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Tuesday, 10 December 2002
Page: 7534


Senator CONROY (2:07 PM) —My question is to Senator Hill, the Minister for Defence. Can the minister confirm that the Mid-Year Economic and Fiscal Outlook released recently shows a total $505 million cut in Commonwealth expenditure on Defence over the next three financial years since the budget in May? Given the Prime Minister's claim that Defence spending needs to be increased, why does the MYEFO show spending in the next three years being cut back since the budget? As a result of those cuts, doesn't Defence spending as a proportion of Commonwealth expenditure decline over the next three years?


Senator HILL (Minister for Defence) —I also noticed that figure and asked the same question. The answer was basically that there were two factors involved.


Senator Conroy —Whom did you ask?


Senator HILL —I asked the accounting people in my department. The answer is that it is partly as a result of changes in accounting methodology and that it partly relates to the sale of certain assets. I was told that it does not in fact have the consequence suggested by the honourable senator.


Senator CONROY —Mr Deputy President, I ask a supplementary question. Minister, doesn't the MYEFO document also state that a large component of the actual increase in Defence spending in the current year flows automatically from a change to the indexation? Doesn't this additional funding merely compensate for inflation and represents no real increase in Defence spending?


Senator HILL (Minister for Defence) —No, that is not right. As the honourable senator knows, this government is committed to a three per cent increase in real terms and is meeting its commitment, as is demonstrated in the budget figures. It is true that the department is compensated on an indexation basis for increases in contracts, according to a long-established formula. But, in terms of the extent to which the increased funding has been indicated to the public in the past, it still stands.