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Wednesday 23 Aug 2017 | 14:37 | SYDNEY
Wednesday 23 Aug 2017 | 14:37 | SYDNEY

A bloody blizzard for Defence

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COMMENTS

4 July 2011 15:17

Beyond the fog of war, the Australian Defence Department is groping through a blizzard of reviews and reforms towards some tougher ideas of responsibility. That word 'responsibility' is being hammered so hard it is taking on a haunting tone.

The process is being driven by a Defence Minister who has moved quickly beyond the bemused and baffled stages, out towards the bloody end of anger and frustration. A couple of trends can be seen through the blizzard.

First, Defence can't build the kit it wants by the target dates it sets. Or, as Mark Thomson judges: '...it finally became clear in May that the schedule for modernising the ADF laid out in the 2009 Defence White Paper had fallen so far behind as to be implausible.'

The implausibility problem drives another emerging reality: the pledge of 3% real growth in defence spending is being quietly redefined into oblivion. The demise of the pledge is achieved by action while not being acknowledged by words.

The way Defence was mugged in the May budget made clear that Defence's status as a budget untouchable has been shredded, and the 3% principle adopted from the Howard Government is sick and sinking.

The implicit reason for the demise of the 3% rule is that Defence is so bloated it can't eat fast enough to get through all the cash it is being fed. The funny thing is that Defence is even prepared to apply the Fat and Bloated label to itself.

The incoming-government brief Defence gave the Gillard Government after last year's election had this headline in its budget chapter: 'FAT AND BLOATED' PERCEPTION OF THE DEFENCE BUDGET. And the strongest response Defence could make to this charge was that it was a bit of a misunderstanding: 

'Defence consumes approximately 9 per cent of government outlays and is typically seen either as largely discretionary spending or at least more capable of being financially reshaped than other government agencies. Indeed there still exists a view that
despite the $44.9 billion of funds reinvested in the 2009 Defence White Paper, $20 billion (gross) of which were identified in the Pappas Audit, there still is "plenty of fat" within Defence. These views, although ill-conceived, render Defence an obvious target for any major budget reshaping'.

The obvious target has become even easier to shoot at because it cannot deliver what it promises nor spend what it is given. The budget saw Defence hand back to the Government $1.6 billion that could not be spent in the financial year that ended last week.

Note Stephen Smith's judgement of that performance: 'A $1.6 billion underspend is a significant failure in Defence's planning and budgeting processes.' As Smith noted, that failure would have been closer to a $2 billion underspend if $300 million hadn't been used for extra C-17 aircraft and an amphibious ship.

It is a tad unusual for ministers to talk publicly of 'a significant failure' by their own department. Increasingly though, this is the volume Smith uses to talk to those who are supposed to be his people. The Defence budget process is pronounced ripe for reform. That review is due by the end of the year so that, in Smith's words, funding is 'based on realistic and reliable forecasts.'

What does that say about previous forecasts? At least the government is starting to find the words to describe how it is sinking the 3% pledge. In my next post I'll take a look at how this is affecting one particularly under-the-weather section: The Defence Materiel Organisation (DMO).

Photo courtesy of the Australian Department of Defence.

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