Rapid growth in defence budget risks 'wasteful shopping expedition': think tank

Anzac Class Frigate HMAS Toowoomba. Photo: James Davies
Anzac Class Frigate HMAS Toowoomba. Photo: James Davies

The Abbott government's plan to pump billions of dollars into defence risks encouraging the military to go on "a shopping expedition" for equipment and personnel that aren't really needed, a top think-tank warns.

In its annual defence budget report, the Australian Strategic Policy Institute embraces the government's goal to spend 2 per cent of gross domestic product on defence as a credible one.

But it makes a series of warnings about the scale of the Coalition's ambition, noting that the target means military spending would reach $52 billion in 2023-24, up from $29.3 billion in the coming financial year.

This would "depend on the electorate's willingness to incur the resulting opportunity cost of forgone social services and higher taxes".

Each of Australia's roughly 10 million workers would be kicking in about $5000 a year to sustain such a large defence budget, the report by the institute's Mark Thomson - regarded as the country's leading defence economist - states.

Most pointedly, the 262-page report warns defence would face a challenge actually spending the money, which is based on an arbitrary figure rather than on what the military actually needs.

"The risk in all of this is that proposals of diminishing worth - for both extra personnel and new equipment - will arise," Dr Thomson writes. "By setting a generous financial target for Defence, the government has effectively sent the military on a shopping expedition."

As examples, he cites recent "profligate" proposals to retire the current Anzac frigates early to make work for shipyards at risk of going idle, and to build support ships in Australia when they could be bought more cheaply offshore.

Such ideas "exemplify the risk of generous funding leading to wasteful spending", Dr Thomson writes.

The plan to spend 2 per cent of Australia's GDP on defence was a key election promise by Prime Minister Tony Abbott.

Dr Thomson questions whether "absent a strategic crisis" there is the mood in the public to make the sacrifices needed in other areas to spend this much on defence.

Equally, now that the promise has been made, ditching it could damage Australia's credibility in the region and with its allies, he warns.

Labor's 2009 and 2013 White Papers, each of which set ambitious visions for defence but failed to stump up the money, "showed ... to anyone who was paying attention, including our allies and friends ... that we were all talk and no action", he writes.

Of the current 2 per cent promise, "if we once more fail to follow through, it'll be a second strike against our credibility".

"In an era when the United States is looking for its allies to step up rather than free ride, there's much at stake," Dr Thomson writes.

He says the May 13 budget established "a credible base from which the government can deliver its promise to spend 2 per cent of GDP on defence by 2023-24".

It would mean an impressive 5.3 per cent growth above inflation for each of the six years beyond the four years covered by this month's budget.

Dr Thomson said the money would have to go either on major new hardware or by increasing the sizes of the army, navy and air force. Both would be needed to absorb the new money, he said.

Recent cuts to defence had fallen mostly on equipment rather than personnel and the day-to-day running costs of the military. Therefore most of the new spending would go to new hardware, Dr Thomson said.

"Experience shows that such rapid growth will be very difficult to achieve," he wrote.

This story Rapid growth in defence budget risks 'wasteful shopping expedition': think tank first appeared on The Sydney Morning Herald.