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Begin New Search Political Geography Australia/Pacific Author Marcus Hellyer

1. ASPI AUKUS update 2: September 2022—the one-year anniversary

Author:
Malcolm Davis, Ben Stevens, Alex Bristow, and Marcus Hellyer
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
Consistent with a partnership that’s focused on the development of defence and technological capability rather than diplomatic grandstanding,1 there have been few public announcements about the progress of AUKUS. That’s an observation we made in our first AUKUS update in May,2 and one we make again in this latest update, one year on from the joint unveiling of the partnership in mid-September 2021. Periodic press releases note meetings of the three-country joint steering groups—one of which looks at submarines and the other at advanced capabilities—but provide little hint about what was discussed.3 On Submarines, we shouldn’t expect to hear anything concrete until the 18-month consultation phase concludes in March 2022. What’s changed, however, is that the strategic environment that gave birth to AUKUS has worsened markedly, most notably in Russia’s invasion of Ukraine and China’s escalating pressure on Taiwan and other parts of the Indo-Pacific. Those developments are making the advanced technologies AUKUS aims to foster even more relevant.
Topic:
Diplomacy, Treaties and Agreements, Partnerships, and AUKUS
Political Geography:
Australia and Australia/Pacific

2. The Cost of Defence: ASPI Defence Budget Brief October 2022–2023

Author:
Marcus Hellyer
Publication Date:
11-2022
Content Type:
Policy Brief
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
Shortly before the recent election, the previous government released a defence budget that continued its record of delivering the funding it promised in the 2016 Defence White Paper (DWP) and subsequent 2020 Defence Strategic Update (DSU). The Albanese government’s first budget was not designed to focus on Australia’s security situation or defence spending. Tasked with sharing Australia’s difficult economic situation with the Australian public, the budget has more immediate fish to fry. For those Australians who want to see increased defence spending, this was not going to be that budget as it would have directly undercut existing defence reviews due within months. Certainly, the Prime Minister has stated that the government will do whatever is necessary to ensure Australia has the defence force it needs in these strategically uncertain times. But this budget gives no indication of how much the government is willing to spend to do that. With the Defence Strategic Review (DSR) under Stephen Smith and Angus Houston conducting its work and not due to report until March next year, the government has stuck with the existing funding line it inherited from its predecessor. That’s an artefact of the 2016 Defence White Paper—a document developed in a different era and quickly overtaken by events. So Defence is in a holding pattern while the government keeps its powder dry and waits for Smith and Houston (noting their interim report has recently been handed to the government). No doubt it has had conversations with the DSR leads indicating its comfort zone for additional spending, but that hasn’t been made public. What we can say from the information set out in this budget is that any increase to defence spending will require difficult reprioritisation. While the government received a revenue windfall this year due to high commodity prices, those are forecast to return to normal. And with the government committing to deliver the tax cuts agreed by its predecessor, its income is under further pressure. At the same time, it’s facing five growing spending pressures: interest on the growing debt, the National Disability Insurance Scheme, health care, aged care, and defence—and that’s before any increase to the existing defence funding line. The result is a forecast for deficit spending for the next 10 years. That’s not a good situation for the DSR leads. They’re tasked with delivering new military acquisitions faster in the next decade, but the existing acquisition plan is probably already unaffordable (without increased spending), with many entirely new capabilities or expensive replacement projects. And with nuclear-powered submarines and frigates on the untouchable list, the challenge of delivering more sooner gets even harder, as those two programs will consume tens of billions of dollars over the coming decade even before they deliver their first vessels. Moreover, inflation is rapidly eroding Defence’s buying power by billions of dollars every year. By the end of the forward estimates, Defence may have lost around $18 billion in buying power even if inflation rapidly returns to the Reserve Bank of Australia’s target rate. That’s the budget papers’ predictions, but those predictions haven’t been very accurate in recent years. This year, despite nominal growth of over 7% in defence spending, real growth is under 1% once inflation is taken into account (although, with inflation difficult to predict, it’s also difficult to reliably quantify real growth). It’s hard to see Defence affording its ambitious acquisition program with a budget that’s essentially static in real terms. Inflation is also driving nominal GDP growth at a predicted 8% this year. That means that defence spending is falling as a percentage of GDP for the second year in a row despite the government delivering the funding set out in the 2016 Defence White Paper and 2020 Defence Strategic Update. Predicted defence spending has also fallen significantly just since the March budget, from 2.11% to 1.96%, despite the funding line remaining fundamentally unchanged. In summary, there is no pot of gold available to cover increased defence spending. That doesn’t mean the government can’t or won’t increase defence spending, but any increase will require either higher taxes (which appears unlikely, since the government is proceeding with its predecessor’s planned tax cuts), greater borrowing (accelerating the vicious cycle of debts and deficits), or cuts to other priorities that have constituencies of their own. When we look at Defence’s big three areas of spending—capital acquisitions, people and sustainment—there have been no significant changes since the March budget. With the Australian dollar at a 20-year low against the US dollar, the Defence budget has received a large automatic top-up to maintain its purchasing, but there’s no adjustment to compensate for inflation. There are a few changes to spending, but they’re broadly consistent with what we would see in a mid-year budget update. For those who follow capability, the top 30 acquisition projects and sustainment products hold some interesting information, but the lists are quite consistent with previous plans. We’ll have to wait for the outcomes of the DSR to see anything new. Similarly there’s been no adjustment to Defence’s personnel allocation since March. But that still means the ADF needs to find roughly 13,000 more people this decade to operate the capabilities on its shopping list, even though it’s only managed to grow by an average of 300 per year since the 2016 White Paper. Smith and Houston may need to consider whether it makes sense to acquire capabilities that the ADF can’t crew, or at least how the ADF can maximise its combat power without many additional people. Of course, another HR strategy is one based on ‘if you build it, they will come.’ The situation is also difficult with Defence’s civilian and external workforce. To deliver its ambitious capability program, Defence has relied on growing numbers of contractors. They’ve helped Defence spend record amounts in its acquisition programs in recent years, despite the impact of Covid-19; however, they come at a cost. That growth may be over; in the October budget, the government is seeking $144.6 million in ‘savings from external labour and savings from advertising, travel and legal expenses’. That’s not a large percentage of Defence’s total budget but, if it means the organisation can’t hire the people it needs to manage the acquisition program, it’s hard to see how Defence will deliver more capability sooner. Overall, while there were no surprises, the October budget hasn’t made the job any easier for Smith and Houston.
Topic:
National Security, Budget, Economy, Industry, and Defense Spending
Political Geography:
Australia and Australia/Pacific

