Military Spending

Australia plans to double its annual defense spending in the next decade. Australia will increase its defense spending by nearly 30 billion Australian dollars, or about 21 billion US dollars, over the next 10 years. The move is in response to the changing nature of regional security, such as China's maritime expansion. Australia's Prime Minister Malcolm Turnbull announced the country's 2016 Defense White Paper on 25 February 2016. The paper says Australia's prosperity depends on the stability of the Indo-Pacific region. The paper expressed Australia's concern over the unprecedented speed and scale with which China has been building artificial islands in the South China Sea. The paper says Australia opposes the use of those islands for military purposes.

The Government’s defence strategy is supported by increased defence funding, which will grow to two per cent of Australia’s Gross Domestic Product by 2020-21, three years ahead of the Government’s 2013 election commitment. The Government’s funding plan provides $29.9 billion more to Defence over the period to 2025-26 than previously planned, enabling approximately $195 billion of new investment in Defence capabilities in this period.

The Commonwealth government’s defence budget has been tipped to surge to a compound annual growth rate (CAGR) of 5.05 per cent between 2022 and 2026 in a Janary 2022 report published by analytics company GlobalData. The report — Australia Defense Market: Attractiveness, Competitive Landscape and Forecasts to 2026 — has suggested the surge would be driven by a spike in acquisition costs as Defence accelerates its push to modernise air, land, and maritime capability amid heightened security threats in the Indo-Pacific. Over the same period, defence spending as a proportion of GDP is tipped to remain above 2 per cent despite COVID-induced economic constraints.

The acquisition budget is expected to hit US$17 billion (AUD$24.3 billion) in 2026, representing a CAGR of 6.43 per cent. The Government's investment in defence capability represents one of the largest discretionary items in the Commonwealth's budget. Department of Defence (Defence) and Defence Materiel Organisation (DMO) have over $100 billion worth of military equipment under sustainment, in the process of acquisition, or being planned over the next ten years. This includes the management of some 230 major projects worth over $20 million each and the sustainment of over 100 Australian Defence Force (ADF) fleets, platforms and weapon systems. The size of this task has seen DMO grow to over 7,000 employees with an annual budget of nearly $10 billion. This makes it larger than over half of the current Departments of State.

Defence funding was increased in the 2001-02 Commonwealth Budget and forward estimates to address a number of specific priorities detailed in the 2000 Defence White Paper. The White Paper provided a funding commitment for Defence of around $29.4 billion (b) (in 2007-08 dollars) over the decade from 2001-02. This funding injection equates to an increase of some 3% of average real growth per year over the period.

In the May 2005 Australian federal budget (), $13.1billion was allocated to defense, at 1.9% of GDP. This represents a 3% increase on the previous budget, a figure that has been maintained annually since the year 2000. Increased operational activity has accounted for much of the increase, with someanalysts in the industry claiming that the capital budget shouldreceive a greater level of funding to avoid impending block obsolescence. The capital equipment and facilities budget in theMay 2005 budget was $3.5 billion, close to a four-year average.

The Australian defense budget was increasing steadily at 3% overall as of 2006, when it stood at close to $14 billion. A recent expansion in operational activities, encompassing security, reconstruction and peacekeeping activities has stretched the budget, with some slippage in the timing of capital equipment acquisitions.

In the 2007-08 federal defense Budget, Australia made a spending commitment of $18.5 billion, an increase of 10.6% over the previous year. Following efficiency reviews beginning over a decade ago, the emphasis on defense resources has progressively moved to the sharp end - increasing the ratio personnel in combat and combat-related positions from 45% to 67% over the past eleven years. In just over the past twelve months, $35 billion of new funding has been added to the Australian Defense Department forward to the year 2017. Australia is determined to acquire the military means to deter and protect itself against threats to its sovereignty and economic assets.

Other national security agencies had been granted large budget increases, boosting both defense and security capability. While investing in new capability is one thing, maintaining equipment at a high level of readiness is another. Defense Focus identifies investment in new equipment in each issue - but behind the major platforms is a solid investment in spares and repairs to maintain readiness. A $3.4 billion allocation has been made over the next ten years to ensure a high level of war fighting capability.

The DMO managed over 200 major capital equipment projects, and over 100 minor projects, across more than 50 locations in Australia and overseas. It also purchases and maintains equipment in support of operations. DMO is the manager of one of the largest inventories of physical assets in Australia, with $19.7 billion of in-use specialized military assets, $7.5 billion of asset under construction, $1.5 billion of general stores and fuel, and over $1.8 billion of explosive ordnance.

Defence Capability Plan

The most concrete expression of Government's priorities for the development of the ADF is the Defence Capability Plan (DCP). An unclassified version of the DCP is published every two years or so to inform industry of the nature and size of prospective projects. The DCP is a costed, rolling ten-year program of as yet unapproved major capital equipment projects. In the past, cost and schedule estimates in the DCP have shown a persistent trend to significantly underestimate the cost and time needed to deliver capability. This is especially the case for new entries in the later years of the plan. The Australian Strategic Policy Institute stated that since 2000: "For the twenty-five projects that have been approved, costs rose from an initial estimate of $16.5 billion to $29 billion-a 76% increase."

The military capabilities of the Australian Defence Force have a 'life cycle' that begins with the identification of a current or future capability gap. That is, a shortfall between what the ADF has the capacity to do and what Government wants it to be able to do. This is progressively translated into a new capability system, or an upgrade to an existing system, which is then maintained in service until withdrawal. Once a capability is withdrawn from service, its physical assets are disposed of and associated personnel redeployed.The Capability Life Cycle is divided into five phases - Strategy and Needs, Requirements, Acquisition, In-Service (Sustainment), and Disposal.

A major review of Australia's national security was released December 15 2005. It outlined current threats and challenges facing Australia, and the measures the Federal Government is taking to keep Australia secure. The report concluded that terrorism, the proliferation of weapons of mass destruction, and the consequences of state fragility and failure remain the most immediate strategic challenges for Australia. Consequently, it concludes, the ADF needs to confront current international security issues such as terrorism in Iraq and Afghanistan whilst helping build capabilities in South East Asia. It also determined that a competitive defense industry is critical to support, sustain and upgrade defense assets.

A major review of Australia's national security was released on 05 July 2007. Like its predecessors in 2003 and 2005, Defence Update 2007 reflects the Australian Government's commitment to regularly review the balance of concepts, capabilities and forces to meet strategic challenges as they arise. Defence Update 2007 sets out Australia's strategic outlook and the measures being taken to ensure Australia's security is maintained. The Federal Government chose a conference being held in Adelaide in July 2009 to release its Defence Capability Plan, which charts opportunities for defence industries.