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Tuesday, 21 August 1973
Page: 65

Outlays on defence in 1973-74 are estimated at $1,266 million, an increase of 2.6 per cent on outlays in 1972-73. Estimated outlays on defence in 1973-74 represent 10.4 per cent of estimated total budget outlays; the corresponding figure in 1972-73 was 12.1 per cent.

The estimates of defence outlays presented in this Statement differ in some respects from estimates shown in budget Statements in previous years. With the introduction this year of the functional classification of budget transactions, some expenditures previously included in Defence' are now allocated to other functions ; for example, interest payable on loans arranged in the United States to fund defence procurement is now allocated to 'Public Debt Interest'. Conversely, 'Defence' now includes certain expenditures not previously classified as defence outlays, including expenditure by the National Capital Development Commission on buildings for the defence group of departments in Canberra, and expenditure on war graves by the Department of the Special Minister of State. Had the previous format been retained, the estimate for defence expenditure in 1973-74 would have been approximately $1,345 million.

Manpower Costs

Manpower costs are expected to increase by $81 .4 million in 1973-74. The main reasons for the increase are the full-year effects of the implementation of the Woodward Committee recommendations on service pay, the application of the Jess Committee recommendations to the Defence Forces Retirement and Death Benefits (DFRB) Scheme, and the costs of awards and determinations made in 1972-73. These increases will be offset in part by some reductions in strengths of uniformed and civilian staffs in the defence group of departments.

Defence Equipment and Stores

Outlays on defence equipment and stores are designed to ensure that operational equipment (ships, aircraft, etc.) is adequate to meet likely contingencies. Outlays on such equipment in 1973-74 are estimated at $101 ,3 million, a decrease of $36. 9 million which reflects the effects of the 1972-73 currency realignments and a tapering off in payments for some items including Flll-C aircraft. Expenditure on supporting equipment in 1973-74 is estimated at $118.5 million, a decrease of $7.4 million from 1972-73, with savings from currency realignments and the cessation of National Service among the contributing factors.

Defence Facilities

Expenditure under this heading is to provide and maintain adequate living and working facilities for personnel. The major factor in the estimated increase of $1 3 . 7 million in 1 973- 74 is an increase of $9.5 million in the level of advances to be made to the States for the provision of housing for servicemen and their families.

Industrial Capacity

The main reasons for the expected increase of $6.4 million under this heading are the extension of payments to private industry, in addition to Government factories, for the maintenance of reserve production capacity and the provision of additional working capital to support the operations of Government factories. As a consequence of this financial support, however, the rates charged by private industry to Service departments (mainly Air) for repairs and overhauls, will be correspondingly decreased.

Research and Development Establishments- Department of Supply

Expenditure on research and development is aimed to assist the Services to keep abreast of advances in military technology and to develop weapons systems for Australia's defence needs. The estimated increase of $1 . 1 million reflects mainly wage and other cost increases.

Defence Aid and Co-operation

Through defence aid and co-operation the Government aims to help friendly countries in the region of immediate strategic interest to Australia to strengthen their own, Lnd the region's, capacity for defence. The estimated outlay of $12.5 million in 1973-74 represents continuing assistance previously committed under three-year programs to Indonesia (a $20 million program terminating on 30 June 1975) and to Malaysia and Singapore ($16 million and $4 million programs respectively, terminating on 30 June 1974). Military training assistance in Australia is also provided on a smaller scale to some other countries, including Fiji, the Philippines and Thailand. In addition, substantial expenditure is incurred by Australia on the development and maintenance of Papua New Guinea's Defence Force.

Storage and Transport Services

Included in this category are removal and storage costs associated with the transfer of government employees, including servicemen, and the costs of operating Australian Government transport pools. Salary and wage determinations granted during 1972-73 are primarily responsible for the estimated increase of $1.4 million in 1973-74.

General Administrative Expenditure

This broad category of expenditure covers a wide range of matters including travel, office requisites, postage and telephone services, fuel, light, power and water supplies, freight and cartage, compensation payments, and medical and dental services provided by civilian authorities.

Civil Defence and Other

Included in this category are outlays on civil defence, war graves and various miscellaneous items.

Recoveries and Repayments

The large increase of $30.9 million expected in recoveries and repayments in 1973-74 results from the introduction of a new pay structure for servicemen consequent on the adoption of the Woodward Committee recommendations on service pay and conditions. In past years, service pay has reflected rates of pay net of deductions for rations and quarters. Present arrangements, however, are based on a full salary concept which requires recoveries to be made where rations and quarters are provided; such recoveries are estimated at some $30 million in 1973-74.

Overseas Expenditure

Although not related to the functional classification it may be of interest to comment briefly on the extent to which defence expenditure is being made overseas.

Defence expenditure overseas in 1973-74 is estimated at $138 million, or $33 million less than in 1972-73. This expenditure includes payments in respect of Fill and other aircraft, helicopters, submarines, and on maintenance of defence forces overseas; it does not include defence expenditure in Papua New Guinea or on defence aid and co-operation for overseas countries.

In recent years some payments overseas for defence equipment and materials have been financed under credit arrangements negotiated with the United States; such payments amounted to $56.9 million in 1970-71, $43.6 million in 1971-72 and $58.0 million in 1972-73. These credit arrangements were cancelled with effect as from 30 June 1973 and all payments overseas in 1973-74 will be on a cash basis.

Repayments of principal and interest under previously negotiated credit arrangements will continue until 1979-80. In 1972-73, repayments of principal under these loans amounted to $59.5 million and in 1973-74 are estimated to amount to $56.7 million. These amounts are not included in the figure for defence expenditure overseas quoted above.







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