ASPI celebrates its 20th anniversary this year. This series looks at ASPI’s work since its creation in August 2001.

‘Strategy without money is not strategy.’

— Arthur Tange, Secretary of the Department of Defence, 1970–1979*

On the cover of ASPI’s first defence budget analysis, The cost of defence 2002–2003 ^[1], there’s a small picture of a couple of Australian Army vehicles inset into a larger picture of the Department of Defence’s administrative offices at Russell in Canberra.

Below the pictures is a dollar amount, spelled out in words: ‘Thirty-nine million, nine hundred and ninety-one thousand, eight hundred and ninety-eight dollars and sixty-three cents per day’.

That was what Australia budgeted then, every day, to pay for defence. An updated daily dollar figure has since been on the cover of every annual ASPI evaluation of the defence budget.

For 2021–22 ^[2], the spelled out number was ‘One hundred & twenty-two million, two hundred & forty-two thousand, seven hundred and thirty-nine dollars and seventy-three cents per day’.

Tracking the cash for the kit, then giving the clearest of explanations, has been an enduring feature of the institute’s approach to its examination of Australia’s defence organisation.

The second annual budget brief introduced what became an intermittent feature—a cartoon on the cover. Among the cover greatest hits: a cartoon of a submarine firing two torpedoes rendered as barrels loaded with cash, with the words ‘Pork barrels away!’ issuing from the conning tower; a paper aeroplane labelled ‘White paper’, with one wing on fire and trailing smoke; a bayonet charge by uniformed kangaroos and koalas, all wearing slouch hats; and a senior officer with many medals smiling at a piece of paper labelled ‘Defence budget’, exclaiming ‘Incoming’ as showers of bank notes fall from the sky.

The cartoons are fun with high purpose.

The official presentation of the defence budget had always been notoriously opaque and incomprehensible ^[3], Hugh White wrote in 2016, even to people within government and defence: ‘ASPI believed that it would be impossible to foster a more rational and better-informed debate on defence priorities without a clear understanding of how the money was being spent and what things cost.’

For maximum impact, this analysis has to be published only a few weeks after the federal budget is announced in early May, not least to help inform the Senate estimates hearings that begin around the end of May. Recalling the first 2002–03 report, White wrote:

After an astonishing marathon effort, Mark Thomson duly produced the first of what has become an annual series of ASPI defence budget briefs, which was launched in Parliament House in late May. This laid out in clear terms just what the defence budget was being spent on, and how well the numbers added up, as well as including clear recommendations for what could be done better. This immediately established ASPI as the authoritative source of information on and analysis of the hard nuts and bolts of defence policy.

After a decade watching Thomson do his annual May marathon as a frantic sprint, Andrew Davies pronounced: ‘Every year I get to watch Mark Thomson pull off a remarkable feat of “extreme analysis”, as he cranks out 260 pages of the annual Cost of Defence report in the couple of weeks after the federal budget is released. (It’s a bit like extreme ironing ^[4], but with fewer shirts and more graphs.)’

Extreme ironing involves taking an iron and ironing board up mountains, on bikes, on the tops of cars, on parachutes, on skis, and in the midst of war zones. For Canberra, Thomson’s feat of extreme analysis was equally as impressive.

Not only did he explain the defence organisation to everybody else in government, politics and bureaucracy, he helped explain Defence to itself.

The sprawling Defence beast was offered a comprehensive yet sharp understanding of its own nature.

Journalists in the parliamentary press gallery quickly embraced Thomson’s deep understanding and clear exposition. He became a unique resource on the day of the federal budget’s release, when reporters spend six hours in the ‘lock-up’, confined in parliamentary committee rooms with embargoed copies of the budget until the treasurer rises to speak at 7.30pm. For defence writers, the most welcome arrival (aside from the coffee and sandwiches) was the smiling, lanky figure of Mark Thomson (also locked up) ready to offer a burst of analysis and explanation. The coffee quality was so-so, but the budget-night journalism on Defence got the Thomson version of intellectual caffeine.

