For nearly two decades, Australia’s annual budget has been a bit of a ho-hum experience for Defence.

It was not quite tick-and-flick, but Defence has had relatively little to fear. At the start of the 1990s, Labor defence minister Robert Ray got a unique deal (no other part of the bureaucracy need apply): Defence could hang on to any funds unspent at the end of the financial year and roll the cash over to the next year. Budget night got even easier under John Howard, who guaranteed 3% real growth in the Defence budget. And he kept the promise.

Last night, those decades of ho-hum came to a shuddering end. Defence is to hand back to the government $2.7 billion.

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This is comprised of efficiencies (cuts) totaling $1.32 billion; the cancellation of the purchase of two C130J aircraft worth $111 million and — cop this, Russell Hill — a “Capital Investment Reprogramming” worth $1.28 billion. “Reprogramming” is a polite way of saying the government is gouging back cash that Defence cannot spend on time.

The Defence Budget Brief claimed this claw-back will have no “adverse impact on the delivery of Force 2030 or military operations”. Some strange things are promised and claimed on budget night and that assertion of no impact on the Defence White Paper (Force 2030) is a beaut. Think of some synonyms for “impact”: crash, collision, shock. And consider a few thoughts that flow from what got done last night:

  • Defence’s status as a budget untouchable has been shredded.
  • Defence’s spending for next financial year is up by 2.45%. Mark the promise of 3% annual real growth that Labor adopted from Howard as sick and sinking.
  • The equipment timeline announced by the White Paper is no longer deliverable. Defence is handing back cash because it can’t spend it on time; mainly because the equipment isn’t being built to schedule.

All that is dramatic enough. But there is another dimension to this trashing of what had been Defence prerogatives. Defence Minister Stephen Smith is taking some pleasure in kicking his department in some very sensitive places.

The military hierarchy is about to be remade as the Chief of the Defence Force, Angus Houston, retires. This is an “all change” moment for the military hierarchy. Smith is asserting his authority in the process in a most personal way. He is calling in senior officers and conducting his own interviews for the top jobs. The message is that this minister will decide for himself, not accept from the options proffered up by the services.

Smith has ripped into Defence’s funding, and he is going to have as big an impact on the next generation of military leaders, to be unveiled within weeks.

All this was given a certain personal expression in the budget lock-up in parliament. The press gallery goes into lock-up for six hours before the budget speech at 7.30pm, to wade through the budget documents. The Treasurer is the star of the behind-closed-doors show. But last night, other ministers did the rounds to sell their bit of the budget strategy to the captive hacks. And the one with the broadest smile, perhaps even a quiet swagger, was the defence minister.

Going back to Jim Killen in the 1970s, I’ve never seen a defence minister grace a lock-up. Smith has achieved that minor media first, but his much bigger achievement last night was to break the budget mold.

Defence is no longer untouchable. It can now be mugged.

*This article was originally published at Lowy Institute blog The Interpreter

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Peter Fray
Peter Fray
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