Why Australian defence spending stacks up

Canberra's recent cut backs on defence spending have been disproportionately criticised – with a comparatively high per-capita spend, Australia is more than pulling its weight in the world.

Australia’s defence budget is coming under scrutiny with the Gillard government scaling back the increase in defence expenditure as it implements its macroeconomic fiscal program to move the budget to surplus. The defence spending restraint is also part of a global phenomenon as governments around the world reassess defence requirements in the context of reduced need and tight budgetary circumstances.

For Australia too, the trimming of the defence budget reflects an evolution in spending priorities, the result of which is defence spending being overtaken by other priority areas.

According to a Peter Hartcher from Fairfax Media, US Secretary of Defence Leon Panetta asked Australia "not to cut Australia's defence spending any more”.

If true, this request would be a bit cheeky given the swingeing defence cuts being delivered in the US over the next five years. It is unlikely to be the full story given that Defence Minister Stephen Smith rubbished the notion on ABC Insiders on Sunday.

Either way, it is worth looking at a few facts relating to Australia’s defence spending and putting them in some form of global context. It is useful to do this because it is likely that defence will be asked to further pull its weight in the years ahead as budget surpluses remain a priority and areas such as education and national disability insurance remain higher top tier programs competing for scarce government funding.

According to Stockholm International Peace Research Institute, Australian per capita defence spending is $US893 per annum. This is the same as in the United Kingdom, a little above that of France and over 50 per cent higher than Germany, France and Canada. The only countries with a higher per capita spend on defence are the United Arab Emirates, the United States, Israel, Singapore, Saudi Arabia, Kuwait, Norway, Greece and Bahrain. Of those, only the United States, Norway and Greece are NATO members.

On this comparison, Australia is more than pulling its weight when it comes to defence expenditure and its global obligations, even with some trimming and internal reorganisation of the defence department.

In the 2011-12 department of defence annual report, Secretary Duncan Lewis and Chief of the Defence Force David Hurley noted that the cost reductions in the last two years were met "without any adverse impact on capability or safety.” This is the point often overlooked by those bemoaning a less rapid rise in the dollars being spent in the defence portfolio. Savings were made in the formulation and management of capital equipment budgets and the implementation of efficiencies in defence’s budgeting processes.

The US and everyone else should be pleased with this efficiency being embraced in the public service.

Australia is not alone in tightening its defence expenditure, although the defence cuts in the UK and US are huge by way of comparison.

The recent UK budget outlined further cuts in nominal defence spending in 2012 and announced the fact that army numbers will fall from around 102,000 in 2011 to just 82,000 by 2015. Air Force numbers will drop from 44,000 to 39,000 over the same time and there will be an additional 25,000 job cuts in the civilian administration. The British army will be the smallest it has been since the Boer War (1899-1902). There is very little evidence that US is concerned that its greatest ally, the UK, is cutting defence spending too much.

The extent of the UK defence cuts makes a mockery of the claim that the US is genuinely concerned by the level of defence spending in Australia or that Australia will "free load” on the US. It isn’t and it won't.

In the US itself, defence spending is being slashed. The Washington based Center for Strategic and Budgetary Assessments estimates that US defence spending will fall from current levels of around 4.2 per cent of GDP to 2.7 per cent of GDP by 2017. The main driver of these massive cuts is the fiscal requirement to reduce and then eliminate the budget deficit, a requirement of the Budget Control Act.

Part of the savings will come from a reduction of 100,000 in the number of army and marine corps service personnel. Other savings will come from lower equipment purchases including the number of fighter jets and navy boats. The US defence spending to GDP ratio is set to fall to the lowest level since the 1930s. The ending of the US involvement in Afghanistan will account for savings after 2014.

All of this puts the tightening of defence spending in Australia in some context. To date the savings have been concentrated on efficiency gains and purchasing procedures. Australia is more than pulling its weight on the global stage, a point reinforced by its extremely high per capita spend on defence.

Rather than Australia free-loading on the US, it seems the US could well be wanting to free-load on a still robust and disproportionately high level of defence spending in Australia.

This is an amended version of the article. The previous version omitted the United States as a member of NATO in paragraph six.

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