{"id":39178,"date":"2018-05-09T11:00:41","date_gmt":"2018-05-09T01:00:41","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=39178"},"modified":"2018-05-09T11:07:16","modified_gmt":"2018-05-09T01:07:16","slug":"2-of-gdp-just-a-hop-skip-and-a-jump-away","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/2-of-gdp-just-a-hop-skip-and-a-jump-away\/","title":{"rendered":"2% of GDP: just a hop, skip and a jump away"},"content":{"rendered":"
<\/figure>\n

The government may be planning to get into surplus in 2019\u201320, a year earlier than it looked like last year, but that doesn\u2019t mean it has also brought forward its commitment to increase the Defence budget to 2% of GDP by 2020\u201321. That might be asking a little too much. So the main news out of this year\u2019s budget is that the government is standing by its 2016 Defence White Paper commitment.<\/p>\n

So 2% is now only a hop, skip and a jump away. The hop from last year to this was a healthy if not spectacular nominal increase of $1.2\u00a0billion, up to $36.4\u00a0billion for Defence, which translates into a 1.4%\u00a0increase in real terms. Next year\u2019s skip is slightly better, but that will still leave a big jump of nearly $3.4\u00a0billion, or a 6.2%\u00a0increase in real terms, to hit the magical 2%\u00a0in 2020\u201321.<\/p>\n

Generally there\u2019s not a lot of new news in Defence budgets. This year\u2019s is no exception. In terms of money moving around, Defence got an extra $500\u00a0million late in 2017\u201318\u2014probably to help out Treasury with balancing the broader government\u2019s books\u2014which Defence has to pay back over the forward estimates. With its big US-made projects (like the Joint Strike Fighter (JSF) and P-8A maritime patrol aircraft) Defence can do this simply by bringing forward a scheduled payment to the US from this July into June.<\/p>\n

With the Australian Signals Directorate becoming a statutory agency, its funding of $827\u00a0million has been removed from Defence\u2019s tally and doesn\u2019t show up in Total Defence Resourcing. But the government and Defence still count that money towards the 2%\u00a0target (which is fair enough).<\/p>\n

In terms of uniformed people, Defence\u2019s allocation appears to be unchanged from the white paper plan and increases by nearly 600 to 59,794 this year. Whether it can achieve that target is another matter, since in actual terms it missed hitting its 2017\u201318 allocation by about 600\u00a0people, with the biggest shortfall being in the Navy. In essence the uniformed workforce will need to increase by 1,200 this year to make up for last year\u2019s shortfall.<\/p>\n

Defence civilian allocation is around 2,000\u00a0people fewer that its white paper target of 18,200\u2014but before public servants start having heart attacks, Defence\u2019s advice is that the change is entirely due to \u2018machinery of government\u2019 changes\u2014in other words, taking ASD\u2019s people (and some others) out of the Defence column. Without a detailed accounting we\u2019ll have to take their word for it.<\/p>\n

Funding for operations this year is $750\u00a0million. With the exception of a $150\u00a0million decrease in Operation Okra (Iraq), presumably due to the F\/A\u201118s coming home, that\u2019s about the same as last year.<\/p>\n

As ASPI has previously noted, there has been a significant decline in transparency in Defence, particularly in its capital program. Defence isn\u2019t reporting project approvals in the annual report or additional estimates statements in anything resembling a comprehensive fashion. And now it\u2019s no longer including a list of planned project approvals for the coming year in its portfolio budget statement (PBS). So we can\u2019t know what approvals are coming up or whether they\u2019re actually approved. That\u2019s not to mention that there\u2019s no coverage at all of the information and communications technology (ICT) program. It\u2019s really an abysmal situation.<\/p>\n

One good thing about this year\u2019s Defence PBS presentation is that the capital program is now better aligned with Defence\u2019s Integrated Investment Program. The PBS now shows only major capital equipment (the biggest), facilities, ICT and minor projects. The \u2018other capital\u2019 line has been moved into sustainment and operating costs, where it fits better.<\/p>\n

But even taking the removal of \u2018other capital\u2019 into account, the capital program falls short of last year\u2019s predictions. This year\u2019s total, for example, is more than $700\u00a0million short of where last year\u2019s PBS said it would be\u2014and the figures for major capital, facilities and ICT individually are all short of last year\u2019s predictions. The same goes for the next two years.<\/p>\n

Exchange rate adjustments don\u2019t seem to be significant enough to account for the reduction in the capital budget either. With the sustainment budget up from where last year\u2019s PBS predicted it would be, it\u2019s possible that Defence has needed to move money from capital expenditure to meet rising sustainment costs.<\/p>\n

That said, the capital program is still showing a very healthy rate of increase, averaging real double digit percentage increases over the forward estimates. Lots of money is continuing to go into fixing Defence\u2019s neglected facilities. We\u2019re a long way from the dark days of 2012\u201313 and 2013\u201314 when the capital budget crashed.<\/p>\n

But Defence is going to need all of those investment dollars. This year, for the first time, a single Defence project will hit $2\u00a0billion in annual cash flow, with the JSF program spending $1.8\u00a0billion on equipment and over $200\u00a0million on facilities. Considering that Defence still needs to spend another $10\u00a0billion or so to get its 72\u00a0aircraft into service by mid-2023, it\u2019s probably going stay around that level of cash flow for another four years.<\/p>\n

And the shipbuilding program, the monster that potentially will eat everybody\u2019s lunch, has barely begun to get hungry. Between them, the future submarine, future frigate and offshore patrol vessel projects will spend nearly $750\u00a0million this year even though the submarines and frigates are still in the design stage and won\u2019t cut steel for several more years. So as construction starts, that number is going to get many times bigger.<\/p>\n","protected":false},"excerpt":{"rendered":"

The government may be planning to get into surplus in 2019\u201320, a year earlier than it looked like last year, but that doesn\u2019t mean it has also brought forward its commitment to increase the Defence …<\/p>\n","protected":false},"author":767,"featured_media":39179,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[1823,26],"class_list":["post-39178","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-defence-budget","tag-defence-spending"],"acf":[],"yoast_head":"\n2% of GDP: just a hop, skip and a jump away | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/2-of-gdp-just-a-hop-skip-and-a-jump-away\/\" \/>\n<meta property=\"og:locale\" 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