3. ‘Impactful projection’: long-range strike options for Australia

Author:
Marcus Hellyer and Andrew Nicholls
Publication Date:
12-2022
Content Type:
Special Report
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
The Australian Government has stated that the ADF requires greater long-range strike capability. This was first stated by the previous government in its 2020 Defence Strategic Update (DSU), which emphasised the need for ‘self-reliant deterrent effects’. The present government has endorsed that assessment: Deputy Prime Minister and Defence Minister Richard Marles has stated that ‘the ADF must augment its self-reliance to deploy and deliver combat power through impactful materiel and enhanced strike capability—including over longer distances.’ He’s coined the term ‘impactful projection’ to describe the intended effect of this capability, which is to place ‘a very large question mark in the adversary’s mind.’ The term may be new, but the concept is not. To us, it’s a restating of the concept of deterrence by denial; that is, having sufficiently robust capabilities to convince an adversary that the cost of acting militarily against us isn’t worth any gains that might be made. But the need for the ADF to have those kinds of capabilities has become much more urgent. As the 2020 DSU noted, we no longer have 10 years of warning time of conventional conflict involving Australia. Moreover, this is not just the prospect of conflict far from Australia’s shores. People’s Liberation Army (PLA) force-projection capabilities have grown dramatically in the past two decades and include long-range conventional ballistic missiles, bombers and advanced surface combatants that have already transited through Australian waters.
Topic:
Defense Policy, NATO, and Economics
Political Geography:
Russia, China, Europe, Australia, and Australia/Pacific

