Budget: Budget 2012: Death of a 1,000 cuts | ADM June 2012

2012 is the politically magical year where the government will return to surplus. Indeed the headline figure is a $1.5 billion surplus. But cuts had to come from somewhere and Defence has most definitely played its part.

Defence barely rated a mention in the Budget speech from Treasurer Wayne Swan except towards the very end where he talked of a balanced budget where Defence had deferred expenditure and prioritising support for operations. And there are actually 1,000 cuts in Defence this year; they come in the form of Australian Public Service (APS) jobs. These 1,000 APS jobs are on top of the 1,000 APS job cuts from last year. However, the cuts from the previous year came from Defence merely not filling positions for the most part. This financial year may see more people in roles leaving the organisation rather than never actually joining.

Defence will forgo $5.454 billion across the coming four years, with $971 million being saved this financial year. According to calculations from Mark Thomson at the Australian Strategic Policy Institute this is a year on year cut of roughly 10 per cent in real terms (see PXX for on the budget from ASPI’s Mark Thomson). The cuts see Defence drop from 1.8 per cent of GDP down to 1.6 per cent, a historic low.

Savings will come from a number of areas including:

• $1.3 billion by rescheduling, rescoping or cancelling projects’ already approved by government;

• $1.7 in rescheduling, rescoping or cancelling projects’ not yet approved by government (see below for more on this);

• $1.2 billion from major capital facilities programs;

• $483 million in administrative costs;

• $360 million from 1,000 job cuts from the Public Service;

• $251 million from the early retirement of the C-130H fleet;

• $91 million from the cancellation of the Gap Year program;

• $50 million by deferring the roll our of the ADF Family Health Program by a year;

• $46 million from reductions in trave and postings arrangement in line with the Strategic Reform Program (SRP);

• $45 million cut in Minors projects from all three services. Defence is also having to pay for a range of new priorities. These include:

• $700 million for Collins sustainment;

• $550 million for ICT remediation;

• $400 million for improved Defence Housing;

• $330 million for relocation of Defence units from Moorebank to Holsworthy;

• $270 million for Navy fleet sustainment;

• $220 million for investment and upgrade of Defence estate;

• $160 million for Fringe Benefit Tax liabilities;

• $150 million for enhanced garrison support services’ ad

• $70 million for further investment in international engagement under the Defence Cooperation Program.

To address this, defence has ‘reallocated and reprioritised’ $2.9 billion from the DCP and Approved Major Capital Investment Program (AMCIP) and general operating budget. The organisation also had to cope with the purchase of some large tickets items outside the DCP process with the delivery of HMAS Choules, two additional C-17 heavy airlift craft, 101 more Bushmasters (with more orders likely) and the interim capability of the MSV Skandi Bergin. The total value of capital programs approved in 2011 was just over $6 billion.

Statements from the Minister also confirmed that the government is still committed to the ‘core capabilities’ in the 2009 White Paper, despite announcing the next White Paper will be moved forward by a year to address the changes in the region and the economic realities it now faces. These core capabilities have been confirmed as:

• 12 future submarines;

• the JSF;

• Caribou replacement;

• Medium and heavy trucks;

• upgrades to the C-130Js, Orions and Anzac class ships;

• consideration of the Growler;

• LHD; and

• AWD.

Of the 180 programs that were outlined in the 2009-2019 DCP, the budget this year has seen 10 removed. Exact details of these removals will be revealed when the new DCP is released later this year. It will also have a long list of re-scoping and deferrals including:

• the cancelling of the self propelled element of Land 17 where the requirement will now be fulfilled by the purchase of more towed M777s;

• a two-year delay to the first three squadrons of Joint Strike Fighters (JSF) under stage 1 (Air 6000 Phase 2A/2B) and a one year delay to the fourth squadron (Air 6000 Phase 2C);

• a one year delay to the ne P-8As, the Maritime Patrol Aircraft under Air 7000 Phase 2B which will replace the Orions;

• a one year delay to the Pilot Training System under Air 5428;

• a one year delay to the vehicles under Land 400;

• removal of the final tranche of Phase 8 of the Joint Command Support Environment under JP 2030 Phase 8;

• a reduced scope and one year delay of the defence simulation program under JP3028;

• a reduced provision for high grade cryptographic equipment under JP2069 Phase 3;

• cancelling of Round 16 of the Capability Demonstrator Program (a Defence spokesperson could not comment on the future of the program for either Capability Development Group or the Defence Science and Technology Organisation nor point to specific details in the budget papers pertaining to the program during the Budget lockup);

• a one year delay to the Air Combat Officer Training System under Air 5232;

• a one year delay to the replacement mobile regional operations centre under Air 5405;

• a one year delay to the upgrade of the digital topographical systems under JP 2044;

• a two year delay to Phase 1 of the Enterprise Content Management under JP 1544;

• a one year delay to Phase 2 of the Enterprise Content Management under JP 1544;

• a one year delay to the Tactical Unmanned Aerial Vehicle under Phase 3 of JP 129;

• a one year delay to the replacement refuelling tucks under JP157;

• a one year delay to the integrated broadcast service under JP2065 under Phased 2 and 3;

• a one year delay to non-lethal weapons under JP 3011 Phase 1; and

• a one year delay to the maritime communication modernisation under Sea 1442 Phase 5.

Further savings are being made by Navy reprioritising its operating activities and reviewing all non-operational activities and Army reducing its use of M113AS4 vehicles and M1A1 tanks, where some vehicles are being placed into storage.

