Australia’s defense spending will rise by over 6 percent in real terms in the coming year.
Earlier this week, the new Australian government released its first federal budget for FY 2014-2015. The defense budget indicated that the government is trying to fulfill its pledge to boost defense spending to 2 percent of GDP over the next ten years.
As reported by Jane’s, “Australia’s defense spending for the 2014-15 financial year will rise by AUD2.3 billion (USD2.14 billion) to AUD29.3 billion, a real increase of 6.1%.” Jane’s also noted that this would constitute a .1 percent increase in defense spending as a percentage of GDP, from 1.7 percent to 1.8 percent. However, these real spending increases will stagnate over the next two years before rising again starting in FY 2017-2018.
Some of this year’s increases will go to the Defense Materiel Organization (DMO), which is tasked with procurement and sustainment of weapons platforms for the military services. According to official budget documents released this week, in FY 2014-2015 the DMO will receive “$12,580.1m which consists of $6,308.7m for the procurement of equipment, $6,166.0m for the sustainment of existing capability and support to operations, and $105.5m for the provision of Australian Defense Industry programs and management services.”
This is an aggregate increase of AU$456m over FY2013-2014. However, the rise in capital investment is actually higher than this at AU$528.2m. That’s because Canberra’s defense budget expects to save roughly AU$105m in reducing Net Personnel and Operating Costs and Workforce and Operating Costs in the upcoming fiscal year.
The budget documents also reveal that the Australian Navy intends to decommission a number of vessels in FY 2014-2015. These include the frigate HMAS Sydney, the Landing Ship Heavy (LSH) HMAS Tobruk and the Heavy Landing Craft (LCH) HMA Ships Brunei, Labuan and Tarakan. At the same time, it also anticipates the first Landing Helicopter Dock (LHD) entering into service sometime during the year.
The forward estimates through FY 2017-2018 show that the Navy’s spending increases will be smaller than those for the Army and the Air Force and it will receive the lowest amount of funding of the three services.
In a speech to parliament earlier this week, Australia’s Treasurer, MP J. B. Hockey, said: “The Government is committed to building defense spending to two percent of GDP within a decade and by the middle of next year the Government will have a new strategic plan for the defense of the nation.”
The projected defense spending increases in the year ahead appear to be coming, at least in part, at the expense of other kinds of foreign affairs spending, most notably the aid budget. For example, over at the Lowy Interpreter, Alex Oliver notes:
“The aid budget has been dramatically shaved. We knew this was coming, and there will be more on this later in the week from development experts, but the top line is that Government will save $7.6 billion over five years ‘by maintaining official development assistance (ODA) at its nominal 2013-14 level of $5.0 billion in each of 2014-15 and 2015-16’. From then, it will be pegged to CPI, as foreshadowed by the Minister early this year. This will cut particularly deeply in 2017-18, where the savings will amount to more than $3.5 billion. These are deeper cuts than previously thought.”