Increasing Defence spending to continue

The big news is that the revised Defence Capability Plan promises increasing Defence spending by three per cent a year out to 2015-16 with extra funding earmarked for key projects.
The revised DCP will receive an additional $2.4 billion over the period 2011-12 to 2015-16 for the 'logjam' years as major new capabilities including Air Warfare Destroyers, Amphibious Ships and the new JSF tactical fighter are introduced into service.

The 2000 Defence White Paper promised to increase Defence spending by an average of 3 per cent real growth a year from 2000-01 to 2010-11. That promise has not only been met but has now been extended for a further five years with Defence spending continuing to grow by three per cent a year.

This will see the Defence budget growing from $12.6 billion in 2000-01 to a projected $26.7 billion in 2015-16. The upcoming year (2006-07) will see expenditure climb to some $19.6 billion almost double that of the previous year. Of this total, expenditure on major capital equipment projects in 2006-07 is estimated at more than $5 billion with a further $3.65 billion to be spent on sustainment of existing capabilities.

Among key aspects of the revised DCP, which is to be released later this year, are modifications to the AIR 9000 helicopter plans to reduce the number of aircraft types and to create a common joint training and management system with some $5 billion set aside to achieve this aim, including the early replacement of the Sea King helicopter. Other forward programming includes:

* Over $500 million worth of naval surface projects new projects including enhancing the ANZAC class air search radar system, developing undersea warfare detection capabilities, and sea mine counter-measures

* A 40 per cent boost in funding for Army networking projects. across the majority of units as part of the HNA initiative. Army's Ground Based Air Defence capability will be enhanced

* A mid-life upgrade of the Hawk lead-in fighter, and future upgrades for the Wedgetail Airborne Early Warning and Control aircraft and refurbishing or replacing the C-130H and Caribou fleets

* Greater priority to use of satellite capability with more than $1 billion to be invested in satellite infrastructure

* Continued improvements to Defence's core enterprise systems including the logistics management system

The following projects and sub-phases will be considered for second pass approval during 2006-07:
* AIR 5276 /8B AP-3C ESM - Acquisition
* AIR 5276 CAP 1 AP-3C Capability Assurance Program
* JP 2048 /4A/4B Amphibious Deployment and Sustainment(3)
* SEA 1428 /4 ESSM
* SEA 4000/ 3 Air Warfare Destroyer
* AIR 5376/ 2.3C F/A-18 EWSP - Jammers(3)
* LAND 58/3 Weapon Locating Radar LOTE
* LAND 121/3A Overlander-Field Vehicles & Trailers
* LAND 121/3B Overlander-Field Vehicles & Trailers
* LAND 125/3 Soldier Enhancement Ver. 2
* JP 126/2 Joint Theatre Distribution System
* JP 2030/8 ADF Joint Command Support Environment.
* JP 2077/2B Improved Logistics Information Systems
* JP 2089/2 Tactical Information Exchange Domain (Data Links)
* JP 2090/1C Combined Information Environment

Notes
1. Capability and Technology Demonstrator projects, Project Development activities and some
sensitive projects are not included in the list.
2. Defence will only progress these projects to Government approval if quality decision data can be
provided (as required by the Kinnaird Review)).
3. These projects were listed for approval in the Portfolio Budget Statements 2005-06. With the exception of AIR 5376 Phase 2.3C, these projects obtained first-pass approval and will be considered for second-pass approval in this period.

The following projects are to be considered for first pass approval during 2006-07:
* AIR 9000/3 Seahawk Mid-life Upgrade and Life Extension
* AIR 9000/7A Navy Helicopter Training System
* SEA 1439/5B.2A Collins Continuous Improvement Program
* AIR 6000/2A/2B New Aerospace Combat Capability
* AIR 8000/1 C-130H Refurbishment/ Replacement
* AIR 8000/2 Battlefield Airlifter
* LAND 146/2 Combat Identification for Land Forces
* LAND 53/1BR NINOX - Night Fighting Equipment Replacement
* JP 5408/3 ADF NAVWAR Capability
* JP 2077/2D Improved Logistics Information Systems
* JP 2097/1 REDFIN - Special Operations Capability
* JP 2085/2 Explosive Ordnance Warstock

Notes
1. Project development activities and some sensitive projects are not included in the list.
2. Defence will only progress these projects to Government approval if quality decision data can be
provided (as required by the Defence Procurement Review 2003 (the Kinnaird review)).

