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Wednesday, 17 June 2009
Page: 6436


Dr KELLY (Parliamentary Secretary for Defence Support and Parliamentary Secretary for Water) (4:00 PM) —I am pleased today to have the opportunity to highlight the priority the Rudd government places on issues of national security, which is clearly evident in 2009-10 defence appropriation bill. As you are aware, the government released a 2009 defence white paper in May this year. This white paper is the most comprehensive defence white paper ever produced by an Australian government. Through these appropriation bills, the government is reforming the way Defence is funded to better align defence funding with the costs of delivering the future force required for the defence of Australia. The new funding model sets in place funding for Defence that will see the white paper fully funded to 2030.

Under the new funding model, the government has reaffirmed its existing commitment to provide an average of three per cent real growth to 2017-18. Additionally, the government is now committing to providing 2.2 per cent real growth from 2018-19 to 2029-30. Provision of such real growth in the defence budget is essential and is consistent with the inherent long-term cost of defence. In addition, the government has decided to change the basis for indexation of defence funding by moving to a constant annual rate of 2.5 per cent per annum, which accords with the target consumer price inflation agreed by the Australian government and the Reserve Bank. This model for indexation will provide much greater funding certainty for Defence and allow more robust planning for future capability.

The no-win, no-loss arrangements for net additional costs of overseas operations and foreign exchange risks will be continued. This will also help in defence planning and in meeting real defence costs. In quantitative terms, this revised funding model provides Defence with $104.4 billion over the budget year and forward estimates and $308.2 billion over the decade to 2018-19. In total, the new funding model provides Defence with an additional $10.8 billion over the decade to 2018-19 and an additional $146.1 billion over the 21-year period to 2029-30, when compared to the projections of the Updated Economic and Fiscal Outlook. This is truly a great result for the security of our nation.

When considering gross defence funding, the transfer of funding for the Defence Materiel Organisation service fee from the Defence appropriation to the DMO appropriation must be kept in mind. This transfer amounts to $3.2 billion over the budget year and forward estimates and $8.7 billion over the decade to 2018-19. As announced in the white paper, over the past 14 months Defence has undertaken detailed analysis of almost every aspect of the defence enterprise and has developed a comprehensive strategic reform program aimed at increasing efficiency and effectiveness while delivering gross savings of around $20 billion over the decade. The government has agreed  that these savings should be reinvested within Defence.

The strategic reform program comprises 15 separate reform streams, some of which will result in direct savings, while others will help keep costs down through better quality planning, cost estimation and control. When combined with further savings initiatives, reprogrammed funds and the new funding from government, Defence will have nearly $45 billion for investment across the decade. These savings will allow the government to invest approximately $30 billion over the decade to deliver stronger military capabilities, to remediate areas where there has not been enough funding in the past and to modernise the defence enterprise backbone, all of which are essential to support the fighting force.

The defence white paper process undertook detailed examination of all major aspects of the defence organisation and revealed areas which had previously been significantly underfunded and require remediation. A key area of remediation is funding of the Defence Capability Plan where additional funding is essential to fill critical equipment and capability gaps. There are also funding shortfalls in areas such as net personnel and operating costs for the operation and sustainment of major equipment which includes fuel, personnel, wages, spare parts, maintenance and facilities upkeep.

Another key area of remediation that will be undertaken by this government will be increased funding for infrastructure. The Defence estate has fallen into a state of disrepair over the last 10 years and this government is taking action to repair the state of infrastructure in Defence. The government is committed to sustainable funding arrangements for the Defence budget to deliver the capability required to meet our nation’s strategic needs. This government’s action to initiate a comprehensive defence white paper— (Time expired)