![]() Graph 3: Budget expenditure for selected functions as a percentage of total outlays In 2010, ASPI estimated that in order for Australia to substantially improve its defence capabilities, a minimum of 3.1 per cent annual growth in the Defence budget would be required. This estimate was obtained by extrapolating from historical trends, a method which ASPI acknowledges cannot claim to be definitive and ‘is at best indicative of the likely cost of maintaining a force of the sort we have today’. ĪSPI has in the past estimated that real growth of around 2.65 per cent in the defence budget was necessary in order to maintain capability levels. … the observed growth in defence spending largely reflects the rising intrinsic cost of delivering modern military capability. Spending on defence has risen in dollar terms since 1995 (when it was $9.7 billion), but as the Australian Strategic Policy Institute (ASPI) points out: Graph 2: Defence expenditure 1901–2015 expressed in real terms Graph 1: Defence expenditure as a proportion of GDP and total expenditure The 2010 Intergenerational Report stated that, based on the funding model contained in the 2009 Defence White Paper, spending on defence was expected to be 1.8 per cent of GDP by 2029–30. It is notable that the last time the defence budget was at 2 per cent of GDP was in June 1995. This would imply, based on 2011–12 funding, an increase of $7.8 billion. The 2013 Defence White Paper states that the Government’s ‘long term objective’ is to move defence funding towards a target of 2 per cent of GDP. It is also striking how quickly expenditure falls at the end of both the World Wars as the large numbers of people serving are discharged from the services.Īnother notable trend is that defence spending has been in gentle decline since around 1988. ![]() Defence spending also increased during the conflicts in Iraq and Afghanistan but because GDP and total government expenditure rose over the same period this increase does not show as a bump in the graph. As Graphs 1 and 2 indicate, Australia spends more on defence during times of war, most strikingly during the two World Wars, but also to some extent during the Korean War and the Vietnam War. ![]() In light of this sort of commentary, it is useful to look at some of the longer term historical trends in defence spending. By contrast the US is spending 4.7 per cent of GDP on defence, Britain 2.6 per cent, South Korea 2.5 per cent and Singapore 3.6 per cent. This reduces Australian defence spending to 1.56 per cent of GDP, the lowest it has been since 1938. What is worse is that in 2010-11 it cut the defence budget by almost 5 per cent and then in the recent budget it cut defence spending again by 10.47 per cent. However, the reality is that since the government was elected it has delivered 3 per cent real growth in only three of the six defence budgets it has brought down. Then in the 2009 Defence White Paper the government committed itself to 3 per cent real growth to 2017-18 and 2.2 per cent real growth from then until 2030. When the Labor government was elected in 2007 it did so on a platform of maintaining the Coalition's long-running trajectory of 3 per cent real growth in defence spending a year. A good deal of this commentary was critical of the Government: These cuts and the continued deferral of expenditure to fulfil the 2009 Defence White Paper’s ambitious capability program prompted a great deal of commentary which, amongst other things, stated that Australia’s defence spending, expressed as a percentage of GDP, was at its lowest point since 1938. The 2012–13 Budget saw Defence funding cut by $5.5 billion across the forward estimates. ![]() This Budget Background Brief provides a historical perspective in which to view the 2013–14 Defence budget by setting out some long-term trends in the funding of defence in Australia and highlighting some key factors underlying these trends.
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