Someone in Defence must have clicked their heels and said “there’s no place like home” three times, because the department has just discovered that it is firmly back in Kansas, far from the yellow-brick road of budget largesse.
While the first Rudd government budget has delivered Defence a real increase as promised, and has quarantined it from cuts that have affected the rest of the public service, that’s where the good news stops. For a start, the increase of less than 1% in real terms falls well short of the 3% promised by the Howard government. And there will be no more “special supplementations” that deliver Super Hornets or C-17s outside of the normal budget process.
Defence has also been asked to find an annual billion dollars worth of efficiencies in order to fund expected operating shortfalls and to partially offset the cost of operations in Iraq, Afghanistan and elsewhere. Some of those efficiencies are programmed in by the budget, such as cutting the number of non-operational overseas posts. The rest is up to Defence to find and, even for Defence, a billion dollars is not small change.
And that’s not the end of the pain. The Government has already approved a number of new policy proposals, like a new intelligence collection initiative. (If they told you what it was, you’d have to eat the budget papers afterwards.) In the past, new proposals like these came with new funding as well. This time Defence will have to fund them out of hide.
But there is one saving grace – Defence hasn’t managed to spend the money it was given last year. $700 million of last year’s budget has been spread over the next few years. Given the future shortfalls that even optimistic projections show, that will at least go part of the way to filling in the hole. And the Rudd government has promised growth of around 4% in the next couple of years.
The world of Defence projects continues to throw up unpleasant surprises. The Wedgetail airborne radar system is apparently running even later than the two years we already knew about. With a project budget of almost four billion dollars, that’s a lot of money that won’t be spent next year. In fact, when other underperforming projects are included, $1.77 billion dollars of project money has been “slipped right” – Defence speak for moved into the future. Defence puts this down to the constraints of industry capacity but, whatever the cause, the amount of money that will have to spent in future years to catch up to the new equipment plan is getting bigger every year. Known to insiders as the “bow wave”, it’s starting to look more like a tsunami.
Defence can’t claim to have done badly under this budget – it would have to take a number and get in line behind other departments – but it’s probably still a shock to the system to find that it is going to have to live more within its means.