 per annum to 6500 ... [22] The ADF profile currently does not
represent the broader Australian community, with women and
indigenous and ethnic communities under-represented.[23] Defence Science and
Personnel Minister Warren Snowdon has said that the ADF needs to be
more representative of wider Australia , pointing to the fact that
the ADF tends to attract young Caucasian males .[24]
Despite stating that the skills shortage is Defence s biggest
challenge, the Minister for Defence hinted in January this year
that the money provided for recruitment and retention in the 2008
09 Budget would not amount to big figures when he said that success
won t so much be determined by the size of the spend but how well
we spend .[25] In
the end, the size of the spend will be $148.7 million for Defence
Force Recruiting programs and operations. It includes targeting
Generation Y , women and indigenous and ethnic communities as a
source of new recruits.[26] However, it is unclear from the Portfolio Budget
Statements
2008 09 just how this money will be allocated.
The only portion of the $148.7 million readily identifiable in
the budget papers is $3.381 million for Indigenous
Expenditure.[27]
There are currently approximately 700 indigenous soldiers in
the Australian Army, a number which equates to 1.4 per cent of
their force.[28]
An ADF report to federal government in 2001 recommended that
women be admitted to combat roles, if their fitness and medical
standards were the equivalent of male employees .[29] And while, after a directive
late last year, Australian women are now allowed to serve in the
Artillery for the first time, women still cannot be employed in
direct combat roles jobs that have the potential to expose them to
direct combat, including field artillery, infantry, clearance
divers and defence guards .[30] Female officers are well aware that combat roles
assist officers to move up the chain and to ultimately become
chiefs of service.[31] While Defence has ruled out women serving as front-line
infantry, if the government is serious about increasing the
recruitment of women, further incentives need to be rolled out,
including possibly assigning a female mentor to each new recruit
and implementing flexible working arrangements .[32]
The government wants to talk to Generation Y in their language,
through the mediums they rely upon for their information [33] Recruitment websites
give glowing descriptions of lifestyle, sporting facilities, food
and opportunities for travel .[34] A variety of other initiatives is being
introduced to lure Generation Y, including interactive recruiting
centres in capital cities .[35]
Mental health initiative
In 2007, the media reported that
121 ADF personnel were discharged for mental illnesses,
including anxiety and depression, after serving in the Middle East
.[36] The
government has allocated $3.8 million from the Defence budget, over
four years, for the introduction of a set of nine strategic mental
health initiatives. The package is aimed at improving access to
mental health services for current and former ADF members and
active reserve personnel. In the continuation of the new government
s apparent strategy of funding budget measures from within Defence
s existing resourcing, the government has allocated $2.2 million to
the Department of Veterans Affairs and the remaining $1.6 million
for the mental health initiative will have to be met from within
existing resourcing of the Department of Defence.[37]
The package aims to enhance psychological resilience among
serving members, ensure successful transition into civilian life
and provide effective rehabilitation and support .[38] This initiative cannot come soon
enough for many Defence personnel suffering with mental illness
some complain they have been denied adequate support and have faced
bullying and bastardisation when they sought help for mental health
problems.[39]
Professor Mark Creamer, the director of the Australian Centre for
Post-Traumatic Mental Health, has estimated that 10 per cent of
Iraq or Afghanistan veterans have mental health problems and said
the ADF s mental health resources are massively under-resourced
.[40]
The government will also provide $1.5 million over four years to
the Department of Veterans Affairs to provide training and
workshops for community mental health workers who treat veterans
[to] help improve practitioners ability to identify and treat
service-related mental health problems .[41]
ADF family medical and dental care trial
The government s 2008 09 Budget has allocated $12.2 million over
four years to trial the provision of free basic GP services and
limited dental care to families of ADF members in the rural and
remote areas of Singleton (NSW), Katherine (NT), East Sale (Vic),
Cairns (QLD) and Karratha/Pilbara (WA). The amount allocated for
2008 09 is $2.4 million.
