Mr COX (7:22 PM) —Reserves are one of the principal assets of the Australian Defence Force. Our reliance on them will increase in coming years, if we are to develop an appropriate level of capability and sustainability. The recent deployment to East Timor drove this message home. It demonstrated the country's limitations if we were forced in a larger contingency to rely on our present force structure. The pressure that was placed on the ADF in Timor, particularly to provide personnel for rotation, would have been greatly reduced had the Howard government not abolished the Ready Reserve scheme set up under Labor after the Wrigley review and the 1991 white paper. That was one of a number of short-sighted decisions by this government that have cost the nation dearly in terms of defence capability. I hope we will receive some recognition in the forthcoming Defence white paper of some of these problems, even if the government will not admit the true cause of those problems, and that some action will be taken towards their rectification.

The reason the government abolished the Ready Reserve was that Labor had created it. I frequently meet people in my electorate who believe we should reintroduce national service. Usually they are people who did national service in the 1950s and who recognise the benefits they had derived from that training. I explain to them that, quite apart from the issue of compulsion, that was a different time and the threat scenarios were different. Military training and full-time service are expensive. We cannot afford to use scarce defence resources where there is not a clearly defined defence need. In the Ready Reserves we had a substantial force of well-motivated and well-trained volunteers who were fulfilling, in terms of their capability and readiness, a defined defence need. They were providing that capability with savings of 30 to 40 per cent of the cost if regulars had been used to provide the same capability. Yet the Howard government abolished them. As the shadow defence minister, the member for Cunningham, said this morning, reserve recruiting is down from 6,000 per annum then to 1,600 now.

Those Ready Reserves did a year's full-time training. They then undertook part-time service for the following five years. This was particularly useful for tertiary students, who received a year of full-time work before commencing study, had their tertiary fees paid by Defence and had a reliable source of income from parades and training camps over the succeeding years while they were studying. They were effective soldiers, and the structure of their training ensured they had appropriate individual and collective skills for the operations on which they were liable to be called out. It was a cost-effective means of providing an essential force element that did not require the maintenance of full-time forces.

The problems faced by the ADF in managing the personnel requirements of Australia's East Timor deployments were a wake-up call. That wake-up call has already been heard by the Defence Subcommittee of the Joint Standing Committee of Foreign Affairs, Defence and Trade in its report From phantom to force. That report raises a number of critical issues: a lack of planning for expansion and sustainability; force elements that do not have an adequate number of personnel for deployment; problems recruiting and training reserves; and an impending financial crisis in the Defence budget because of rising personnel costs. This problem with funding defence personnel costs was based on an analysis undertaken by Mr Derek Woolner. Mr Woolner has assumed a yearly increase in personnel costs of four per cent but supplementation to the Defence budget of only 1.5 per cent on account of those costs. He concluded that by 2009—assuming the Army's wages remain fixed as a proportion of total defence expenditure—defence spending will have to rise to 2.5 per cent of GDP simply to handle growth in personnel costs, or alternative methods will have to be found to meet the Army's personnel requirement.

Defence spending is currently 1.8 per cent of GDP, so an increase to 2.5 per cent represents a very large and real fiscal problem. That problem would not be as large now if the Howard government had not abandoned the most appropriate alternative method of meeting the Army's personnel requirement. I want to make the qualification here that I have not examined all of the assumptions underlying Mr Woolner's analysis. As I have not attempted the analysis myself, I am not able to offer a well-considered assessment of its validity, but neither do I accept it uncritically, because to do so could lead to an exaggerated or inappropriate policy response. That is code for committing too much money on too little analysis, when better outcomes could be achieved without as large a contribution of additional resources. However, it is exercises like Mr Woolner's that can focus errant ministerial minds on a significant emerging problem.

The big lesson for the Howard government is that defence personnel are expensive to recruit, train and maintain. High levels of readiness increase the costs of maintaining regular military personnel by a substantial additional factor. For any given level of resources applied to defence, there is a set of potential trade-offs between the number of personnel, the level of readiness and the amount of money that can be committed to the acquisition of platforms and weapons systems that will enhance capabilities. It is for that reason that much more analytical effort needs to be applied to optimising the personnel component of the force structure, to meet the contingencies the ADF must be prepared to deal with.

Properly trained reserves offer the most cost-effective means of providing for expansion and sustainability. That is not to imply that their role is limited to making up the numbers on a shortened warning time than for new recruits. Other countries' military forces, most notably those of the United States, make much greater use of reserves than Australia does. Reserves offer the opportunity to maintain elements with particular skills that are at a higher level than is available amongst existing regular forces. The most obvious example of this is medical staff. A trauma surgeon from a major public hospital is going to be at a high state of readiness to be sent to a field hospital in a combat zone. Similarly, with the revolution in military affairs, there will be technical specialists who are needed only on a part-time basis who can offer high levels of capability that may be costly and difficult to maintain on a full-time basis. I seek leave to continue my remarks later.

Leave granted; debate adjourned.