reform to how Defence goes about its business.
With budget pressures looming large, the question is whether additional savings are possible through further reform to how Defence goes about its business. The answer is a qualified ‘yes’. In the easy‑money days of the 2000s, the number of executive and senior management positions (and military equivalents) grew much more rapidly than the size of either the civilian or the military workforce (Table 1).
Table 1: Defence senior officers (civilian and military), 2000 and 2013
Category 2000 2013 Increase
Senior Executive Service 103 168 63.1%
Senior officers (EL1 & EL2) 3,317 6,767 104.0%
Total civilian workforce 16,295 21,217 30.2%
Star‑ranked officers 120 190 58.3%
Senior officers
(MAJ to COL & equivalent)
1,415 2,042 44.3%
Total military workforce 50,355 58,253 15.7%
Sources: Defence PBS 2012–13 and annual report 2000–01.
Of course, the classification creep experienced by Defence over the period is far from unique. Most government agencies are more top-heavy today than in the past. Nonetheless, the streamlining of defence management and command should be pursued as a priority—not just to save money but to deliver better quality administration.
Concomitant with that, a better alignment of output delivery and accountability should allow for a more efficient allocation of resources and better governance. In particular, the multi-group arrangement within Defence almost guarantees ponderous decision‑making—with resultant opportunity costs to the taxpayer.
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Traditional approaches to outsourcing and public–private delivery models are another potential area for further savings. But expectations must be realistic; most of the low-hanging fruit’s been harvested in these areas, leaving only limited opportunities.
The challenge in pursuing further reform and savings in Defence will be to reduce accumulated administrative and command overheads while retaining the momentum of current reforms. Whatever’s done, the resulting savings won’t close the gap between current plans and available funding.
Questions to ask:
• What more can be done to align accountability with control of resources?
• With operational tempo declining, how do we adapt the ADF to peacetime? Do we need as many people in military headquarters as we have today?
Challenge 3: Matching strategy, resources and capability
Current plans for the ADF exceed the funding likely to be available. That might even have been true before
the 2009 Defence White Paper, but the situation became critical with its ambitious plans for a substantial maritime expansion. The challenges are as follows:
• Defence needs increased funding, or some of the current or planned ‘core capabilities’ will have to be scaled back or culled.
• A coherent strategy needs to identify the essential tasks for the ADF and then match the funding available to it.
There are two broad ways of matching a force structure and strategy. A top‑down approach identifies a strategy suited to the strategic circumstances of the day (and for the reasonably predictable future) and develops a force structure capable of implementing that strategy. A bottom-up approach looks at the extant force and the resources available to upgrade or modify it and then fits the strategy to suit the force.
In practice, we do some of each. When external circumstances demand it, Australian governments will make significant changes in the defence force—and in the budget that supports it. The most recent example was the reaction of the Menzies government to instability throughout Southeast Asia in the 1950s and 1960s, when Australian forces were committed to combat operations in Vietnam, Indonesia and Malaysia at various times.
The most dramatic example was in 1939–45, when Australia came under attack from a major power. Figure 2 shows clearly the waxing and waning of Australian defence spending. At times of peak spending, the ADF can change relatively quickly.
But in between those times it tends to be ‘business as usual’, with budgets big enough for the maintenance of the existing force (usually), a slow decline (1990s) or a modest expansion (2000s). The current situation’s unusual.
The 2009 Defence White Paper made the case for a significant change in the externalities—the rise of China and the potential for the major power balance in the Asia–Pacific to shift in an unhelpful way. In response, it proposed a significant expansion, particularly of maritime force projection capabilities. So far, so good, as far as matching strategy and force structure goes. The problem is that the money isn’t there to support that approach. We have a plan, but we aren’t willing to pay for it.
Figure 2: Australian defence spending as shares of GDP and government outlays, 1870 to 2010 (%)
Source: Australian Bureau of Statistics figures.
In the current fiscal situation, the incoming government is unlikely to find a significant boost in defence funding to be an appealing option. If that’s the case, the strategy needs to be adjusted to suit the force structure that the funding envelope can support. That’s going to require some tough decisions.
Despite recent cuts to capital investment, several large projects are underway. The next few years will see the delivery of three air warfare destroyers and two huge amphibious ships to the Navy. At the same time, there’s a pressing need to replace the Navy’s afloat support ships and patrol boats. Meanwhile, the Air Force will take delivery of 12 new Growler aircraft (the operating cost of which might be an unpleasant surprise) and 10 new battlefield airlifters, and will be bedding in multi‑role tanker transports and Wedgetail early warning aircraft. The additional cost of operating and crewing these new platforms will be substantial. The prospect is that sustainment will progressively eat into the defence budget as the new assets enter service. Similarly, without a cut in personnel numbers, the cost of keeping the ADF at the same size will continue to grow in real terms.
The consequence of that, within a fixed budget envelope, is that either the readiness of the existing force will be run down or the share of money available for investment in equipment will decline. And there are at least four $10 billion plus projects on the books at the moment: the recapitalisation of the Army’s protected mobility vehicles and the acquisition of the F-35 Joint Strike Fighter, future submarines and frigates. Defence has described those projects as each being big enough to distort the Defence Capability Plan (DCP)—for which read ‘will potentially squeeze out all of the enabling projects that allow the ADF force elements to operate effectively with each other’.
The default for Defence might well be to simply defer decisions, adding to the existing ‘bow wave’ of unapproved projects out beyond the forward estimates. But that only puts off the reckoning rather than avoiding it,
it also increases the amount of risk to capability of requiring the ADF to continuing to operate increasingly elderly equipment.
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