{"id":66731,"date":"2021-08-30T11:00:13","date_gmt":"2021-08-30T01:00:13","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=66731"},"modified":"2021-09-01T14:11:50","modified_gmt":"2021-09-01T04:11:50","slug":"the-economics-of-defence-industrial-self-reliance-budgeting-and-buying","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/the-economics-of-defence-industrial-self-reliance-budgeting-and-buying\/","title":{"rendered":"The economics of defence industrial self-reliance: budgeting and buying"},"content":{"rendered":"
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Graeme Dobell\u2019s brief history<\/a> of ASPI\u2019s Cost of Defence series over two decades reveals a fascinating tussle between Australia\u2019s military\u2013industrial complex and economic reality. That tussle is arguably more intense than ever, reflected in recent reports by Treasury and the Productivity Commission.<\/p>\n

When plans to acquire materiel on a scale unprecedented in peacetime were formulated by the Department of Defence, Australia\u2019s strategic environment was relatively benign and the economy was buoyed by decades of uninterrupted growth. Over the past 18 months, the geostrategic outlook has deteriorated, and so has the fiscal climate.<\/p>\n

From Australia\u2019s lacklustre productivity performance, vastly increased government debt from Covid-19, and structural deficits in the federal budget that are likely to persist for decades comes a need to carefully prioritise Defence\u2019s investment in capital equipment. Central to that is whether an enterprise approach to managing acquisitions should be strengthened in existing areas and extended to others.<\/p>\n

Treasury\u2019s 2021 Intergenerational Report<\/a> forecasts defence funding to increase at a relatively modest rate, from 2.1% of GDP now to 2.3% in 2031\u201332, and thereafter \u2018in line with the economy\u2019. That\u2019s based on an optimistic rate of productivity growth. Before the report\u2019s release, Treasury Secretary Steven Kennedy observed<\/a> that \u2018when deficits are being used to support economic growth, the quality of decision making is crucial\u2019. One political commentator remarked<\/a> that \u2018national security hawks have their best hopes punctured by the [intergenerational report].\u2019<\/p>\n

None of that necessarily precludes more funding for Defence should the need arise. But several factors perhaps not captured fully in current financial planning could also place significant pressure on the department\u2019s budget and demand a more exacting approach to investment decisions:<\/p>\n