An additional $623 million in 2006-07 has been provided for Defence operations, comprising:

* $392.7 million over three years from 2006-07 to maintain the present Australian Defence Force level of commitment to Iraq ;

* $218.2 million over three years from 2006-07 for deploying and sustaining our Reconstruction Task Force to Afghanistan ; and

* $12.1 million in 2006-07 for the surveillance of Australia 's northern approaches as part of Operation RELEX II.

Approximately $300 million will be provided over eight years to modernise propellant manufacture at Mulwala NSW, as part of a commitment to ensure Australia retains a capability to manufacture propellants and high explosives. The Mulwala facility requires extensive redevelopment. The government will contribute $130.8 million in additional funds over six years to modernise the propellant facility, with Defence providing the remaining amount.

The redevelopment project aims to modernise the core propellant production capability at Mulwala, which is essential to delivering a safer propellant manufacturing capability and meeting environmental regulations. Bovis Lend Lease, which has teamed with US munitions technology partner ATK Thiokol Inc (USA), has been selected as the preferred contractor for the project. Subject to the successful conclusion of negotiations and parliamentary clearance, a contract will be signed in the first half of 2007. Options for further enhancements to the facility will be undertaken at a later stage.

The Army is to receive an additional $1.5 billion funding over the next decade to ensure it is of sufficient size and strength and has the right equipment to meet the challenges of an increasingly demanding strategic environment. For 2006-07 the government has fully funded the Hardened and Networked Army (HNA) initiative announced by my predecessor in December last year. This will improve the combat power, sustainability and survivability of the Army in operational conditions. In all, an additional $1.5 billion has been provided over the decade to 2015-16 to:

* restructure the Army, based on combined arms battle-groups with increased protection and firepower;

* increase the size of the Army by 1,485 servicemen and women to improve the sustainability of deployed forces;

* re-role a parachute infantry battalion to a mechanised battle-group and relocate it from Sydney to Adelaide;

* optimise the use of equipment being delivered through the DCP; and

* re-role, re-train and re-task the Army Reserve to provide direct support to Army's operational units.

Total resourcing available to the Defence Materiel Organisation in 2006-07 is $8,783.2m, with the most being revenue from Defence estimated at $8,669.6m. This covers the procurement of capital equipment ($5,017.6m) and the sustainment of existing capability ($3,652.0m).

As part of its direct appropriation from the Parliament ($45.5m), the DMO will deliver procurement and industry policy and advice to other elements of the Defence Portfolio and the Government. The remainder of the resourcing primarily comprises $34.4m revenue from sale of assets and $33.8m revenue for other goods and services.

The total level of resourcing of $8,783.2m represents an increase of $1,623.6m compared with the projected result in 2005-06. In comparison to the 2006-07 estimates contained in the Additional Estimates 2005-06, there has been an increase in the DMO's revenue of $1,327m as a result of:

* a net increase in commissioned work required by Defence, including:

* the acquisition of the C-17 heavy lift aircraft (+$792m);

* adjustments to Defence Capability Plan funding (+$124m);

* provision for the net personnel and operating costs associated with the introduction into service of new equipment (+$125m);

* additional funding from Defence to support operations (+$91m);

* additional logistic funding for naval aviation (+$26m);

* reactivation of two Huon-class coastal mine hunters (+$23m);

* funding from Defence to modernise the Mulwala explosives and propellant facility (+$19m);

* an increase in funding for minor acquisition projects (+$8m);

* the application of indexation and foreign exchange parameter updates for acquisition and sustainment activity (+$104m); and

* an increase in funding received from foreign governments for collaborative project (+$30m).

By Tom Muir, Canberra