Aspects of these budget measures on ADF family health which the
government has linked to Labor s election commitments differ from
statements made during the election campaign which clearly
identified the policy as a retention initiative. The Labor Party s
defence policy document,
Labor s plan for defence, released during the 2007 election
campaign, said:
Free medical and dental care for
ADF families
ADF families can face significant difficulties
obtaining access to general medical and dental care for dependants,
especially in regional and remote localities.
Posting to a remote location can mean that ADF
families struggle to access the sort of health care that
Australians enjoy.
A Rudd Labor Government will progressively
extend free health care currently provided to ADF personnel to ADF
dependent spouses and children.
Labor will begin this with a $33.1 million
investment starting at 12 Defence Family Health Care Clinics, with
a focus on remote bases locations and major regional centres.
On
12 November 2007 Mr Rudd identified Lavarack Barracks in
Townsville and Robertson Barracks in Darwin as the location of two
of the clinics. A media statement,
Federal Labor s Plan for Defence Families free Health and Dental
Care , released by Mr Rudd and Mr Fitzgibbon also on 12
November 2007, set out further details of the commitment. This
explained that Labor would invest $33.1 million in a four year plan
to extend basic medical care to 12 000 ADF spouses and
children and saying Federal Labor s 12 Defence Family Healthcare
Clinics will extend the free GP and dental care currently available
to ADF personnel to their dependant spouses and children.
In contrast, the 2008 09 Budget limits the program to $12.2
million over four years and also limits dental care to $300 per
dependant per annum. Only five of the 10 rural and remote defence
locations are mentioned, and rather than Defence families attending
Defence Family Healthcare Clinics at these locations, families will
now select the doctor or dentist of their choice .[42] Changes to the commitment to
provide Defence Healthcare Clinics in Townsville and Darwin are
also reportedly being considered, with the possibility that the two
Defence Family Healthcare clinics promised in the campaign at
Lavarack Barracks in Townsville and Robertson Barracks in Darwin
will be replaced by defence families accessing Health Department GP
Super Clinics in Darwin and Townsville.[43]
White Paper
The Defence Portfolio Budget Statements 2008 09
describe the process which Defence is undertaking to produce a new
Defence White Paper, including the production of a Force Structure
Review which will take a top-down approach to analysing the force
structure and capabilities priorities needed out to 2030 .[44] The White Paper will
form the foundation of Australia s future defence capabilities. The
process of developing the new White Paper includes a number of
companion reviews into: workforce sustainment; the Defence
Capability Plan (which sets out plans for defence equipment
acquisition); facilities investment; information technology
requirements; defence industry; defence science and technology; and
logistics.
The government will conduct consultations on the White Paper
with state and territory governments, industry and the general
public. Also integrated into this process will be an audit of the
Defence Budget. To accommodate changes in Defence policy flowing
from the White Paper process, the next Defence Capability Plan, the
public version of which would ordinarily be released in 2008, will
now not be released until 2009.[45]
One outcome of the White Paper process is the need to reprogram
$45.0 million of spending from 2008 09 to 2013 14 due to the
deferral of some first and second pass project approvals in the
Defence Capability Plan until after the Defence White Paper is
finalised.[46]
Additionally, the Departmental Income Statement points to a budget
adjustment of minus $139.7 million because of the need to reprogram
net operating costs due to the expected reduction in capabilities
entering service until finalisation of the new Defence White Paper
.[47]
As one analyst has said about the Defence Budget, [t]he solution
is not necessarily to throw more money at defence. A key part of
the next white paper will be to align means and ends. In the
process, it will be important to look closely at defence efficiency
.[48]
Nigel Brew
Foreign Affairs, Defence and Security Section
In contrast to previous budgets under the Howard Government,
national security is not a major feature of this year s Budget the
Rudd Government s first. Most of the funding in the area of
national security is intended to continue or enhance existing
programmes, rather than initiate any new ones, with some of the
funding already provided by the forward estimates. This perhaps
reflects both an acceptance of the previous government s security
initiatives and a decreased focus on terrorism and security issues.
