In an opinion piece in today's Australian Financial Review, I argue that US concerns about Australian defence spending are very real and that the Defence Minister's comparisons between Australian and US defence austerity budgets are very misleading. This is for four reasons:

  • Australia's defence cuts are more serious, sudden, and sharp than those in the US.
  • Australia is starting defence cuts from a lower baseline (US spending increased form 3.1% to 4.7% of GDP over the past decade; Australia's remained near constant at 1.8%).
  • There is a more pressing need for modernisation of equipment in the ADF than in the US military.
  • And, finally, US officials are talking candidly about the consequences of such cuts whereas Australian officials are not.

The last point is the most critical. Reducing defence spending is an entirely legitimate policy option. There are arguments out there that recommend reducing our spending on armaments below even the current 1.56% of GDP.

I happen not to agree with them. But what stinks in current defence policy is that the Government is not articulating an argument for lower defence spending and reduced defence capability. It is instead pretending that reduced expenditure will not undermine plans to modernise the ADF, or limit Australia's ability to match our middle power aspirations with a middle power defence force.

It's tricky talk and has been criticised by every defence expert in the country, including the Chief of Army, a former Secretary of Defence and even members of the Government. Yesterday, former defence minister Joel Fitzgibbon spoke out, saying Australia should be spending around 2% of GDP on defence.

The Defence Minister, Stephen Smith, echoed this view here at the Lowy Institute on 10 August, stating: 'Obviously I would prefer that it was closer to 2%.' Surprisingly, this has not been reported by the media until now.

Think through the implications of this. If Smith is right, then the Government needs to find another $6 billion to invest in the defence budget and it's goodbye to either the Gonski recommendations or the much vaunted surplus. The alternative is that, by the Minister's own analysis, defence remains under-funded by nearly 25%, and yet he continues to assure that all is well and there will be no loss of military capability.

Instead, most defence experts, including my colleague Hugh White and the US Pacific Commander Admiral Locklear, believe that the minimum credible level of Australian defence spending is 2.5%. That would mean increasing the defence budget by more than $10 billion next May.

AUSMIN, which starts today, will be a critical test for Australia. I've argued before that there are three things that will trigger deep reform: strategic shock or failure of the ADF to respond to a contingency, increased politicisation of defence issues, or criticism from our major ally.

Stephen Smith may have a tough time convincing our great and powerful friend that our defence capability remains credible. But then, as US military commander Stonewall Jackson said, 'If I can deceive my friends, I can make certain of deceiving my enemies.'

Photo by SXC user jimjarmo.