Squeezing every penny: Getting the most out of our Defence spending

It is not hyperbole to say that the release of the Albanese government’s Defence Strategic Review and supporting National Defence Strategy and Integrated Investment Program have heralded a major shift in the way the nation thinks about and funds Defence spending.

This ambitious plan has been described by the government in the May budget as being a “generational investment” in the nation’s defence capabilities, which will see the National Defence Strategy and “rebuilt” Integrated Investment Program promising the “allocation of $330 billion over the decade to 2033–34”.

We are told that when broken down further, this will see the nation’s Defence budget hit $100 billion by the end of the decade to 2033–34 and will come as a result of an additional $5.7 billion over the forward estimates and an additional $50.3 billion to be invested over the next decade.

Yet despite the enormity of the money being promised to Defence over the next decade, the rise of massive, complex and costly “megaprojects” like the nation’s fleet of future nuclear-powered submarines, Hunter Class and general purpose frigate programs, let alone the Guided Weapons and Explosive Ordnance (GWEO) program are all promising to break the bank.

This has prompted a series of questions and debate about the level of Australian Defence spending as a proportion of gross domestic product (GDP) with much of the emphasis focused on the sacrosanct 2 per cent spending floor, but as is always the case no matter the scenario, more money isn’t always the answer.

Indeed, sometimes being smarter with the way we spend money and “squeezing” the most out of every dollar is the best way to maximise the impact of Defence spending at a time when the nation’s budget situation is increasingly constrained and the geopolitical and strategic environment continues to deteriorate.

So how do we maximise the efficiency of our Defence spending and get the most out of every dollar without compromising capability for the warfighter?

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This prompted me to do some digging and speak to a series of experts who could shed some light on this sensitive matter, without it sounding like I was just an angry man yelling at the clouds (although that sometimes may be the case).

Disruption, transparency are key

Over the past two decades, we have witnessed the immense power of disruption in sectors as varied as at-home food deliveries, telecommunications, artificial intelligence and space systems, yet it is something that Defence, as an ecosystem, seems reluctant to embrace.

Highlighting the importance of disruption and the broader idea of “creative destruction” in the defence context is Dr Marcus Hellyer, head of research at Strategic Analysis Australia, who said, “Defence occupies a space in the middle of a comfortable monopoly-monopsony relationship. It is a monopoly provider of security services to the Australian government. It is also a monopsony consumer of security goods and services from industry. In that construct, Defence is the innovation bottleneck. It is also the bottleneck preventing Australia from getting better value for money for its defence dollar...

“One way to disrupt that model is to bring in suppliers from outside the monopsony, i.e. companies from outside the traditional defence industrial space, just as the comfortable and incredible inefficient space market has been disrupted by Space X and Starlink. We can see signs of this starting to happen, for example with Anduril entering the defence space.”

Equally important is transparency in the way in which Defence spends tax dollars, particularly on the aforementioned costly megaprojects that continue to serve as fodder for senators during the biannual Senate estimates hearings.

Dr Hellyer’s colleague and Strategic Analysis Australia founder and director, Michael Shoebridge, said, “Disrupting the Defence business model by pushing it to work closely with the most innovative companies on the planet – start-ups and small and medium enterprises like the ones equipping the Ukrainian military is an essential start. Simplifying the Defence organisation so that it can understand itself and engage rapidly and effectively with its external environment is also essential.”

Explaining the importance of increasing the transparency for defence spending, Dr Hellyer said, “Increasing the Defence budget is pointless unless Defence can spend it well. To ensure it does that, we need much greater transparency around how well Defence is spending public money. Unfortunately the trajectory of transparency in Defence is going backwards.

“The current government has been profoundly disappointing in this regard; it talked a good game in opposition but has done nothing to increase disclosure and transparency. This is not acceptable if the government and Defence want the Australian public to support increased spending on Defence and high-risk activities like the SSN program.”

Unpacking the impact of this lacking transparency, particularly in the context of inquiry and investigation by the elected representatives and custodians of the Australian taxpayer’s money, Dr Hellyer said, “To provide an example, the system is weighted against our representatives. At Estimates, officials come with thick folders of Estimates briefs containing vast amounts of detail around Defence activities and programs, for example the SSN enterprise.

“These briefs are unclassified, yet they are not provided to the Parliament or published unless in response to a FOI request or an explicit Senate order. This means that there is a vast imbalance in information between the Parliament and departmental officials. Officials may get frustrated at the questions senators ask, but if they provided actual information in advance, the quality of discussion and disclosure would be greatly improved.”

But these factors are only part of the equation when it comes to maximising the efficiency of Defence spending and capability delivery.

‘Mature designs’, reinventing the wheel and exquisite ‘bespoke’ platforms

Over the past three decades, Australia, like many comparable nations across the Western world, has been seduced by the promise of prohibitively expensive, boutique, bespoke or niche platform solutions to problem sets that result in limited production runs, thus creating a death spiral of rising costs throughout the acquisition, maintenance and sustainment cycles.

