Defence is budgeted to spend $35 billion in 2018-19, and $156 billion over the forward estimates. It is our third largest category of expenditure.
Defence represents 7.1% of all Commonwealth expenditure, and 1.8% of GDP in 2018-19. Government policy is to lift this spending to 2% of GDP by 2020-21.
Defence is a very large, very complex activity. It is people intensive, and capital intensive. It is relatively easy – over time – to expand the Defence Force, to acquire additional or more sophisticated capabilities, or, correspondingly, to reduce the number of people and the range of capabilities that Defence has.
It is not feasible at this time to develop estimates based on particular capabilities, force numbers or operational tempo. But it is possible to increase or decrease overall Defence funding, and leave to Defence how these changes are best implemented. This in fact is what is usually done.
You can choose:Given the degree of ‘lock-in’ in capital acquisitions, and the long lead times required to recruit and train additional personnel or to acquire new capabilities it is simply not feasible to rapidly build up or wind back Defence activities in peacetime. For this reason the timeframes to execute the more extreme funding changes (i.e. toward 1% or 3% of GDP) extend well beyond the current forward estimates, and more radical funding options are simply not credible and therefore have not been offered for consideration.
The model does not take into account any second round effects.