Budget Review 2016–17 Index

David Watt

There is less mention this year of national security issues in the Government’s budget documents than has been the case in recent years. Instead, emphasis is placed on what the Treasurer’s budget speech describes as:

A defence plan for local hi-tech manufacturing and technology.[1]

This draws out two of the Budget’s major themes: support for industry and investing in regional growth.

The recently released 2016 Defence White Paper (2016 DWP) set out a long-term vision for Defence with the  promise of an additional $29.9 billion in funding for Defence across ten years to 2025 and linked this to expenditure of $195 billion in defence capability across the same period. The Budget Overview document states that this will aid the creation of 3,600 Australian jobs as well as ‘thousands more’ in the supply chain.[2]

The Defence budget measures for 2016–17 are dominated by the $700 million in additional Defence White Paper funding and $615.8 million for military operations during 2016–17.[3]

Unsurprisingly, the Budget provides funding for Defence that is very much in line with the funding model set out in the 2016 DWP and the accompanying Defence Integrated Investment Program (DIIP). Both documents set out funding which aims to reach $42.4 billion by 2020–21, or 2 per cent of GDP based on current Treasury predictions.[4]

The total Defence funding for 2016–17 of $32.4 billion is close to the 2016 DWP’s promise of $32.3 billion and the forward estimates are also aligned with their white paper counterparts. Of course, this does not cover the 10 year period envisaged in the 2016 DWP.

The Australian Strategic Policy Institute (ASPI) states that this year’s funding is about the same in real terms as the current financial year and actually represents a slight fall in Defence’s funding as a percentage of GDP.[5] As ASPI points out, this accords with the plan set out in the 2016 DWP which outlines modest funding in 2016–17 before the increased funding promised in future years. A further feature impacting next year’s funding allocation is the rephasing of $500 million from 2016–17 to 2017–18.

The Budget documents also set out major defence capability already announced, such as the future submarines, offshore patrol vessels and future frigates. However, since each of these projects is relatively new, they have little effect on the 2016–17 Budget.

Defence’s contribution to regional Australia

Defence has a prominent presence in the Government’s statement Investing in Regional Growth—2016–17.[6] This includes:

• Defence assistance to the civil community in dealing with bushfires and cyclones
• Defence industry’s role in regional Australia
• the Centre for Defence Industry Capability headquartered in Adelaide, but with services to be provided ‘across the country’
• Defence Logistics Transformation Program which aims to modernise storage and transport facilities around the country
• Explosive Ordnance Logistics Reform Programs which seek to do the same for ordinance storage infrastructure
• Defence housing upgrades and
• United States Force Posture initiative.

Not all of these activities include new money (and some do not mention money at all), but they reinforce Defence’s contribution to regional Australia.

Industry support

The Budget Overview document repeats the 2016 DWP commitment of $1.6 billion to build industry skills and competitiveness across the ten years between 2015–26.  This was detailed in the Defence Industry Policy Statement (DIPS) that accompanied the 2016 DWP.[7] Activities in this area include:

• the Centre for Defence Industry Capability (CDIC) which the documents accompanying the 2016 DWP stated will be ‘funded at around $230 million over the decade’. While funded by Defence, the CDIC will be administered by AusIndustry under a memorandum of understanding (as is the case with the Defence Industry Innovation Centre, the function of which will be subsumed by CDIC).
• the Next Generation Technologies Fund, which will receive around $730 million over the decade and
• a ‘virtual’ Defence Innovation Hub funded at around $640 million across the decade.

These do not form major initiatives in the 2016–17 Budget, but represent funding commitments for Defence across the decade.

While this is a budget delivered on the eve of an election campaign, and a number of the Defence initiatives no doubt form part of the federal government’s re-election strategy, the industry announcements in particular should significantly improve the Australian Defence Force’s capability.

All online articles accessed May 2016. 

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