4. The Cost of Defence 2020-2021. Part 1: ASPI 2020 Strategic Update Brief

Author:
Marcus Hellyer
Publication Date:
08-2020
Content Type:
Policy Brief
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
The Defence Strategic Update (DSU) represents a remarkable commitment by the Australian Government to sustained growth in the defence budget. Released on 1 July after months of bad economic news caused by the Covid-19 pandemic and growing budget deficits caused by the government’s measures to mitigate the economic pain, the DSU nevertheless confirms the robust funding line presented in the 2016 Defence White Paper (2016 DWP) and extends it for a further four years. This means the defence budget will continue to grow past 2% of GDP, and indeed at a faster rate than before the Covid-19 pandemic hit. Measured from a starting point in 2019–20, the budget is planned to grow by a remarkable 87.4% over the coming decade. Why did the government make that commitment? It’s clear from the DSU that it’s very concerned about Australia’s strategic circumstances, which it assesses as having deteriorated significantly in the four years since the 2016 DWP. It states that the region is in the middle of the most consequential strategic realignment since World War II. That brings significant uncertainty and risk. The government regards robust military capabilities as essential to managing it. The DSU marks a clear break from previous high-level strategic statements in the frank way it describes those risks and the new capabilities needed to address them. It also makes several key adjustments to strategic policy settings: It redefines our immediate region to an arc from the northeastern Indian Ocean, through maritime and mainland Southeast Asia, to Papua New Guinea and the Southwest Pacific. It’s still a huge area. It prioritises the immediate region for defence planning. It introduces the concepts of ‘shape’, ‘deter’ and ‘respond’ to focus defence planning. The emphasis on shaping reinforces the importance of regional engagement and partnerships in creating a region conducive to our interests. It states that a largely defensive force won’t deter attack. Instead, ‘new capabilities are needed to hold adversaries’ forces and infrastructure at risk from a greater distance. They include longer range strike weapons, cyber measures and area-denial systems.’ It acknowledges that Australia can no longer rely on warning time, even for a conventional military attack on Australia, and so won’t have time to ‘gradually adjust’ military capabilities. While the redefinition of the immediate region might not in itself result in changes to the defence investment program—now known as the Force Structure Plan (FSP)—the other factors listed certainly will. To acquire new capabilities, the growth in the DSU’s funding model continues the pattern of the 2016 DWP. That means the capital component of the budget grows to 40% of the total budget and stays there. That’s a far higher percentage than has historically been the case. By the end of the decade, if that planned increase is achieved, the acquisition component of the budget will have grown by 148% in nominal terms from its 2019–20 start point. Despite the broader economic and budget uncertainty, this means that Defence is in the fortunate position of being able to add some significant new capabilities to its shopping list. Perhaps the most remarkable feature of the FSP is that the ADF has entered the ‘age of missiles’ with a vengeance. There’s potentially $100 billion in investment over the next two decades in missiles and guided weapons. That includes the offensive systems needed to deter and defeat an adversary from a greater distance, such as hypersonic weapons. Even the Army is acquiring long-range missiles. But it also includes greatly enhanced defensive systems, such as ballistic missile defence, which is something Defence has considered for a long time but never previously committed to. That’s a clear sign that the region is getting much more dangerous. While the FSP is short on detail, the big picture it paints is pretty clear. It’s one in which the ADF continues its trajectory of steadily fielding improved capability and developing greater strategic weight. But there are risks, both in the design of the plan itself and in delivering it, that need to be managed. It must be said that Defence’s planning processes are improving along with its costing methodologies, so it’s likely that these are risks that it has considered in the development of the DSU and FSP. The first set of risks relates to the question of whether this is the right force for our deteriorating circumstances. Despite the recognition that Australia can’t rely on warning time, much of the planned force is still a long way off in the future. The first future frigate won’t be operational for 10 years and the first future submarine for 14, and subsequent vessels are to be delivered only on a two-year drumbeat. The Air Force isn’t getting additional air combat aircraft beyond its 72 F-35As until late in the decade. Most of the major new additions to the force structure are also some way off in the future. There’s a funding line that potentially provides a way forward to get Boeing’s Loyal Wingman unmanned aerial vehicle into service, but most of the big buckets of funding for unmanned and autonomous systems are still late in the 2020s or even in the 2030s. Until then, it looks like Defence is relying on improved weapons delivered from existing platforms to provide the main capability enhancement. Also, the force envisaged in the DSU and FSP is growing increasingly broad. There are many new capabilities in the plan, but virtually none are being retired or cancelled. Similarly, the range of tasks that the force is being asked to do isn’t being reduced. In fact, the DSU requires greater regional engagement as well as greater capacity for domestic disaster response—but will the force be able to do all the tasks expected of it? Related to this, our changing strategic environment seems to be pulling the force in two directions. The DSU states that we can’t match major-power adversaries and need to develop capabilities to deter them through strike, cyber and area-denial systems. This suggests a growing recognition of the need for asymmetric operational concepts and capabilities, yet the force is still largely being built around traditional, conventional capabilities such as expensive, multi-role, manned platforms of the kind Australia has relied upon to overmatch potential adversaries. Defence is also investing in an increasingly heavy conventional land force. That’s likely to be useful against some potential non-peer adversaries—but does it play a deterrent role against a major-power adversary? There’s also the question of balance between acquisition, sustainment and personnel funding. Acquisition’s share of the budget is growing rapidly. Personnel’s share is also growing but more slowly, and will decline as a percentage of the overall budget. The DSU states that the government will consider increases to Defence’s workforce next year, but