Defence economists publicly discuss the funding elephant and its impact on ADF capability

The election of the Coalition in 2013 saw a major shake-up in the way defence was approached by government. Following what the Coalition describes as six years of neglect under the tumultuous Rudd/Gillard/Rudd governments, the newly formed government sought to create an environment of stability and consistency for defence with a number of key policy objectives.

Central to this was the commitment to return Australia’s defence expenditure to 2 per cent of GDP following what both Prime Minister Scott Morrison and now former minister for defence Christopher Pyne explained as a 10 per cent reduction in real terms in the last year (FY2012-13) of the previous government – resulting in defence investment falling to its lowest levels since 1938.

While Australia’s defence expenditure looks set to increase to $38.7 billion in 2019-20, it is a case of business as usual for defence and industry, with the Coalition’s budget announcement signalling the government’s continued commitment to supporting the capability and development of Australia’s sovereign defence industry capabilities.

The Coalition remains committed to continuing the delivery of a number of key projects identified as part of the government’s 2016 Defence White Paper, which focused on delivering a series of major capability upgrades and modernisation programs across the Australian Defence Force, including:

• The delivery of the first unit as part of the $5.2 billion LAND 400 Phase 2 program for Boxer combat reconnaissance vehicles;
• Industry partners presented their bids as part of the $10-15 billion LAND 400 Phase 3 Armoured Fighting Vehicle program;
• Construction progress for the $35 billion SEA 5000 Hunter Class guided missile frigate program;
• Construction commencement and milestones at the $535 million SEA 5000 Shipyard facility at Osborne, South Australia;
• The continued arrival of Australia’s Lockheed Martin F-35A Joint Strike Fighters;
• Signing the Strategic Partnership Agreement for the $50 billion SEA 1000 Attack Class future submarine program; and
• Committing to the acquisition of 30 self-propelled howitzers and 15 support vehicles to be built and maintained at a specialised facility in Geelong. 

Further supporting these milestones, the government has confirmed over the next decade to 2028-29 that it will invest more than $200 billion in defence capabilities. 

Despite this seemingly unprecedented period of modernisation and recapitalisation within the ADF, Michael Shoebridge of the Australian Strategic Policy Institute (ASPI) identifies the challenges facing both the ADF and Australia as a whole when it comes to funding the 'future force' of the ADF, drawing on support from his ASPI colleague and Defence economist, Marcus Hellyer.

"You’d think that $40 billion a year on defence (2 per cent of gross domestic product) and mega-projects giving the military what it has always wanted – frigates, submarines, strike fighters, infantry fighting vehicles and the electronic systems to lace them all together – meant defence spending and force structure were off the Morrison government’s to-do list. The 2016 Defence White Paper is the plan and it just needs to be implemented," Shoebridge explained. 

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Regional responsibilities stretching resources 

Shoebridge takes his claims further, focusing on the expanded role the government has placed upon the ADF, namely the Pacific step up program, designed to counter the growing influence of China in the region, while also serving to reinforce the nation's own geo-strategic, political and economic interests in the region. 

"Australia is 'stepping up' in the south Pacific, with the first package of initiatives costing more than $2 billion. Defence is involved with a new humanitarian assistance ship to be built, crewed and operated, a big new joint naval base project with Papua New Guinea and the US on Manus Island, a training facility in Fiji and a deeper, more frequent tempo of military engagement with PNG and south Pacific forces," Shoebridge states. 

"The costs for Defence’s bit are magically being absorbed into the budget, putting more unaffordability into the mix. That’s not sustainable without hard choices, particularly with further steps such as opening ADF recruitment to Pacific islanders, which would be a smart strategic, people-to-people and ADF capability move."

Further compounding these challenges is the continued evolution of the regional order, namely the rise of China and periphery nations in south-east Asia and the western Pacific, each with their own competing ambitions, designs and often ancient enmities which serve as potential flashpoints for Australian response should they threaten the strategically and economically vital waterways the nation is dependent upon. 

Invest in cheaper, 'disposable' platforms 

Shoebridge shifts his focus to the seeming reluctance within the Defence and political establishments to augment the impressive array of manned military capabilities with a growing range of unmanned and semi-autonomous land, air, sea and undersea platforms, each of which will serve to ensure that Australia's expensive and valuable manpower and manned platforms remain as safe as possible. 

"It has become glaringly obvious that small numbers of exquisitely complex, capable, manned platforms to which we have committed will be vulnerable unless complemented by large volumes of cheap, disposable, replaceable semi-autonomous and autonomous systems: unmanned systems in the air, on land, in the sea and under the sea. But the Defence integrated investment plan treats these new technologies as speculative hobbies that may prove disruptive sometime later on," Shoebridge eloquently describes. 

Going further, Shoebridge states, "They have done so already and they will continue to. Sticking with the all-in bet the white paper places on small numbers of complex, manned systems is a broken strategy that risks the ADF being the obsolete Kodak of militaries. But, luckily, the complementary technology that will protect and empower the ADF’s small number of big platforms is relatively cheap and likely deliverable by Australian industry."

Your thoughts

For Australia, a nation defined by its relationship with traditionally larger, yet economically weaker regional neighbours, the growing economic prosperity of the region and corresponding arms build up, combined with ancient and more recent enmities, competing geo-political, economic and strategic interests, places the nation at the centre of the 21st century's 'great game'.

Embracing a combination of traditional manned and next-generation unmanned and semi-autonomous systems could serve to future-proof the capabilities of the ADF in the coming decades while also minimising the exposure of Australia's service personnel and expensive traditional military capabilities to threat – the combination requires further discussion and debate. 

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