Defence funding will hit a record $55.687 billion for 2024-25 but the really significant increases outlined in the new National Defence Strategy (NDS) won’t be seen until 2027-28.
That’s year four of the forward estimates and then defence spending will reach $67.393 billion, a leap of almost $7 billion on the previous year,
Ultimately, defence funding will hit $100 billion by 2033-34, exceeding 2.3 per cent of gross domestic product.
Last year’s defence budget was $53.331 billion – 1.99 per cent of GDP - so funding this year represents a 6.3 per cent increase, taking defence spending to 2.03 per cent of GDP.
Defence Minister Richard Marles said the government was making the biggest commitment to increasing Defence funding over the forward estimates in decades.
“National security is a big focus of the Albanese Government and it’s a big focus of the Budget. This is about ensuring our Australian Defence Force is fit for purpose and equipped with suitable capabilities to meet present and future challenges,” he said.
Defence certainly didn’t dominate this year’s budget, though it does rate more of a mention in Treasurer Jim Chalmers’ speech than in some budget speeches of recent years.
“In a world of rapid economic change and heightened strategic competition, investing in modern defence industries serves our economic and national security interests,” he said.
“That’s why we’re injecting $50.3 billion over the decade to deliver the capabilities we need to keep Australians safe – as part of the National Defence Strategy.”
The budget was headlined by a range of measures aimed at easing cost of living pressures, including tax cuts, power bill relief, a freeze on the cost of medicines, indexing of student loans, debt relief for students and the building of more homes.
All could fall under a broad heading of helping to get Labor re-elected at the election likely to be held next year.
Defence budget papers do reveal some interesting outcomes for 2023-24.
A comparison with last year’s budget documents show personnel cost Defence around $1 billion more than estimated. That likely reflects cost of living increases.
Expenditure on capability acquisition came in more than $2 billion less than estimated, likely due to the slowdown in procurement in anticipation of the new Integrated Investment Program. That and the NDS were released on April 17.
Sustainment also cost much more than anticipated. The 2023-24 estimate was $15.36 billion but the real cost was $16.303 billion, a difference of $943 million.
Typically, Defence budgets feature announcements of new equipment and programs but this year’s offerings are scant - $81.9 million to support shipbuilding jobs and $166.2 million over five years to support small and medium businesses and local defence industry as part of the Defence Industry Development Strategy.
Then there’s $28 million to implement reforms under the Defence Trade Controls Amendment Act 2024 and $232.3 million for international military support, including $144.3 million for Ukraine.
The new Parliamentary Joint Committee on Defence, intended to enhance parliamentary oversight and understanding of Defence activities, will cost $17.5 million.
What the defence budget papers do reveal is the spectacular ramp up in spending on maritime projects - nuclear submarines, warships and their infrastructure.
Nuclear subs spending rises from $475 million last year to an estimated $2.8 billion in 2024-25, $2.75 billion in 2025-26, $1.25 billion 2026-27 then a spectacular leap to $4.97 billion in 2027-28.
Along the way, the Commonwealth of Australia will make substantial payments as a “fair and proportionate” contribution to create additional capacity in the US and UK industrial bases.
All up that’s more than $12 billion just over the forward estimates period for subs capability we are unlikely to see for most of a decade.
Funding for the Hunter-class frigate project for 2024-25 hits $813 million while funding for the Arafura-class offshore patrol vessels reaches $587 million. Both projects have been reduced in scope. Initially Australia planned to acquire nine Hunters, now down to six, and 12 Arafuras, also down to six.
Once Defence’s acquisition program was dominated by new air combat capability, the Lockheed Marrtin F-35 Lightning, a long running project costing at inception what seemed a mind boggling $16.5 billion.
But now most of the 72 aircraft ordered are here, with the rest to be delivered later this year. So far $12.4 billion has been spent. Estimated funding for 2024-25 is $370 million.
Significantly, spending on F-35 in 2024-25 is topped by spending on weapons to equip them and the RAAF’s F/A-18F Super Hornets.
That includes the Long Range Anti-Ship Missile (LRASM) and Joint Air to Surface Stand-off Missile Extended Range (JASM-ER). Total project cost is $2.5 billion with $412 million to be spent this year.
Defence continues to struggle to attract and retain the personnel it needs. Defence estimates it needs 63,597 permanent uniformed personnel in 2024-25 but the actual force in 2023-24 was 58,600.
Is Defence suddenly about to recruit just under 5000 soldiers, sailors and air men and women? It would seem most unlikely. Neither, under present circumstances, would a force of 66,873 appear achievable for 2027-28.
Where Defence appears to have fewer problems is in employing the public servants it needs, with just over 18,000 on the payroll in 2023-24 and 19,127 needed in 2024-25, rising to 20,150 over the four years of the forward estimates.