Much of the cost will be met from within the existing resourcing of
relevant departments and agencies essentially representing a cut to
their current budgets. This means that those affected will most
likely have to cease or cut back existing activities to find the
necessary savings. Many of the Budget s funding measures
specifically address the government s election commitments.
Office of National Security and the Asia-Pacific Centre for
Civil-Military Cooperation
There are, however, two major new initiatives which stand out
the establishment of an Office of National Security within the
Department of Prime Minister and Cabinet (PM&C), and the
establishment of the Asia-Pacific Centre for Civil-Military
Cooperation, both of which were election commitments.
Having all but abandoned the concept of a US-style Department of
Homeland Security, the Rudd Government has committed to
establishing an Office of National Security, headed by a National
Security Adviser.[49] The role of the Office will be to develop, advise on
and coordinate whole-of-government national security policy
.[50] The
government is providing funding of $5.2 million over five years,
with part of the cost to be met from the existing budgets of the
Australian Federal Police (AFP), the Australian Security
Intelligence Organisation (ASIO), the Department of Defence, the
Attorney-General s Department and the Department of Foreign Affairs
and Trade.[51] The
new Office of National Security has, however, been described by one
critic as a re-badging [of] the old national security division that
already exists within PM&C and which should instead be
established as a separate, statutory authority .[52]
The Asia-Pacific Centre for Civil-Military Cooperation will be
established to provide training and liaise with Australian and
international government and non-government organisations to help
Australia to develop future responses to stabilisation,
reconstruction and peace building needs in the Asia-Pacific region
.[53] The
government has allocated $5.1 million over four years to the
project (commencing 2007 08), the entire cost of which is to be met
from within the existing resourcing of the Department of
Defence.[54]
Policing
Another new initiative is the provision of $25 million over five
years to develop a recruitment and retention programme within the
AFP to assist it in meeting its recruitment targets and to improve
the retention of existing staff .[55] That the government has funded a specific
programme to address the issue at an annual cost of $5 million
hints at the possible extent of the problem.
Related to this measure is the government s undertaking to fund
an additional 500 sworn AFP officers at a cost of $191.9 million
over five years to work on high-impact criminal
investigations.[56]
The government claims this delivers on an election commitment.
However, as the Opposition has pointed out, only $36.7 million of
this funding is due to be spent before the next scheduled election
in 2010 and the budget papers do not indicate just how many
additional officers of the promised 500 are expected to be
recruited before then.[57]
The government has also funded several policing and law
enforcement initiatives as part of its overseas aid programme and
these are covered in the section on Official Development
Assistance.
Previous funding for the AFP which has been deferred, reduced or
withdrawn includes:
- half of the funding for the AFP s airport liaison officer
network, which will now be provided from within the AFP s existing
budget, generating savings for the government in 2008 09 of $1.5
million.[58]
- funding to maintain a surge capacity in the AFP, which will
instead now be provided from within the AFP s existing budget,
providing savings of $2.5 million in 2008 09.[59]
- half of the funding for the AFP s regional rapid deployment
teams (to deal with security incidents at regional Australian
airports), which will now be provided from within the AFP s
existing budget, generating savings for the government in 2008 09
of $2.2 million.[60]
- funding for an increase in the staffing of the AFP s
International Deployment Group (IDG), which has been deferred by
one year, providing savings of $10 million in
2008 09.[61] The
government considers it likely that the IDG will have sufficient
capacity during 2008 09 to undertake its mission.