According to the Australian Financial Review, the influence of Thomson’s analysis gave him ‘power’ in the way Canberra dealt with Defence. The paper published an annual list of the most powerful people in Australia—wielding overt, covert or cultural power—and one sector was the five most powerful people in defence. Mark Thomson got the fifth spot in the list in 2004, 2006, 2007, 2010 and 2011. In the first year he appeared, the list ran: prime minister, defence minister, Defence secretary, chief of the Australian Defence Force, and at number 5, Mark Thomson, with this explanation from Geoffrey Barker:

Mark who? A new name on the power list. Dr Thomson is budget and management analyst at the Australian Strategic Policy Institute. He has single-handedly over the past three years made the labyrinthine Defence budget transparent and accessible through his superb post-budget briefs for ASPI. His insights are widely admired and sought in defence, industry and foreign policy circles.

The 2006 list lauded the ‘unprecedented clarity’ Thomson brought to Defence spending, making him ‘a powerful and respected Defence insider’. In 2007, the list called him a ‘star’. In 2010, John Kerin wrote that Thomson ensured ‘the government provides more certainty for the defence industry on weapons’. In 2011, Kerin said that Thomson’s review of the budget was ‘once again compulsory reading. Its release is even more anticipated than the budget itself.’

As well as the annual Cost of Defence work, Thomson ranged widely across the cash–kit–capability nexus. In Pay your money & take your pick ^[5], in 2003, he considered what sort of defence force Australia could afford by examining five alternative futures and differing levels of defence spending, ranging from a modest 1.3% of GDP up to a robust 2.5%.

At the cheaper end, Australia would have a force less capable than today’s but still able to undertake a credible range of tasks. The problem was that Australia’s relative military strength would erode as regional countries continued to modernise. With the top option, 2.5% of GDP would provide a power-projection capability built around two aircraft carriers and a much expanded army and more capable air force and navy, significantly boosting Australia’s standing as an ally and its role in the region.

To the question, ‘How much should Australia spend on defence?’, Thomson responded that there was no ‘right’ answer. Canberra made choices and trade-offs. Better a modest policy that worked and lasted than a more ambitious one that failed when the money ran out. Joined to that eternal economic judgement about the opportunity costs of government choices was a statement of the strategist’s creed:

Finally, in all strategic policy making, it is wise to maintain an intelligent pessimism. Lurid and implausible worst-case scenarios should not dominate our thinking, but it is important to bear in mind that strategic policy choices last a long time, and that large and unexpected changes happen surprisingly often. A strategic policy that cannot encompass inherently improbable events is likely to prove inadequate.

Australia’s ability to fund defence was a recurring topic—a discussion ranging from regional power shifts to Australia’s changing demographics. Assuming defence would account for 2% or 3% of Australia’s GDP by mid-century, Thomson’s 2004 calculation was a cash mountain of more than a trillion dollars ^[6], just to maintain current capabilities through to 2050:

To many commentators, the question of defence spending is all too simple. You work out what is required so that the Australian Defence Force … can fight and win in any credible circumstance and you simply pay the bill. And you do this irrespective of competing demands for health, education and prudent economic management. In this view, the government (and ultimately the electorate) retains a steady appetite for national security, no matter what the cost. If only defence planning was that simple.

The reality was a constant set of choices about affordability and risk management ^[7]. The Thomson prediction was that economic needs would batter at Defence’s budget:

If demographics are destiny, our destiny is mixed. While we should be able to maintain a defence force like we have today—or even somewhat larger—out to 2050, our relative economic weight is set to decline in the decades ahead along with, more than likely, our strategic weight. This, by itself, is not an argument for spending more on defence. Just because we can afford to spend more on defence, does not mean we should; and just because other countries can afford to spend more on defence does not mean that they will.

In 2016, Thomson noted that since he wrote his first Cost of Defence in 2002, capital investment to modernise the force had driven the budget: investment had grown by 120%, operating costs by 46% and personnel costs by 39%. The ADF had become ‘a little larger, somewhat better managed, much better equipped, and a lot more expensive ^[8]’.

Saying goodbye to ASPI in 2018, Thomson worried that multibillion-dollar defence projects were being contorted to ‘buy Australia’ ^[9] and serve parochial politics:

In normal times, the creation of a boutique defence industrial complex in Australia would simply be wasteful. But these aren’t normal times. The strategic environment is deteriorating ^[10] much more rapidly than current plans are strengthening the ADF. While the government focuses on the economically dubious ^[11] goal of ‘creating jobs’ in defence industry, the gap between what the ADF can do and what it might be called upon to do grows by the day.

* Arthur Tange, quoted by Paul Dibb, ‘Defence policymaking’, in Peter J. Dean, Stephan Frühling and Brendan Taylor (eds), Australia’s defence: towards a new era, Melbourne University Press, 2014, p. 166.