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Monday, 25 June 2012
Page: 4437

Senator MARK BISHOP (Western Australia) (21:50): Tonight I want to address the Defence budget, the hysteria it seems to have generated and the reality behind that. As with so many other issues in public life, the Defence budget has been greeted with a complete lack of rationality and understanding. Yes, it is true that the Defence budget has been cut by $5.5 billion over the next four years—I repeat: the next four years, from a budget totalling in excess of $103 billion on present-day prices; with $971 million next financial year from a total budget of almost $25 billion.

For the record, the so-called cuts are as follows: savings of $1.3 billion from rescheduling projects, cancelling some and changing others. For example, there is a saving of $900 million for deferral of the purchase of 12 Joint Strike Fighters. The reason is that the production schedule is slipping, for which payment simply does not have to be made, as was originally planned—nothing to do with the Australian government; a simple fact, but a fortuitous saving this year. Indeed, it is a very healthy sign to see that projects are being re-examined as to their scope and detail and that some are being cancelled. Hence 10 projects, saving $1.7 billion, have been eliminated—and for good reason. Let us take, for example, the $220 million self-propelled Howitzer, which has been plagued by controversy throughout its procurement. No doubt a few million dollars have been wasted, but better to admit it and make the savings, regarded as a sunk cost, rather than persist with a flawed process. Also included is some $700 million for the deferral of additional JSF aircraft beyond the 14 already committed. Again, it is more common sense, simply because original hopes for this aircraft have changed again due to production delays in the United States. Once again, funds do not need to be committed and, regardless of the speculation and doubt, alternatives do exist—perhaps more Super Hornets off the shelf from Boeing, as has already been done. There will not be any gap in air power in those circumstances.

Similarly, there will be a deferral of $1.2 billion of capital facilities, construction that is not critical to capability. Simply put, when any government is faced with reduced revenue, and expenditure has to be reduced, some things on the wish list have to go on hold. An amount of $438 million is to be cut from administrative costs, which really shows how much fat there is in the system. Another saving of $360 million will come by reducing the civilian workforce, an area that has grown significantly in the last few years. It will be reduced by about 1,000, but, I stress, over four years, which, at a rate of 250 civilians per year, is hardly severe, especially given that the ADF will continue to grow to an estimated 58,500 next year, the highest since 2005, when it was just over 51,000. Next, there is $250 million in savings to be made from the early retirement of the C130 aircraft, which is clearly tolerable operationally, particularly given the recent purchases of extra capacity. Timely procurement decisions are preferable to patching up old aircraft. Again, it is good management.

There will also be savings from forward estimates. An example is the cessation of the gap year initiative, which will save $91 million. Why this saving? It simply recognises that healthy recruitment levels have made the program redundant. Savings of $50 million will be realised by deferring the rollout of the Family Health program. This program was motivated by concern for Defence families' health and welfare. In a nation with an excellent public health system this was always going to be problematic, especially where the supply side is so tight. Finally, a further $91 million is to be saved from the Strategic Reform Program initiatives, addressing travel and posting arrangements. There are also other deleted minor capital works projects, which will just have to wait until the revenue recovers.

Having gone through that list, one might ask: what has all the heat been about? Political prejudice, which sees Defence budgets immune from financial reality and any common sense, simply is not good enough, especially where there is a complete blind spot to repeated waste and appalling management within Defence going back over many years. All we have done is reduce the planned growth factor, leaving the Defence budget relatively stable in cash terms, hence my disdain for the silliness of the slogans that have been mouthed about this Defence budget.

For those critics, let me provide some context, which they have to date failed to recognise. At present Defence has a total permanent workforce of 57,882 and it will reach over 59,000 in the next four years. This compares with 51,199, in 2005. Adding reserves and high-readiness reserves to this, the total this year will be over 80,000. That is part of a total Defence workforce that is estimated to grow despite civilian cuts.

The overall financial commitment to procurement of materiel is barely dented. There are no changes of any great substance to the Capability Plan. The massive naval shipbuilding program remains unchanged. Likewise, the government has been quick to fill the gap in the amphibious fleet by the purchase of HMAS Choules, from the UK. We have also acquired the humanitarian relief ship MSV Skandi Bergen. Upgrades to the fleet of Anzac frigates will continue as planned. Approval has been given for the upgrade of Sea Sparrow and SM2 missiles. Old aircraft are being sold and new ones ordered. There are six C17s and, recently, the 10 new Alenia Spartans, not to mention continuing upgrade programs for Orion long-range patrol aircraft and the C130Js. There is also the potential for upgrades of some Super Hornets to Growler configuration. The purchase of 24 new naval combat helicopters has been approved, as has the purchase of two heavy-lift Chinooks. For the Army, there are 101 new Bushmasters and 900 G-Wagon trucks, both of which are significant additions to Army's capability.

A further $2.9 billion has been reprioritised within the existing Defence budget for new and emerging priorities. This includes putting a few Abrams tanks and M113 personal carriers into storage. This is not reduced capability but operational sense at a time when there is simply no anticipated deployment for the entire fleet. More sensible management.

Among reprioritised funds is $550 million to continue the rebuilding of Defence's chronically incapable IT network. Historically, it has caused so much inefficiency and failed accountability. An amount of $300 million has been approved for the relocation of Defence units from Moorebank to Holsworthy for the new intermodal freight hub, an important decision to the people of Sydney who are choking on freight transport from the south-west. Most pleasing is the additional $270 million for Navy fleet maintenance, which in recent years has completely failed through sheer negligence over the last 15 years.

These redirected resources are the best signs of all that management of Defence is now getting serious about budget management and about accountability responsibilities. There is absolutely no reduction of capability. At last we have some new, fresh honesty about dealing with waste and past failures, hence we have a needed fresh approach to strategic planning. This will be done through the early revision of the 2009 white paper, within which it is hoped that achievement is not measured by dollars alone. Above all else, we need to see much greater transparency and accountability for what Defence and the DMO do. If projects start to fail let us admit it and cancel them in whole or in part, just as this government is doing through its revision of the major projects review. Let us also look at productivity and the elimination of waste, especially that caused by overdue procurement projects and the overlays of unnecessary management addressed by the Chief of the Defence Force last week in committee hearings. In that context, Defence, like everyone else, will strive to do more with less.