For all the talks of cuts in the coming year, the government was also kind enough to provide a list of projects that they will be considering for first and second pass approval this year, totally an estimated $9 billion. Those slated for first pass consideration include:

• JP 2064 Phase 3 – Geospatial Information Infrastructure and Services;

• JP 2080 Phase 3 – Defence Management Systems Improvement – Financial Systems;

• JP 2089 phase 3A – Tactical Information Exchange Domain (Datalink) – Common Support Infrastructure;

• Land 155 Phase 1 – Enhanced Gap Crossing Capability;

• Sea 1397 Phase 5B – Nulka Enhancement; and

• Sea 1654 Phase 3- Maritime Operational Support Capability, the replacement of HMAS Success.

Those slated for second pass include:

• Air 5276 Phase CAP2 – AP-3C Capability Assurance Program;

• Air 5349 Phase 3 – Growler;

• Air 5416 Phase 4B.2 – C-130J Large Aircraft Counter Measure (LAIRCM) system;

• JP 66 – replacement air defence targets;

• JP 2008 Phase 3H – SATCOMS – wide band terrestrial terminals;

• JP 2025 Phase 7 – JORN industry capability;

• JP 2044 4A – digital topographical systems upgrade;

• JP 2047 Phase 3 – terrestrial communications;

• JP 2072 Phase 2B – Battlespace Communication System (Land);

• JP 2080 Phase 2B.1 – defence management system improvement – personnel systems modernisation;

• JP 3029 Phase 1 – Space surveillance

• JP 5408 Phase 3 – ADF Navigation warfare capability;

• Land 17 Phase 1C.1 – towed howitzer’

• Land 19 Phase 7A – C-RAM

• Land 121 Phase 3B – Overlander medium/heavy trucks

• Sea 1357 – Phalanx block upgrade;

• Sea 1397 Phase 5C – Nulka enhancements;

• Sea 1439 Phase 3.1 – Collins Obsolescence management; and

• Sea 1448 Phase 4A – Anzac class electronic support system improvements.


Force Posture Review

The report finds that our changing strategic environment does not require widespread changes in the location of our Defence Force bases, but that some adjustments should be made to meet future needs.

It finds that there are some weaknesses and risks associated with the capacity of ADF (ADF) bases and training areas as well as our ability to sustain high-tempo operations in Northern Australia and our neighbourhood and region.

Release of the final report follows the Government’s release of the interim report of the Review on 30 January.

The Force Posture Review addresses the range of present and emerging global, regional and national strategic and security factors which require careful consideration for the future.

These strategic and security factors include:

• the rise of the Asia-Pacific as a region of global strategic significance;

• the rise of the Indian Ocean rim as a region of global strategic significance;

• the growth of military power projection capabilities of countries in the Asia Pacific;

• the growing need for the provision of humanitarian assistance and disaster relief following extreme events in the Asia Pacific region; and

• energy security and security issues associated with expanding offshore resource exploitation in our North West and Northern approaches.

The Review also examined logistics support requirements, training areas for large-scale and joint training exercises, demographic and economic factors, public communications strategies, and engagement with industry, particularly the minerals and petroleum resources industries in Australia’s North and West.

The Review concluded that the ADF needs a force posture that can support operations in Australia’s Northern and Western approaches, as well as operations with our partners in the wider Asia Pacific region and the Indian Ocean Rim. This will be particularly important as the ADF approaches a period of transition and subsequent drawdown in Afghanistan, as well as in East Timor and Solomon Islands.

The Review identifies expanding maritime capabilities as significantly influencing Australia’s future force posture. Joint amphibious capability is identified as having a transformational effect on Navy, Army and the ADF generally, driving force posture considerations.

The Review examined possible basing options in the North and North West of Australia and the possibility of arrangements that enhance access to commercial ports. While permanent Navy bases in the North West are not operationally necessary, the Review recommended that Defence examine options involving investment to enhance Broome, Darwin and Cairns as naval bases. The Review highlights the potential for greater wharf capacity and support facilities at HMAS Stirling (Fleet Base West) to support major surface combatant capability and operations.

The Review finds that Defence should proceed with its plans to homeport the Air Warfare Destroyers and Landing Helicopter Docks at Fleet Base East in the short term but also develop additional options involving Brisbane and Fleet Base West.

The Review also found that while Air Force bases are well-located, many currently lack the capacity to fully support new platforms, and some air bases in Northern Australia face significant logistics constraints.

The Review found that Defence should upgrade bases at Edinburgh, Learmonth, Pearce, Tindal and Townsville to enable unrestricted operations by KC-30 and P-8 aircraft and that Defence should upgrade Curtin, Learmonth, Tindal and Townsville, with Scherger as a lower priority, to support future combat aircraft operations.

The Review also identifies Defence’s international engagement as a significant strategic asset.

The conclusions and recommendations of the final report are in the main longer term options for consideration. No decisions have been made about individual proposals. Many of these options, including development of new facilities involve substantial additional investment.

The Force Posture Review report will now form part of the security and strategic considerations feeding into the 2013 Defence White Paper (which was previously going to be released in 2014 having been moved forward a year in the same announcement), and decisions on Force Posture Review options will be made as part of the 2013 White Paper process.

The Review was undertaken by the Department of Defence and overseen by an expert panel comprising two of Australia’s leading national security experts, Dr Allan Hawke and Mr Ric Smith, both former Secretaries of the Department of Defence.

The final report is available at: www.defence.gov.au/oscdf/adf-posture-review/

Operational funding

The government at every level has been careful to say that military personnel number will remain unaffected by job cuts, particularly when it comes to operational requirements. In fact, funding for operations this year sees an additional $1.4 billion across the forecasts put aside on top of previous figures. Afghanistan sees a total of $1.7 billion despite the outlined drawdown of troops, East Timor now has $89 million and the Solomon Islands now has $45.6 million. Border protection efforts under Operation Resolute have had another $9.5 million added to their budget but this will come from existing resourcing within the department.