those numbers are already accounted for in the DSU’s personnel funding stream, suggesting that any additional people won’t change the overall trajectory of personnel’s share of the budget. Certainly, increased capital spending is necessary, but is a 40% acquisition / 26% personnel balance feasible in the long term? There’s no point acquiring equipment you can’t crew. Then there are a set of risks that relate to the feasibility of delivery. The first, as ever, is money. The economic future of both Australia and the world is still very uncertain. If the economic impact of Covid-19 results in prolonged economic stagnation, it’s going to take sustained resolve by this and future governments to keep increasing defence funding over the decade. Should that resolve waver and a government revert to something like 2% of GDP, that would be a huge hit to the defence budget of potentially $5–10 billion per year, with a resultant cut to either existing core capabilities or the planned new ones. The government has already stated that it’s committed to Defence’s ‘megaprojects’ and that they aren’t part of any prioritisation or trade-off process, so other things will bear the brunt of any funding hit—potentially, the new asymmetric capabilities being introduced to deter a major-power adversary. Then there’s the very difficult question of the affordability of the force. The defence budget is growing substantially, but so is the list of capabilities Defence is acquiring and sustaining. The acquisition cost of military capabilities grows much faster than inflation. Since 2016, several key capabilities have grown significantly in cost (including submarines, frigates, armoured vehicles and air defence). Moreover, sustainment costs are also growing. The sustainment cost of key future capabilities is likely to be several times greater in real terms than the systems they’re replacing. One of the biggest implementation risks relates to Australian industry’s ability to scale up to deliver the force. The local share of Defence’s capital equipment spend has consistently hovered around one-third of the total. Last year, that was around $2.6 billion. As the capital budget rapidly grows over the decade, local acquisition spending will have to grow to over $7 billion per year just to maintain that one-third share. But it’s clear the government wants that share to grow. It has to, if we’re going to address the supply-chain risks currently inherent in defence capability. Getting to between 40% and 50% means the local acquisition spend will need to reach around $10 billion per year. That’s a lot of money for Australian industry to absorb and a lot of capability for it to deliver, but, if it doesn’t get there, the government won’t achieve the level of sovereign capability that it’s seeking and we’ll continue to rely on imported systems, with the attendant supply-chain risks. While the basic settings of the government’s 2016 defence industry policy statement are the right ones, it’s likely that it’s going to have to do more to develop the kind of local industrial ecosystem necessary to deliver the level of sovereign capability described in the DSU and FSP. Relying on the local assembly of foreign designs using mainly foreign high-value subsystems isn’t going to get us there. More needs to be done to generate technological innovation and advanced manufacturing here. There are only minor increases to innovation funding in the DSU, for example. The new line in the FSP to develop sovereign weapons manufacturing could be a model for a more deliberate approach to generating sovereign industrial capability. The other risk associated with industry policy is the old one of falling into the trap of preferring industrial outcomes to military capability. That risk has already been realised. Some of the hidden costs of continuous-build programs are becoming more apparent: the FSP states that the cost increase for the Future Frigate Program was caused by the government allocating ‘additional funding to enable construction of ships at a deliberate drumbeat over a longer period of time than originally planned to achieve a continuous shipbuilding program’. That is, we’re deliberately paying more to get capability later. The DSU acknowledges that we can no longer rely on warning time to be able to gradually adjust military capability, so surely now’s the time to be spending to accelerate delivery and the rate at which we ‘adjust capability’, not slow it down. If we’re willing to pay a premium to build here, let’s pay it to get more capability sooner, not later. Why are we prioritising jobs for future generations of shipbuilders over capability for current servicemen and women who may be called upon in the near future to use it? The new strategy has been written, and the government most certainly understands the urgency driving its defence policy changes. The key question is whether Defence can sufficiently internalise that urgency to implement the changes needed in how the organisation does business. The Minister for Defence, Linda Reynolds, stated on 7 August that ‘the Defence Department … has systematically for over 100 years failed to deliver on the government’s expectations of the enterprise.’ We now have a plan that calls for speed, lateral thinking, innovation and partnerships—to be implemented by an organisation that’s slow, subject to groupthink, risk averse and reluctant to reach out. Adapting Defence to the demands of our new reality is going to be challenging, to say the least.
Topic:
Defense Policy, Budget, Economy, Economic Growth, and COVID-19
Political Geography:
Australia and Australia/Pacific

5. Accelerating autonomy: Autonomous systems and the Tiger helicopter replacement

Author:
Marcus Hellyer
Publication Date:
12-2019
Content Type:
Special Report
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
The benefits of autonomous systems on the modern battlefield have been widely recognised, yet Defence has only slowly adopted them. It continues to invest heavily in manned platforms that are increasingly expensive but still expose their crews to constantly proliferating threats. This means that Defence is acquiring small numbers of exquisite manned platforms that could be too valuable and too few to risk losing. Defence has started to explore using autonomous systems on the battlefield, but it’s now time to accelerate their development and adoption by the ADF. A new APSI Special Report, ‘Accelerating autonomy: autonomous systems and the Tiger helicopter replacement’ recommends how Defence can jump start the transition to greater use of autonomous systems. Report author Dr Marcus Hellyer said that ‘Defence has slowly been developing trust in unmanned systems. It’s laid a foundation, now it’s time to do a lot more.’ The report argues that Defence needs to identify areas of capability where autonomous systems can deliver disruptive innovation. Investing in those systems can deliver more capability at less cost than traditional manned systems.
Topic:
Defense Policy, National Security, and Military Affairs
Political Geography:
Australia and Australia/Pacific