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Toy Soldiers

Should Defence Department take a budget hit?

By Marcus Hellyer

There’s general consensus the damage COVID-19 is causing to the Australian economy will have a flow-on effect on the federal budget. Non-essential ser­vices will just have to absorb some pain and take a budget cut. Some have suggested that ­national defence is one of them.

Nobody will know the full damage to the Australian economy from COVID-19 for some time. But assuming we are in a ­recession and not a long-lasting depression, we shouldn’t jump to the conclusion that the defence budget should take a cut.

It’s important to be objective and avoid moralising. While we are all in this together and everybody has to do their part to help the nation recover, cutting the Department of Defence’s budget won’t mean it will do more with less. With less money, it will deliver less capability. No defence contractor is suddenly going to give us a 25 per cent discount and nobody is suggesting service personnel should take a 25 per cent salary cut.

Ultimately it comes back to the old maxim that strategy is about aligning ends, ways and means. A coherent strategy is one in which you know what outcome you want achieve, have a plan to achieve it and have properly resourced it. If you reduce the resources, you have to change your aspirations for what you want to achieve and the way you are going to achieve it.

Let’s put to rest some of the breathless talk that has surrounded the government’s commitment to return the defence budget to 2 per cent of gross domestic product by 2020-21.

...there is nothing carved in stone that says 2 per cent of GDP will guarantee your security...

First, there is nothing carved in stone that says 2 per cent of GDP will guarantee your security. Countries facing serious security threats spend more. Australia spent more than 2 per cent during the Cold War.

The defence budget fell below 2 per cent only when governments of both sides of politics reaped a post-Cold War peace dividend. Our current circumstances look a lot more like the Cold War (or worse) rather than the era of US hegemony that followed it.

Second, as many have noted, including the 2016 defence white paper, which laid out that 2 per cent commitment, if you link defence spending to GDP the defence budget goes up and down along with GDP. But that change has nothing to do with how your strategic circumstances may be faring. With the COVID-19 recession hitting this year’s GDP projections, the defence budget may already have hit 2 per cent.

Did you suddenly notice the world become safer? Me neither.

The Australian Strategic Policy Institute has been arguing that in light of the increasing strategic uncertainty in the region we should be increasing defence spending. Unless you want to take your chances with a policy of barely armed neutrality, greater spending is prudent to achieve a number of outcomes, whether to defend Australia itself, provide greater self-reliant capability, demonstrate commitment to allies and partners, have the ability to shape potential conflicts in a way that suits our ends, and so on.

But let’s play devil’s advocate and examine what would happen if Defence did take a cut. First, the currently planned defence force with things such as a much larger submarine force is probably already unaffordable with 2 per cent of GDP. Dennis Richardson, the man who developed that plan in the 2016 defence white paper, recently said as much in this newspaper. A cut definitely makes it unaffordable. But reducing submarines doesn’t help the budget in the next 20 years or so unless you want to delay delivery of the future submarine even longer. Defence would have to cut elsewhere.

What usually happens is that it cuts the “back of house” functions, such as maintenance of equipment and bases, information technology and communications, and stockpiles of spares and munitions, creating a “broken backbone” that becomes apparent only when you need to deploy people and equipment — as in 2010 when Defence couldn’t provide a single amphibious ship during cyclone season. One of the benefits of increased spending the past six years is that much of that accumulated neglect has been repaired.

The contrast in the recent bushfire crisis in which two of Defence’s three big amphibious ships were deployed was remarkable. Now is not the time undo that good work. But that doesn’t mean the government should keep pursuing Defence’s current force structure plan.

It delivers too little, too late. That’s where the government and Defence need to adjust. It’s hard to argue that we need a big defence budget to meet our strategic risks but then commit to a plan that doesn’t deliver on its key planks for well more than a decade.

The government has given Defence a $200bn war chest to buy capability. Rather than cutting it, it has to get Defence to develop a viable plan to deliver more capability sooner.

Originally published by: The Australian on 30 May 2020