Other security-related funding measures
Funding measures which continue or enhance existing programmes
or capabilities include:
- $8.4 million over four years for the continued provision of
intelligence support to Australia s response and law enforcement
operations against illegal foreign fishing in the Southern Ocean
(to be met from within the existing budgets of the Department of
Defence, the Office of National Assessments, the Australian Secret
Intelligence Service and the Australian Customs Service). The
government claims this measure will yield savings of $3.3 million
over four years.[62]
- $1.1 million in 2008 09 for the Australian Customs Service
(Customs) to continue its aerial surveillance of Australia s
northern waters to deter unauthorised arrivals.[63] This funding serves as a top-up
to that already provided in the forward estimates and will be
reviewed in next year s Budget. The government has also committed
$35.7 million over two years (from the forward estimates and
commencing in 2007 08) to keep the Customs vessel Triton
on patrol in Australia s northern waters.[64]
- $1.3 million already provided in 2007 08 to deploy the Customs
vessel, Oceanic Viking, to monitor Japanese whaling
activities in the Southern Ocean.[65] The government also provided $0.7 million in 2007
08 to conduct aerial surveillance of Japanese whaling fleet
activities in the Southern Ocean during the 2007 08 whaling
season.[66]
- $16 million over four years for Customs to increase its
inspection and examination of containers in Launceston, Darwin,
Townsville and Newcastle.[67]
- $58 million over four years from within the existing resourcing
of the Department of Defence to allow Defence to maintain its
capacity to provide threat analysis and assessment in support of
Australia s counter-terrorism efforts.[68]
- $23.8 million over four years from within the existing
resourcing of the Department of Defence to enhance its ability to
meet high-priority intelligence requirements .[69]
- $2.4 million over four years from within the existing
resourcing of the Department of Defence to maintain its
contribution to the National Threat Assessment Centre located
within ASIO.[70]
- $8.7 million over two years to enhance the Australian Secret
Intelligence Service s strategic intelligence gathering
capability.[71]
- $8.4 million in 2008 09 (from the forward estimates) for the
continuation of the Air Security Officer programme.[72]
- $34.1 million over four years (from the forward estimates) to
maintain the AFP s rapid response capability for dealing with
terrorist attacks in the region.[73]
- $8.8 million in 2008 09 to continue the critical infrastructure
protection programme, $1.5 million of which will be met by the
Department of Defence from its existing budget.[74] The remainder has already been
included in the forward estimates. Another $23.4 million over four
years will enable the continued development of the Critical
Infrastructure Protection Modelling and Analysis programme. Of this
funding, $9.2 million is new, $6 million for the
Attorney-General s Department and $0.8 million for Geoscience
Australia has already been included in the forward estimates, and
$7.4 million will be absorbed by the Department of Defence
from within its existing resourcing.[75]
Health security
In keeping with World Health Organization advice that pandemic
influenza remains a threat, the government has announced funding of
$166.5 million over two years for the Department of Health and
Ageing (DOHA) to replenish the National Medical Stockpile.[76] This will ensure that
expiring pharmaceuticals and equipment that might be needed in the
event of a pandemic or a chemical, biological or radiological
incident are replaced and the Stockpile s readiness maintained. The
government has also allocated $4.7 million over two years from DOHA
s existing budget to ensure a whole-of-government approach to
pandemic preparedness.[77]
The government has also announced that it will no longer fund
the purchase of deployable mortuaries which instead will be
provided through a service agreement with a commercial supplier.
This is expected to provide savings of $1.6 million over two
years.[78]
Similarly, the government will no longer be funding rapid
deployment teams for thermal scanning at airports, generating
savings of $5.8 million over two years.[79] The measure will, however, still
proceed, with costs to be met from within the existing budget of
the Department of Agriculture, Fisheries and Forestry.
Conclusion
With the exception of a couple of significant administrative
initiatives, the national security budget this year appears largely
to be designed to maintain the status quo. While this perhaps
indicates a tacit acceptance of the previous Howard Government s
security regime, the major difference is that the Rudd Government
now requires departments and agencies to fund many of the existing
measures from their own budgets. This has had the effect of
generating millions of dollars worth of savings, but undoubtedly
places greater pressure on key agencies, such as the Australian
Federal Police, to maintain their current level of service.
Although the Opposition (and others) has portrayed this as an
unjustified gamble with the country s national security and
described it as very dangerous politics , just what effect this has
on Australia s national security apparatus overall in the short to
medium term remains to be seen.[80]