Little has changed in the [Australian] defence funding picture since last year. This year’s budget continues to follow the trajectory of solid real annual increases set out in the 2016 Defence White Paper.
The consolidated defence budget (that is, the budget for the Department of Defence and the Australian Signals Directorate) reaches $38.7 billion in 2019–20.
Real growth is only 1.3%—the smallest increase under the Coalition government—and the budget has actually decreased slightly as a percentage of GDP (from 1.94% to 1.93%) because GDP has grown faster than the defence budget.
But those figures are a little misleading. Late in the previous financial year, $620 million was moved forward into 2018–19 from 2019–20, making the former a little bigger and the latter a little smaller than planned. If that hadn’t occurred, real growth would have been 4.6% and the budget would have been 1.96% of GDP. Ultimately, it makes no real difference to Defence which year it gets the money—it got it and has already spent it.
The real story is that the government so far has delivered on its White Paper funding commitments. The White Paper presented a 10-year fixed funding line that would not vary as GDP fluctuated up and down. We’re now four years into that decade. Once we take all variations into account (such as adjustments due to foreign exchange rates and supplementation for operations), the $143.2 billion in funding Defence has received over those four years is within 1% of the White Paper funding line.
Granted, Defence has had to fit more things into that envelope; it doesn’t seem to have received additional funding to cover its contribution to the Pacific Step-up announced by the government last year, for example. But it’s rare that Defence has had such funding certainty.
The other key issue to note is that the defence budget, at least for planning purposes, has already moved well beyond 2% of GDP. According to the Portfolio Budget Statements (PBS), the budget will hit that milestone in 2020–21, meeting the government’s White Paper commitment. But after that the budget continues to grow, hitting almost 2.2% by the end of the forward estimates.
In essence, the White Paper funding line and a 2% of GDP funding line diverge significantly.
The difference is substantial, reaching $5 billion a year and totalling over $22 billion for the remainder of the decade after 2020–21. That gap is even bigger if GDP fails to grow at 2¾% or at 3% from 2021-22, as forecast in the budget papers. (end of excerpt)
Click here for the full report (118 PDF pages), on the ASPI website.