In the Australian context, platforms like Australia’s troubled MRH-90 Taipans and ARH Tiger helicopters, the future Hunter Class frigates, the now-cancelled Attack Class submarines and even the EF-88/EF-90 Austeyr service rifle are examples. In the broader context, think of problems like the British Army’s Ajax infantry fighting vehicles, Germany’s PzH 2000 self-propelled howitzer and as much as it pains me to say it, even the US Air Force’s F-22 Raptor is an example (although the collapse of the Soviet Union as a peer competitor has more to do in this context than anything else).

This reality has prompted Australia and many other countries to seek “mature designs” with varying degrees of success off established production lines that provide economies of scale through the life of a capability. However, Australia, in particular, is guilty of a process called “Australianisation”, in which we seek to make these otherwise “mature designs” bespoke and fit for Australian purpose.

Again, this has resulted in varying degrees of success and isn’t without its detractors, particularly when one again looks at the Hunter Class frigate program (I also don’t mean to harp on about it, it is just the most visible and visceral program at the moment).

Dr Hellyer added some colour to this picture, saying, “We also need to disrupt by forcing Defence to break its addiction to the exquisitely complex. All Western militaries are being sucked down the cost-complexity death spiral. The bizarre thing is that they seem to be happy to go along for the ride. Simplicity needs to replace complexity as the key driver of military capability. That will allow new industry entrants. It will also allow Defence to expand rapidly in time of crisis, produce key consumables of war domestically, replace losses and keep fighting beyond the first few days of war.

“Defence is a classic example of a space where it prefers to pay 50 per cent of its budget for the last 10 per cent of capability [pick your exact numbers]. There are cases where that is warranted. But there are many cases where it isn’t. We can see from both historical conflicts and the rebirth of industrialised warfare in recent years that having more is better. Having much more is much better.”

Shoebridge echoed these sentiments, particularly in light of the growth and projected growth in Australia’s Defence spending, saying, “As Australia’s Defence budget has grown from around an annual $32 billion before the 2016 White Paper to $56.5 billion now on its way to over $100 billion per annum, our military has got weaker and more fragile, with Navy ships being retired early years before replacements are even scheduled to turn up, Army helicopters doing the same and with the services unable to maintain the size of their workforces, let alone grow by the 5,000 they are funded to have achieved but haven’t.”

Direct, don’t ‘represent’

One of the consistent points raised by analysts, media pundits and even ministerial staff is the way in which Defence, particularly the bureaucracy, leads the minister, rather than the minister leading the department. This has prompted all sorts of criticism from across the spectrum of ministers and, indeed, their staff being “captured” by Defence.

While this isn’t an entirely fair assessment, particularly given the limited exposure many average Australians have with defence, military, geopolitical or strategic matters, let alone having an understanding of the complex engineering marvels being delivered under these programs, so it is entirely reasonable that they “trust” the information Defence is providing them.

Nevertheless, it is a problem, particularly when a department is meant to follow the direction of the minister of the day.

Highlighting this, Shoebridge said, “[Defence needs] a minister engaged in directing – not representing – Defence, with a commitment to openness and transparency on how and where taxpayers’ money is being spent.”

This only becomes more important as Defence will be asked to justify its spending in the face of mounting pressure to balance multiple competing funding streams across the Commonwealth budget.

Final thoughts

Based on the figures, I am at a loss to see how the lofty ambitions articulated by the government in the Defence Strategic Review, the Independent Analysis into Navy’s Surface Combatant Fleet, the National Defence Strategy and supporting Integrated Investment Program will be delivered if they’re already off to a rocky start.

Equally, the more “failure” becomes the standard in Defence spending, the less likely the average Australian is likely to support increased spending in the area, when we are forced to balance with other spending areas like the National Disability Insurance Scheme, health and education that have a more “direct” impact on their day-to-day lives.

This combination of factors will only serve to place greater strain and stress on the capacity of Defence to meet the tactical and strategic objectives set out by government, so getting it right now becomes more important than ever.

As I have said numerous times before, ultimately, Australia will face a myriad of interconnected challenges to the order upon which our security, prosperity and stability is built; how we confront these challenges and turn them into opportunities is fast becoming the greatest challenges of our age.

Being able to protect our economic, political, and strategic interests in the Indo-Pacific will become the most important responsibility of the Australian government and policymakers in the coming decades, whether they recognise it or not.

So what way Australia? Do we want to be competitive, engaged, consequential and thriving, or do we wish to remain “steady and sturdy” in our managed decline?

In the second part of this short series, we will speak to former senator for South Australia, Rex Patrick to unpack his ideas for how we can squeeze the most out of the nation’s Defence spending.

Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at This email address is being protected from spambots. You need JavaScript enabled to view it. or at This email address is being protected from spambots. You need JavaScript enabled to view it..