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New Zealanders have always discounted claims that Canberra’s defence purse-strings are being tightened—until now. The days when the proportion of Australian GDP devoted to defence was twice the New Zealand level of roughly 1% appear to be over. Gone too is that long era in which a succession of governments (Liberal-National and Labor alike) never once saw a capability proposal they didn’t like. The Defence Capability Plan, replete with its 180 items, is about to have a Jenny Craig moment—or at least that is what should happen as a result of the funding changes being administered by the Gillard government. If elected, an incoming Abbott government would be unlikely to quickly reverse the very significant reductions that Stephen Smith has demanded in an era of depleting federal coffers. The piñata party which characterised Australian defence decision-making for nearly a generation has ended.

There are some ironic twists in all of this. One is that Australia’s strategic weight might be slimming down just as its alliance relationship with Washington is intensifying. But the United States is also reining in its defence expenditure (with more changes to come if sequestration kicks in). One can therefore think, pivot notwithstanding, that future American administrations will expect even more burden sharing from close allies. Yet meeting this expectation will be harder for Australia in an extended period of defence economising.

A second paradox is that just as its defence resources are being slimmed down, Canberra is paying increased attention to its western and northern periphery and to the Indian Ocean, with the latter meaning an effective expansion of its area of strategic concern. A growing gap between ends and means is becoming a distinct reality. That disconnect won’t be so obvious in an era of reducing operational tempo as the troops come home from Afghanistan, the Solomons and Timor Leste. But it will find a way to show up one day when a real test comes.

In this challenging fiscal environment, strong ground rules are needed when it comes to authorising future capability development. First, every responsible government wants to ensure that core capabilities are not sacrificed. But this makes it necessary to define ‘core’ and even ‘capabilities’. It’s surprising what you can learn to live without. Second, any focus on deriving savings from internal efficiencies is likely only to delay cuts to core capabilities unless further injections of capital funds are found (as New Zealand will discover before long). Third, it’s desirable to leave future governments with a series of authentic and therefore affordable choices about future capabilities, so that if a major platform needs to be replaced or superseded, that can realistically occur. That’s something the writers of New Zealand’s 2010 Defence White Paper sought to do. But in practice it means vigilantly policing a never-ending process which conspires to reduce the number of real options. Fourth, elected governments who may accept the need to remove a capability in a less demanding moment will always retain the right to demand those very same options with when things get noisier. This puts a premium on avoiding super specialised single role purchases (and Australia’s shopping list seems to have a few of those). Fifth, it’s necessary to be hard-nosed when friends claim that you are not pulling your weight. You’re doing what you are doing for your own national interest as you, and not others, define it.

Australian decision-makers will need to be similarly hard-nosed to make sure the core of the ADF’s capabilities is a realistic and affordable mix. Ministers should be posing some tough capability questions of the defence establishment, including each of the services. These are the sorts of questions where there are no good alternatives but where some options are less ugly than others. Here are some of the questions that might be asked:

• If Australia really needs new submarines, how would you best employ three in the first instance while we make sure the new platform is proven, workable and that we can find sufficient crews? (Your maximum, incidentally, is six, and please note the next question).

• Do you want the new submarines or the future frigates? We can’t have both.

• If Australia truly needs F-35s, how soon can the Super Hornets be dispensed with? Alternatively, if you want to keep them, or even buy more, how soon can we get out of buying any JSFs at all? Again, we can’t have both.

• How much smaller can the army become as the Iraq–Afghanistan and Timor Leste–Solomons years become history? (The percentage reduction needs to be in double digits, both personnel and vehicles).

• What essential missions would Australia be unable to undertake, and how much would it save, if one or both of the new amphibious ships were mothballed? And if not those, how about the Air Warfare Destroyers?

• What big items need to go when the Defence Capability Plan is reduced in size by one third?

• What are your plans for producing air strike, transport and surveillance options for future governments when we impose a rationalisation of the number of different fixed and rotary wing types you can operate?

Some sceptics may wonder if these sorts of questions will get asked. But an unwillingness to do so will make things that much harder in the new defence expenditure environment which is now a bit closer to the New Zealand model. Not identical of course, but to some degree at least, welcome to our world.

Robert Ayson is director of the Centre for Strategic Studies at Victoria University of Wellington, New Zealand. Image courtesy of Flickr user NZ Defence Force ^[2].