Defense Budget 2020-21: Money Is Flowing, But Does It Buy What It Takes?
May 22, 2021
Defense budget documents are not like other government departments. You won’t find any big policy changes or new major spending programs. These big policy changes are presented well in advance in strategic policy documents, like last year’s Defense Strategic Update. We get some useful details on how this plan is implemented, but it’s still the same plan.
We can see from this year’s Defense budget that the plan is broadly on the right track, but the most fundamental question is whether this is the right plan in the first place.
Defense spending is on the right track. Once again, the government has fulfilled its funding commitment, delivering the funds promised in the MoU and before that in the 2016 White Paper.
This year, it’s $ 44.6 billion between the Department of Defense and the Australian Signals Directorate. This is another real increase from the previous year.
For those interested in defense spending as a percentage of GDP, this amounts to around 2.1 percent of GDP. And the government has kept its promise to reach 2% of GDP by 2020-2021.
So the money is flowing, but how it is spent is what we need to focus on.
There are three main challenges to overcome. The first is that Defense and its industrial partners have a limited capacity to absorb these funds. Last year, Defense forecast a substantial 27% increase in procurement spending. This was always going to be a challenge, especially in a pandemic that was wreaking havoc on global supply chains.
To their credit, they got halfway there, increasing acquisition spending by about $ 1.4 billion from the previous year. So the industry is responding to the sustained demand signal from Defense, but it shows that ramping up takes time and that’s something we don’t necessarily have a lot of. What are the things we can do faster?
The second challenge is that the old problems of the defense procurement system have not gone away.
This year we saw a project to deliver a new underwater rescue system canceled. Defense officials said the ministry and the contractor had irreconcilable differences in their understanding of the project.
How you can close a deal and spend $ 100 million before realizing that you and your partner can’t agree on what they’re supposed to deliver is confusing. And this is a crucial capability as the recent tragic Indonesian submarine disaster reminds us.
We also saw the military‘s digital combat management system put on hold.
Whether rumors that it has serious security flaws are correct or not, the bottom line is that the project has been running for 15 years, cost almost $ 2 billion, only outfitted part of the military and is expected to take even more than a decade. the rest of the army. This is despite being the military’s highest priority.
If taking a quarter of a century to equip your troops with your highest priority capability is acceptable, then Defense clearly has a different sense of urgency than the rest of us.
This brings us to the third fundamental problem with Defense spending – the mismatch between the government’s high-level assessments of our strategic environment and the force structure Defense acquires to cope with that strategic environment.
In short, the government has asked Defense to focus on our nearby region. It is a largely maritime and archipelagic territory, with vast distances to be covered by air or sea.
The government has also said that we need new offensive capabilities to deter a powerful adversary. And it is also said that we now have a new sense of urgency as we can no longer rely on warning time for armed conflict.
However, the force structure plan underlying the DSU did not match these priorities. It was not just the fact that the frigates and submarines that Defense acquires would not begin entering service until the 2030s. On the contrary, the entire force structure remains broadly unchanged.
The force structure of 2020 closely resembles that of the 2016 White Paper, which in turn resembles that presented in the 2009 White Paper. In fact, the recent revelation in US Department of Defense documents that the army is about to spend over $ 2 billion on new tanks just reminds us that much of the structure of the defense force has remained the same for 50 years – and is likely to remain the same for decades . (i.e. 50-100 tanks, about 100 airplanes, 10-12 surface warships and so on).
But worse than that, Double Defense makes its investment in existing systems.
It is launching a program to invest more than $ 30 billion in heavy armored vehicles. The fact that many of these will be built in Australia does not in itself justify the expense.
Admittedly, this is not all bad news. The recent announcement of domestic missile production was a good thing – reliable supplies of guided weapons are essential to the success of modern warfare and many $ 100,000 tank killer missiles seem to me to be a better investment than a small one. number of tanks to $ 10 million. Additionally, the first flight of Boeing Australia’s Loyal Wingman unmanned fighter jet earlier this year was a clear sign of what investment in Australian innovation can achieve.
We came to a fork in the road. We can continue to invest in replacing a legacy force structure with something more or less the same, or we can seriously think about new ways to address the policy challenges that the government has correctly identified.
Marcus Hellyer is ASPI’s senior analyst for economics and defense capabilities.