A hard road ahead for Defence
5 Dec 2013|

Defence Minister Johnston speaks at an ASPI Boeing National Security DinnerDefence faces years of budget discipline as broader financial pressures bear down on the Abbott government. That’s the implicit message from David Johnston in his most significant speech since he took office as defence minister in September.

While Johnston is still sticking to the government’s pledge to lift defence spending back to 2% of GDP within a decade, that goal is bound to prove elusive. At an ASPI dinner on Tuesday Johnston spoke of the budget difficulties that lie ahead for Tony Abbott and his cabinet ministers. He told his audience:

The state of finances in the government is difficult—can I just say difficult—in Defence it’s an unsustainable mess but in more broad terms there’s difficulties. We need to steady the ship and chart a way forward, not just in defence but in a whole host of other portfolios, because of the funding problems we are confronting.

Johnston will shortly commission a new defence white paper, expected to be published by mid-2015, which he hopes will chart a path to lift defence spending back to 2% of GDP. Australia’s defence spending in 2013–14 stands at 1.59%—easily its lowest level in the post-WW2 era. Achieving this target will demand annual real increases in the defence budget in the order of 5%. That presents a political problem for a government faced with a growing structural deficit and a host of competing spending priorities.

It would also present a monumental spending challenge for Defence, which historically hasn’t been proficient at absorbing large budget increases. Over the past 40 years only one defence white paper, John Howard’s 2000 document, has achieved its stated financial targets for defence spending—and that was at the dawn of a decade of unprecedented economic prosperity in Australia.

The 2009 white paper—the most ambitious in terms of force structure since WWII—became obsolete within weeks as the Rudd government walked away from the promised funding of 3% annual real growth in defence spending through to 2018.

Johnston says he’s working on a ‘plausible funding envelope’ for the white paper and is cautiously optimistic about moving defence spending back to 2%. He repeated Tony Abbott’s assurance that the defence budget would face no further real cuts. But, as he conceded this week, its early days yet and the Abbott government’s Commission of Audit due early in 2014 could change the parameters of the debate.

To reach that 2% figure we need to start growing the defence budget as soon as broader economic circumstances permit. This will be a significant challenge but I am strongly committed to that objective. It is important to remember however that the current state of defence resourcing is every bit an ‘unsustainable mess’.

Johnston is expected to appoint defence academic, ex-army officer and diplomat, Alan Dupont, to head up the white paper writing team. This would be an interesting choice and a first for Defence in that Dupont, unlike all previous white paper authors, has never held a senior management position in the Defence Department.

As an academic security expert, Dupont has specialised in non-traditional security issues such as resources security and climate change. He’d bring a novel perspective to bear on how we conceive our defence strategy and plan Australia’s future defence capabilities.

Johnston is looking to the much-reviewed Defence Materiel Organisation for further reform and budget savings. He has already discussed acquisition and sustainment strategies with UK defence procurement chief, Bernard Gray, and will examine the case for further outsourcing of the DMO’s activities. According to media speculation, he’s looking to appoint defence academic and former bureaucrat Ross Babbage and finance expert George Pappas to assist with the Defence reform process.

Johnston’s remarks this week were significant for what he didn’t say about Australia’s future defence acquisitions. Don’t assume the Navy will get 12 submarines to replace the existing Collins class boats. That was a decision taken on a whim by Kevin Rudd and never based on detailed strategic analysis undertaken by the Defence Department. Other planned maritime acquisitions, including the number of new surveillance platforms, will be carefully reviewed by the Abbott government.

Johnston is yet to articulate the way forward for Australia’s future submarine project but spoke this week of the potential for future defence industrial co-operation with Japan. He said Defence had already commenced a very serious exchange with Japanese counterparts on submarines, and he revealed his close interest in the propulsion systems in the Japanese Navy’s 4,200 tonne Soryu class boats—the world’s largest diesel-electric submarines.

Describing the Soryu as extremely impressive, Johnston expressed strong interest in the submarine’s three ‘very special’ Kawasaki motors, notable for their efficiency and output. With disarming candour, the Defence Minister observed

[t]hat is an area which has concerned us in terms of Collins—the drive train issue is a very significant one. I would like them to show us a little bit about the drive train, which is industrial technology—we are not so interested in the front end, which is all about their systems, but the motors are obviously something very special.

Johnston is a Japan enthusiast and visits the country annually, often taking the opportunity to ski in Hokkaido. He also speaks a little Japanese. Expect to hear a lot more about defence industry co-operation with Japan in the coming months.

Patrick Walters writes regularly for The Strategist. Photograph by Cassandra Joyce.