The end of 2%: Australia gets serious about its defence budget

Compared to Tony Abbott, Prime Minister Malcolm Turnbull and his defence minister, Marise Payne, see themselves as having a different emphasis in the way they view security challenges, how Australia should fund its defence, and different philosophies for how to protect the nation’s interests in our region.

Nowhere is this clearer than in Australia’s new defence white paper. It seeks a certain product differentiation to Abbott’s often idiosyncratic, and arguably crude, strategic posturing.

Budget concerns

The biggest return to seriousness is the document’s approach to the defence budget. While media reporting and even the white paper itself highlights that the defence spending target of 2% of GDP will remain, the link between what the Australian Defence Force gets and the health of the economy has been unmistakably broken.

Rather than stating that “2%” was all that would be needed to fix Australia’s defence spending bottom line each year, the white paper uses the 2% target as a once-off only. The projection of what this figure will be in 2025-26 is around A$58.7 billion. This is up from A$32 billion in the next financial year.

The paper explicitly says:

The ten-year funding model will not be subject to any further adjustments as a result of changes in Australia’s GDP growth estimates.

So, even if growth slows, Australia’s economic fortunes will not dictate the share of government spending defence has. This is a sensible and well-considered move.

The 2% target was an “arbitrary” number, as Turnbull recognised. Australia’s security bears no relation to whether we meet this target. By putting the funding first, any hopes for good planning and efficiency would be curtailed.

Strategic thinking

Another serious contribution is the paper’s attempt to link threats to national security and economic prosperity with capability planning and what sort of military upgrades and investments will best help resolve these problems.

This paper attempts to actually “do” strategy. It presents a cohesive ethos in style as well as substance. It is measured in its judgements, keeps Australian interests at the forefront and is cautious of friends and foes.

That can’t be said of some past efforts. The more confrontational 2009 white paper pointed to China’s rise as a concern, stated the intention to buy 12 submarines, and left everyone else to fill in the blanks about how the latter dealt with the former.

There are components of China’s recent behaviour, including in the South China Sea, that are deeply troubling. The white paper does not put this issue on ice, but instead stresses the need for:

… a stable, rules-based global order which supports the peaceful resolution of disputes, facilitates free and open trade and enables unfettered access to the global commons to support economic development.

To better appreciate the increasingly complexity of such big strategic issues, careless and emotive rhetoric that takes contemporary problems and reframes them in the simplistic clothing of past eras should be avoided.

So, it was disappointing to see Turnbull mimic Abbott’s line that in 2012 defence spending had been reduced to the “lowest level since 1938”. Turnbull is right, though, to complain about the A$16 billion or more that Defence lost under Julia Gillard and the harm it did to impending decisions related to designs, process and capacity.

But there is no comparison between the two eras. Australia had 10,000 personnel in its defence force in 1938. Today it has 58,000 and that will grow to 63,000. Australia has 18,000 public servants looking at threats, guiding policy and planning for security. In 1938, this number was just 57.

Turnbull and Payne were wise to explicitly reject the use of GDP as the basis for analysis in their figures. They should ensure they also do so in their political rhetoric. It suggests a flippancy about these issues that undermines the serious and considered nature of the document they have just released.

A more cautious approach seems to have been taken to defence engagement. Excessive claims about the practice creating new habits and norms that would bring peace to Asia have been quietly dropped. Instead, there is a focus on practical co-operation – such as responding to Flight MH370 – and training with allies.

The paper still makes some ambitious and questionable claims. NATO gets a strong run. There’s a hint of belief that the China challenge can be abated if more defence personnel from Australia and China talk to one another.

Payne declared that defence engagement was a “core defence function”. Yet there’s at least regular caveats that co-operation with countries in places like the Middle East occurs “where it is in our interest do so”.

If that’s the standard – with benefits and improvements today and tomorrow the main concern rather than re-aligning the world in 20 years' time – then it should be applauded.

Into the future

No government gets everything right. Concerns and disagreements about defence capability or force structure and acquisition will still abound. And any good policy will not necessarily sell itself.

But part of a more visionary, responsible approach to leadership requires avoiding preoccupation with immediate and too-often-ideological pet projects. It appreciates that new threats might require new forms of action, comprising items like cyber and space warfare units as well as reconnaissance aircraft.

This also means recognising that accurately predicting the future is a perilous business. In 2035, Australia may look back and wish it had spent more. Or it may realise it overspent and misunderstood or misinterpreted threats.

But to the white paper’s credit, it has recognised the current environment’s uncertainties and tried to respond seriously, neither hiding nor panicking about Australia’s preparedness. This is long overdue.

In doing so, the overall presentation of a strategic rationale that attempts to align policy prescriptions, political priorities and shifting international circumstances indicates a welcome return to a more mature, serious debate about the use of Australia’s military and diplomatic assets.