AB GhaylaneThe 2022-23 Defence Budget is a contradictory program. In some ways it recognizes and responds to a changing world, but in others it remains a relic of an earlier era.
Let’s start with the funding line. At $48.6 billion between the Department of Defence and the Australian Signals Directorate, this is a substantial and growing sum. In nominal terms, it is a healthy 7.4% increase over 2021-22. Despite high inflation, this is still a real increase of 3.8%. For those interested in spending as a percentage of GDP, it is 2.11% based on the government’s GDP forecast. Of course, using GDP to measure defense spending is a crude tool; the 2021-22 defense budget started at 2.09 percent, but is now slightly below 2 percent at 1.98 percent because of the strong recovery in GDP, not because the government has not met its funding commitment.
Indeed, we should note that, as in the previous five years, the government has once again met the funding it committed to in the 2016 Defense White Paper. And therein lies the rub. This funding line was developed in 2015, before China’s de facto annexation of the South China Sea, before its neighbors realized the implications of its coercive campaign, and certainly before Vladimir Putin’s invasion of Ukraine reminded us that war still exists.
While the government has shown commendable courage in maintaining its financial commitment to the White Paper during the pandemic, while its bottom line has been significantly affected, its own assessments have highlighted the growing uncertainty and risk in our strategic environment. Is it time to reconsider a funding model developed nearly seven years ago, especially when that funding line continues throughout the budget forecast, and will then be based on assumptions that are more than a decade old?
Nevertheless, the government has shown that it recognizes the changing nature of competition and conflict. It is injecting an additional $4.2 billion into the budget estimate and $9.9 billion over the next decade into the Australian Signals Branch to strengthen offensive and defensive cyber capabilities. This will result in a doubling of DSA funding in just a few years to more than $2.2 billion annually. Whether DSA will be able to find double its current staffing levels is another matter. I’m pretty sure that offensive cyber experts don’t grow on trees, and many of those currently working in the field aren’t the kind of people who are going to get top secret security clearances.
But if the pudding stays the same size while someone gets more of it, then someone must be getting less. More than 85 percent of the additional funding for ASD comes from Department of Defense funding. To be precise, it comes from the Defense Capabilities Acquisition Program. There are cuts of more than $1.5 billion per year over the next three years from the plan of a year ago.
Of course, concerns about DOD’s ability to spend its acquisition budget likely played a role, as the department fell short of its spending target by about $1 billion in each of the past two years. But it seems clear that the government has prioritized emerging cyber demands over traditional equipment programs. What we don’t see in the PBS is whether it’s adapting elsewhere-focusing on small, smart, low-cost projects rather than large, industrial-age projects, for example.
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Its megaprojects simply do not provide relevant capabilities in a reasonable time frame. By the conclusion of 2021-22, the Attack-class submarine program will have spent $3 billion. Worse, DOD will spend another half billion dollars on this program in 2022-23, a year after it was cancelled. All this for a capability that the Prime Minister has admitted will be obsolete by the time it is launched in the mid-2030s.
What other programs must face this same truth? The war in Ukraine seems to have only solidified the positions of supporters and opponents of DOD’s planned $30 billion-plus investment in armor. But even its proponents cannot be happy that by the end of 2022-23 we will have spent more than $2.3 billion on the Boxer combat reconnaissance vehicle and only 25 vehicles will have been delivered (and that from overseas) five years after the project was approved.
If these capabilities are so important, why are we happy to accept such dismal delays? No announcement on the winning bidder for the $20 billion-plus infantry fighting vehicle program has accompanied the budget, but that could still happen during the election campaign. But will we be satisfied with a similar delivery schedule? One could argue that the M-113 has been obsolete for three decades already, so where’s the harm in waiting for yet another one for replacement? One could also look to the example of the Ukrainians, who went from easy to the toughest ground force in Europe in eight years, and ask how they managed to turn things around without waiting for projects that take decades to complete.
Just as new capabilities take time to arrive, so do new people in Defense. Two weeks ago, the government announced an increase of 12,500 military personnel over the next decade and another 6,000 the decade after that. This is not specified in the PBS, but ASPI understands that the $38 billion for the first 12,500 is already built into the current DOD funding model. This year’s PBS gives an idea of how long it will take for them to arrive; there is no increase in ADF personnel from the previous plan until 2024-25. In other words, they won’t start arriving for more than two years. And considering that ADF is already 1,600 people short of what it is currently supposed to be, even that might be optimistic. It took DOD the six years since the 2016 White Paper to grow by about 1,800 people, and according to PBS, it actually shrank last year.
Another notable figure that illustrates the changing role of DLA. For the first time, DOD spent more on domestic operations to assist civil authorities with Covid Assist and flood relief ($257.9 million) than on overseas operations ($255.3 million). But there is little evidence in the CPE that DOD is structuring itself to better respond to contingencies of this nature.
The Defense 2020 Strategic Update gave us some hints of different thinking, with hints that DOD would explore asymmetric approaches to deterring threats. There has been little indication of this transition thus far. The reprioritization of traditional capabilities in favor of cyber, revealed in this year’s budget, is promising, but there is still much to do.
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