Derek Woolner is a Visiting Fellow at the Strategic and Defence Studies Centre, ANU. He was Director of the Foreign Affairs and Defence Group in the Commonwealth Parliament’s research service till 2002.

The debate in The Interpreter over the consequences of the reduced Australian defence budget has morphed over the last month, moving from why such shortsighted policies should eventuate to how Australia's intervention in East Timor in 1999 might be a warning of the consequences of restricted defence funding.

Yet so far, there has been little discussion of the role of the actual folding stuff and hence the conclusions drawn may be a little less than helpful. Several themes need to be considered and I'll attempt to address them over a few posts.

Chief of Army, General Morrison, set the tone in an exposition of the consequences for his Service of the budget reductions. General Morrison cited memories of an Army run down after the Vietnam War, which he thought had been due to a national rejection of defence preparedness. Jeff Grey has expanded on this theme on The Interpreter.

I've put down a somewhat different interpretation in the Canberra Times and it's worth discussing the topic of funding Australian defence during the 1970s, '80s and '90s in a little more detail.

For a start, reductions in defence expenditure did not begin after Vietnam. The 1969-70 defence budget reduced expenditure by 5% at current values. With over 8300 personnel in South Vietnam marking the height of Australia's commitment to the conflict, Defence Minister Alan Fairhall said in his budget speech: 'The idea that government must increase defence spending year after year, or that it should maintain some fixed relationship to gross national product is patiently absurd...'

There were good reasons for such thinking. The ADF had largely completed the build up from a previous period of neglect, having acquired such stalwart equipment as Chinook helicopters and M113 personnel carriers. The national service scheme that boosted Army manpower had matured.

Army strength declined after Vietnam simply because National Service was abolished in one of the earliest and most popular moves of the Whitlam Government. But that did not mean that either it or subsequent governments dismissed the need for defence preparedness. After all, this was still the Cold War and Australia had to deal with inconvenient offshoots of Vietnam, such as America's Guam Doctrine, which demanded greater self-reliance from US allies in their own defence.

The 1976 White Paper, the first to seriously tackle defence funding, proposed a five-year program with 5% real annual increase in appropriations. Following the Soviet invasion of Afghanistan in 1979, Prime Minister Malcolm Fraser feared an outbreak of global conflict, responding with revised defence objectives that forced funding increases to an annual level of 6%. He ordered a fourth FFG-7 frigate and planned an almost 50% increase in the Army Reserve.

Neither of these plans went more than 18 months before defence spending was drastically reduced, so Kim Beazley's 1987 White Paper proposed a more 'realistic' objective of a strategy that could be funded with between 2.5% and 3% of GDP, in effect translating to a rate of real growth in line with average GDP increase at around 3% per annum. Even sustaining defence funding at this level proved impossible and across the 1990s it fell by 2.8% in real terms.

In retrospect these results were not surprising. The post-Vietnam period was one of economic turbulence, stretching from the 'oil shocks' of the 1970s through stagflation, a wages breakout, currency and balance of payments crises to Paul Keating's 'recession we had to have' in 1993. From 1976 to 2000 the Commonwealth budget ran 18 deficits and only seven surpluses. These circumstances brought sharp, sometimes unexpected, contractions in defence funding.

At present, fiscal parameters look very like those of the last decades of the 20th century. The Commonwealth 2008-09 budget deficit, equivalent to 4% of GDP, was larger than any pre-2000. Although the Australian economy is sound, the fallout from the global financial crisis is far from resolved. The first three-quarters of the 2000 decade, which has provided the standard for the ADF's expectations of orderly and adequate capability development, may yet prove to have been an anomaly.

If you don't think the Commonwealth's fiscal problems are serious have a look at this innocent little figure prepared by ASPI's Andrew Davies. That's right; Commonwealth revenue is now a slightly lower portion of GDP than it was during the 1993 recession.

Photo courtesy of Wikipedia.