After the 2013 ADM Congress we asked both sides of politics in what was an election year to “show us the money”? “Show me your bold and innovative ideas on how to do defence differently and more efficiently, or show me the money” was ADM’s refrain.
Well, at least now there is an answer. “We have no money,” said the Minister for Defence, the Hon Senator David Johnston, as he delivered the opening keynote address to the ADM 2014 Congress – and he said it quite a lot.
The good news is that the Minister insists he has a plan in the form of a new White Paper which is to be delivered early in 2015 accompanied by a fully costed Defence Capability Plan. This would be “a bankable document” Johnston said to allay the concerns of any cynics in the audience who may have heard such claims before from a long line of previous Ministers.
“It will focus on aligning aspirations with budget,” he said, “matching a review of our force structure with a long-term budget plan. I want our plan to be realistic and achievable.”
A tough road ahead
Eighteen months from gaining office to delivering a new White Paper and DCP may sound like a reasonable timeframe, but it will be a truly Herculean task. The early months of government are often chaotic as staff are recruited and trained. Cabinet and National Security Committee agendas will be full to overflowing, and defence is not an easy subject for all of our elected representatives and bureaucrats to understand let alone agree on.
Financial issues are clearly on the Minister’s mind as the Abbott government works up to its first federal budget in May. “We have lost 18 billion dollars in the last four years,” he said, “our capital account is in disarray.” Senator Johnston left no room for doubt as to who he thought was to blame saying, “School halls and school bonuses have been where the cash has gone, and now I have got people saying ‘what about our jobs’?”
He cited the Treasurer’s claim from late last year that Australia had accumulated deficits of $123 billion and that over the next four years the trajectory would lead to a net debt position of some $666 billion over the next decade.
Contrast that to the Minister’s stated goal: “This Government intends to grow Defence so that the total Defence budget is 2 percent of our GDP within the coming 10 years.” To the Senator’s credit he sounded like he actually meant it.
The task will not be without its challenges, however, as Australia struggles up from near historic lows in terms of defence spending of around 1.5 percent of GDP.
A balanced force structure
Australian Defence White Papers inevitably produce a balanced force structure, one that maintains the full variety of Army, Navy and Air Force capabilities. However, maintaining and modernising a balanced force when “we have no money” might cause problems - big problems - if not managed very carefully. Hollow capabilities with long notice to move requirements, and equipment that is “fitted for but not with” are likely symptoms.
The government’s plan of attack is to grow the Defence budget once broader economic circumstances permit. The Minister acknowledged the fact that delaying the necessary spending increase will make the ramp-up steeper, “but let me tell you the current issues we are confronting in terms of getting the money right are just horrendous,” he said.
It is on that basis that Senator Johnston made it clear that local defence industry must deliver productivity if it is to survive let alone prosper under the Abbott government. “We must be cost effective, so our earned value figures must be right up around a dollar for dollar. That is the task we are confronting and the most important part of that task is industry.”
AWD review
To get the ball rolling an independent review into the Air Warfare Destroyer (AWD) program was announced, and will be led by Professor Don Winter, former Secretary of the US Navy, and Dr John White, a former head of the ANZAC Shipbuilding project.
Professor Winter and Dr White have been tasked to examine all aspects of performance on the AWD program, including cost, schedule and quality factors. They will seek to identify the factors that have been limiting performance.
The review is tasked to make recommendations to improve the cost and schedule outcomes of the AWD program and produce long-term benefits for the Australian shipbuilding industry. In this instance a “long term benefit” might simply be the survival of the shipbuilding sector.
Senator Johnston was clear and unequivocal on the need for defence industry to boost productivity. “The Government is not about to fund a long-term enterprise that is not productive and on the cutting edge of the earned value matrix,” he said. Anyone who thinks that he or his cabinet colleagues don’t mean it might like to have a chat with any number of soon to be former employees from Holden, Toyota or Qantas.
While assertive and generally upbeat, the Minister had the look of a man who, after six months in the chair, is starting to come to grips with the enormity of the challenge that the defence portfolio presents. Having spent six years as Opposition Defence Spokesman, Senator Johnston probably thought he knew what he was in for, but you can be certain he knows better now.
Defence is a tough gig for Ministers even in good financial times. Plenty of John Howard’s men came to political grief despite tipping in many billions of extra dollars. There is, however, a gathering school of thought that the enthusiastic, strong-minded, former lawyer from WA, a man keen eye for detail, might just get the job done. If a strategically coherent White Paper appears along with a credibly costed DCP any time in the first half of 2015 he will be well on his way.
Daniel Cotterill is a former ADM Correspondent and Ministerial Chief of Staff currently engaged as a PR and public affairs consultant in both the automotive and defence industries.
