Saturday, May 02, 2009

Our Defence Department is hopeless with money..

So we're going to give it more. Heaven knows why

DESPITE warning that it would "reckless" to commit substantial new resources to Defence in the midst of the global economic crisis, the defence white paper has handed the department billions in new resources and locked in the funding for the next 20 years.

It is a treatment more generous than afforded any other arm of government.

Whereas other arms of the Commonwealth will have their budgets stripped back each year in order to comply with efficiency dividends, Defence has not only been guaranteed the previously-promised annual 3 per cent real growth in funding until 2017-18, but an extra 2.2 per cent a year until 2030.

To make planning easier it has been told in advance what the inflation component will be: 2.5 per cent per year, which is the Reserve Bank's inflation target.

It guarantees that by 2030 the Defence budget will be some 70 per cent bigger than it is today...

...and it almost certainly means it will be bigger as a proportion of government spending.

The white paper has made the commitment despite a scathing assessment of the way Defence manages the money it has right now.

Among its urgent concerns, that Defence "become a cost-conscious enterprise," that it strengthen its ability "to understand and manage costs and financial risks," that it focus on "improving the way it plans and manages major acquisitions."

Such an improvement "will be critical in providing Government with increased levels of confidence with respect to cost, schedule and technical risk when it considers major Defence projects," the paper says.

The government believes there are $20 billion of savings to be made in Defence over time, a large figure for an organisation with a current annual budget of $25.6 billion.

It has promised to let the department keep the savings, while putting an elaborate structure in place to ensure they are actually made.

The department will have to develop "detailed implementation plans for which senior leaders will be held accountable". From the middle of next decade those managers will have their annual budgets docked by a "productivity dividend" which will differ from other departments' efficiency dividends in that it will be kept by the organisation and used in other ways.

The process will be overseen by a new Defence Strategic Reform Advisory Board to be chaired by someone from the private sector who has the "skills and experience to advise on a significant reform program in a large and complex organisation".

The board will report directly to the Minister for Defence and will have on it in addition to Defence chiefs, the heads of the departments charged with keeping Defence in check - Treasury, Finance and Prime Minister and Cabinet.

So, why give Defence the extra billions?


CLIMATE CHANGE and the global economic crisis run the risk of exacerbating conflicts and breeding extremists in the nations to Australia's north according to the defence white paper.

The paper says that while large-scale stratgeic consewquences of climate change are not likley before 2030, rising sea levels, changed rainfall patterns and drought will place greater pressure on water and food in our region, including on local fisheries.

"Some South Pacific nations will be placed under significant stress," the paper says, requiring "external assistance to manage the consequences of climate change and to respond to natural or man-made humanitarian crises or disasters".

Should Australian and international assistance fail to mitigate "the strains resulting from climate change or resource security issues, and they exacerbate existing precursors for conflict, the Government would possibly have to use the defence force as an instrument to deal with any threats inimical to our interests".

"It may be that the new potential sources of conflict related to our planet's changing climate, or resource scarcity give rise to very old forms of confrontation and war, such as clashes between states over resources," the white paper says.

The global economic crisis "has already led to low levels of instability and protest".

"Fragile and vulnerable nations, particularly in our region, maintain few significant reserves with which to buttress their economies," the report says, pointing to "the potential for extremists in Southeast and South Asia and elsewhere to seek to capitalise on resentment fuelled by economic woes".

China is likely to be able to continue to afford to expand its military spending at a time when other Asia Pacific nations including the United States may have to cut back.

"Any future that might see a potential contraction of US strategic presence in the Asia-Pacific region with a requirement for allies and friends to do more in their own regions, would adversely affect Australian interests, regional stability and global security, the paper says, noting that even so, the US has large interests in remaining strategically engaged in the region.

It sounds to me like a grab-bag of catchy excuses. I'd love to hear what other people think.

Treasury staff don't much like the idea.