The Defence community’s biggest challenge in answering the call of the Budget this year will literally be getting the money out the door and into programs.
The headline figure of course is expressed as a percentage of GDP, which sits at 1.93 per cent, according to ASPI’s Budget specialist Dr Marcus Hellyer.
“The $38.7 billion figure is on par with spending last year; a 1.2 per cent real increase but there will need to be a big increase to meet the two per cent target from government,” Dr Hellyer said to ADM at the Budget lock up. “Overall, the government has delivered on its 2016 White Paper funding commitments.”
Between all the major current shipbuilding programs (Attack, Hunter, Arafura, and Hobart, Guardian Pacific Patrol Boat classes) Defence is committed to spending a shade over $2 billion this coming financial year on shipbuilding.
This is only rivalled by JSF spending at $2.68 billion for acquisition, sustainment and infrastructure.
Key enablers are also on the up when it comes to approved dollars. Infrastructure spending is a winner with $4.9 billion leaving the building in Canberra to head out around the country. With capital sustainment projects running at $2.9 billion and new facilities at $2 billion, it’s not hard to see why so many infrastructure companies are performing well in ADM’s Top 40 Defence Contractors survey.
Defence infrastructure spending has effectively doubled from the beginning of the decade. Given the chronic under investment in this space, this is no bad thing.
Defence ICT is also a winner with almost $2 billion this year ($864 million in acquisition and $1.3 billion in sustainment respectively) planned for Chief Information Officer Group.
The major capital investment program sees $8.7 billion on the cards for the coming financial year, for a total of $11.8 billion in new programs across the portfolio.
Sustainment is also on the up with $12 billion in the system for 2019-2020.
Stay tuned for Defence Week on Thursday for more on the Budget and the May edition of ADM for the full Budget breakdown and insights from ASPI’s Dr Marcus Hellyer.
ADM Comment: The Defence Budget is short on surprises or big announcements but is solid in working towards the goals outlined in 2016 in the Defence White Paper.
The Budget as a whole is firmly in election mode, with measures and narratives based firmly on firming up swinging voters.
For Defence, it’s good news; steady as she goes on an upward trajectory towards a true fifth generation ADF.
Truly, the biggest challenge is spending the money allocated for the coming forward estimates period of four years. There’s a lot of steel to be turned into ships, vehicles and aircraft and will need even more sand to be turned into circuit boards to then run them all.
In a nutshell, there are a lot of good problems to have in Defence.