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Budget 2012: Budget 2012-13 Defence Budget overview



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Minister for Defence - Budget 2012-13 Defence Budget Overview

8 May 2012

The Prime Minister and I last week announced the commissioning of a new Defence

White Paper to be delivered in the first half of 2013 that will consider the implications

ofAustralia’s strategic and fiscal environment.

In that context, the Defence Budget released today has been developed following a

comprehensive review of the Department’s budget to identify contributions Defence

could make across the Forward Estimates to support the Government’s broader fiscal

strategy.

This review has resulted in a Defence contribution to the Government’s fiscal strategy

of $5,454 million across the Forward Estimates and will see Defence contribute

$971 million in 2012-13.

This contribution will have no adverse impact on operations inAfghanistan, East Timor

or theSolomon Islands. The provision of equipment to Defence personnel on

operations will not be adversely affected and there will be no adverse impact on the

number of military personnel in the Australian Defence Force (ADF).

The reprioritisation of Defence expenditure has been designed to have minimum

impact on the delivery of core Defence capabilities. A number of lower-priority

capability projects will be deferred with a small number cancelled where they have

been superseded by alternative capabilities. Other capability and facility programs

will be subject to re-scoping. A range of administrative and minor capital equipment

savings will also be made.

The decisions taken to determine Defence’s contribution to the Budget bottom line

have all been carefully designed to protect our servicemen and women and our

Defence operations, and to minimise the impact on core capabilities.

The key savings measures to make this contribution across the Forward Estimates

include:

• Projects which have already been approved by Government: savings of $1.3

billion by rescheduling, re-scoping or cancelling a small number of projects,

including a two year delay to the acquisition of 12 Joint Strike Fighters

following delays to the project in theUnited States ($900 million).

• Projects which have not been approved by Government: savings of $1.7

billion by cancelling a small number of projects and rescheduling and re-

scoping others in the Defence Capability Plan, including cancelling the self-propelled howitzer and proceeding with additional towed artillery ($220

million) and deferring later stages of the Joint Strike Fighter project

($700 million for follow-on purchases of Joint Strike Fighters in addition to the

14 already approved).

• Major Capital Facilities Program: $1.2 billion by deferring lower-priority

elements of the major capital facilities program, while maintaining funding for

critical upgrades and enhancements.

• Reduction in Administrative Costs: $438 million from reductions in travel,

outsourcing and consumable items.

• Reduction of 1,000 Australian Public Service personnel: $360 million from a

further reduction in the civilian workforce, which is in addition to the reduction

of 1,000 to the civilian workforce in the 2011-12 Budget. Care will be taken in

this program of reductions to not reduce standards of service in priority areas

of Defence including support to operations.

• Early retirement of the C-130H aircraft: $250 million from the early retirement

of the C-130H aircraft, which is being retired early in order to minimise costs

associated with maintaining and operating the ageing fleet. Current activities

undertaken by the C130H aircraft fleet will be redistributed across the

remaining Air Force air mobility fleet, including C-130Js, C-17s and the

replacement for the Caribou aircraft.

• Cessation of the Navy and Army Gap Year: $91 million from closure of the

Navy and Army Gap Year programs.

• Extended trial of the ADF Family Health Program: $50 million by deferring full

rollout of the ADF Family Health Program, due to low take up rates for the

program.

• Workforce policy changes: $46 million including reductions to travel and

posting arrangements in line with the Strategic Reform Program.

• Minor Capital Projects: $45 million from reduced expenditure in 2012-13 only

on Navy, Army and Air Force minor capital equipment programs.

In addition to this contribution to the Government’s return to surplus, decisions have

also been taken to address changes that have occurred in the Department’s resource

position over the last year which include a range of new cost pressures across the

portfolio, including the following priority areas for investment:

• $700 million additional investment in Collins Class submarine sustainment

• $550 million for information technology remediation activities across Defence

• $400 million for improved housing for Australian Defence Force personnel

• $330 million for relocation of Defence units from Moorebank to Holsworthy to

allow development of the Intermodal Transport Hub

• $270 million additional funding for Navy fleet sustainment

• $220 million for investment in maintenance and upgrade of the Defence estate

• $160 million for Fringe Benefit Tax liabilities

• $150 million for enhanced garrison support services

• $70 million for further investment in international engagement under the

Defence Cooperation Program.

To manage these internal cost pressures, Defence has reallocated and reprioritised

$2.9 billion.

The majority of the $2.9 billion was reallocated from savings in the Defence Capability

Plan and the Approved Major Capital Investment Program (AMCIP), with further

savings, predominately in 2012-13, from across the general Departmental operating

budget.

These savings from across the general Departmental operating budget include:

• Navy reprioritising its operating activities and reviewing all non-operational

activities including Navy’s international program.

• Army reducing the use of M113AS4 vehicles and M1A1 Abrams tanks. Some

of these vehicles will be placed in temporary storage and Army will continue to

review these fleets to ensure a viable mechanised capability is maintained.

These budget initiatives build on the efficiencies and savings gained through the

Strategic Reform Program including in the areas of capability development,

procurement and acquisition and the strengthening of personal and institutional

accountability.

This reform will be further considered during the development of the 2013 Defence

White Paper to ensure that Defence spending, in light of the Force Posture Review, a

revised Defence Capability Plan and the savings already identified, is calibrated

against an up to date assessment of our circumstances both in the short and longer

term.

For more information and access to the Portfolio Budget Statement go to

http://www.defence.gov.au/budget/12-13/index.htm

Media Contacts:

Mr Smith’s Office: Andrew Porter (02) 6277 7800 or 0419 474 392

Department: (02) 6127 1999