{"id":57073,"date":"2020-06-29T13:11:44","date_gmt":"2020-06-29T03:11:44","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=57073"},"modified":"2020-06-29T13:11:44","modified_gmt":"2020-06-29T03:11:44","slug":"defence-requirements-must-be-clear-as-covid-19-puts-budgets-under-pressure","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/defence-requirements-must-be-clear-as-covid-19-puts-budgets-under-pressure\/","title":{"rendered":"Defence requirements must be clear as Covid-19 puts budgets under pressure"},"content":{"rendered":"
<\/figure>\n

As the Australian government\u2019s finances come under increasing pressure<\/a> from the effects of Covid-19, so too might the scope for some forms of Defence investment in new capital equipment. That could pose difficult challenges<\/a> for the department, centring on the issues of cost\u2013benefit analysis and industry protection<\/a>.<\/p>\n

More intense competition<\/a> for many forms of public funding, new investment priorities<\/a> for defence and rising equipment sustainment costs<\/a> raise some vexing questions for defence industry policymakers. In future, what level of price premium should be paid for preferring domestic over foreign supply of traditional weapons platforms as well as a new generation of weapons systems? And how much assistance should be provided to ensure the domestic availability of strategically important industrial capabilities?<\/p>\n

In recent years, answers to those questions have frequently been based on four arguments. First, Australian defence industry is already internationally competitive or can readily become so through a combination of exports and a continuous flow of orders from Defence. The industry\u2019s main problem is being denied a reasonable opportunity<\/a> to bid for Defence work.<\/p>\n

Second, as Australia enters a period of profound strategic disruption, almost all the materiel we require must be manufactured here to safeguard our national security\u2014in what amounts to a form of industrial autarchy.<\/p>\n

Third, as a source of advanced manufacturing, the industry can help the Australian economy avoid an over-reliance on the mining, agricultural and service sectors.<\/p>\n

And finally, Defence\u2019s capital equipment projects are promising sources of technological innovation and labour skills. When they \u2018spill over\u2019 into other areas, those sources provide a net boost to the economy.<\/p>\n

Those four arguments have vociferous advocates. They also have staunch critics, whose concerns have surfaced on numerous fronts (for example, here<\/a>, here<\/a>, here<\/a>, here<\/a>, here<\/a> and here<\/a>).<\/p>\n

However, the level of scrutiny given to these arguments is well below what it should be.<\/p>\n

As Australia enters a period in which the opportunity cost<\/a> of investing in any form of defence capital equipment or defence industry assistance could be magnified\u2014not only for Defence but for the rest of the country\u2014a more rigorous approach to assessing the social costs and benefits is required. If all that sounds overdrawn, consider the following.<\/p>\n

More than four years on from the release of the defence industry policy<\/a> and after the delivery of more than 500 pages of associated policy documentation and a similar number of government press releases on all manner of defence industry issues, there is still no clear picture of what industrial capabilities are critical<\/a> for Australia to hold in-country for military-strategic reasons. Nor is there a useful indication<\/a> of where, when, why and to what extent Defence\u2019s demand might exceed the industry\u2019s capacity to supply any of the 10 industrial capabilities<\/a> already assigned broader sovereign status.<\/p>\n

Defence has released a discernible plan to collect the relevant demand and supply data\u2014as distinct from the collection itself\u2014for only one<\/a> capability. And broader development strategies for relevant areas of the defence industry are being set before<\/em> that data emerges. How industrial sovereignty can be achieved when the Australian content of many major equipment acquisitions is 60% or less\u2014and most components are imported\u2014has yet to be explained. None of those factors are mentioned in the public version of last year\u2019s defence mobilisation review<\/a>.<\/p>\n

In recent years, government media releases covering the effects of major capital equipment acquisitions have emphasised \u2018jobs and growth\u2019\u2014to the exclusion of relevant military-strategic<\/a> issues. And those statements provide little or no insight into the factors that tend to determine economic impact: the price premium, the level of Australian industry content, and knowledge spillovers from domestic assembly that might help reduce the cost of equipment sustainment.<\/p>\n

For higher profile projects, like the F-35 fighter jets<\/a> and naval shipbuilding<\/a>, the economic data proffered in public statements\u2014and in much of the analysis that underpins it\u2014is difficult to interpret from a cost\u2013benefit perspective. Opaque job figures for the F-35 are still being used<\/a>. The government has yet to release its economic cost\u2013benefit data for assembling the $50 billion-plus future submarines and $26 billion future frigates.<\/p>\n

The economic perspective provided by official statements for military vehicles isn\u2019t much better. Although poor public reporting of the economic impact of assembling the Hawkei<\/a> light protected mobility vehicles has attracted much attention, there are other vehicle projects to consider.<\/p>\n

For example, a headline<\/a> figure of 1,450 new Australian jobs has been used for the recent acquisition of combat reconnaissance vehicles for nearly $5 billion. Not disclosed is that the 1,450 is a peak employment figure for only one year of a 34-year assembly and sustainment program. The corresponding annual average number of jobs created, made publicly available only through a freedom of information request<\/a>, is 740<\/a>.<\/p>\n

That figure of 740 is dominated by jobs for vehicle sustainment, which appear to be double-counted. The number of jobs remaining is based on the implicit assumption of a price premium of zero for vehicle assembly\u2014noting that the actual size of any premium hasn\u2019t been disclosed publicly. No supporting evidence is provided relating to job creation or other benefits from spillovers or to the economic importance of the project at a regional level.<\/p>\n

These gaps are difficult to reconcile with Department of Finance reporting guidelines<\/a> for economic benefit. Nor do they appear consistent with two interim findings<\/a> from the Covid-19 Manufacturing Taskforce: the importance of \u2018core sovereign need\u2019 to Defence, and an overarching policy requirement to drive national growth in advanced manufacturing through \u2018rigorous implementation and measurement of impact\u2019.<\/p>\n","protected":false},"excerpt":{"rendered":"

As the Australian government\u2019s finances come under increasing pressure from the effects of Covid-19, so too might the scope for some forms of Defence investment in new capital equipment. That could pose difficult challenges for …<\/p>\n","protected":false},"author":698,"featured_media":57077,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[44,17,126,26],"class_list":["post-57073","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-australian-defence-force","tag-australia","tag-defence-industry","tag-defence-spending"],"acf":[],"yoast_head":"\nDefence requirements must be clear as Covid-19 puts budgets under pressure | 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\/defence-requirements-must-be-clear-as-covid-19-puts-budgets-under-pressure\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Defence requirements must be clear as Covid-19 puts budgets under pressure | The Strategist\" \/>\n<meta property=\"og:description\" content=\"As the Australian government\u2019s finances come under increasing pressure from the effects of Covid-19, so too might the scope for some forms of Defence investment in new capital equipment. 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