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The Advertiser
2 days ago
- Business
- The Advertiser
Arbitrarily increasing defence spending would be a tremendous waste of money. Here's why
The United States is again putting a full-court press on Western nations to boost defence spending. There were reports this week that NATO members are expected to raise defence spending until they spend 5 per cent of GDP on defence. This would include almost doubling spending on defence platforms and assets (from 2 per cent of GDP to 3.5 per cent of GDP) and committing a further 1.5 per cent of GDP on defence-related investments including cyber security. The Treasurer pushed back, saying Australia had already taken significant steps by boosting spending to 2.3 per cent of GDP. He is right to rebuff this target, but not because Labor's defence spending commitment is sufficient for the job. The better reason to reject arbitrary spending levels for defence against GDP is that they tell you almost nothing about the defence capabilities Australia has - or the appropriateness of our defence spending arrangements. In truth, if Australia was to expand its defence spending but continue to spend it in the same way, there is little guarantee of a genuine improvement in our position. Unfortunately, the reality is that both sides of politics have allowed industry concerns and state government parochialism to dominate defence needs when it comes to procurement. There is no better example than our submarine program. Defence ministers continue to insist it is imperative for Australia to have the capability to design and manufacture submarines. This has led to us adopting risky, bespoke submarine designs, creating expensive orphan submarine classes (ones that are used by only one country). Risky procurements like orphan submarines inevitably run over time and over budget. There is also the potential for significant redesign and development costs - especially when those designing and constructing the submarines are effectively learning on the job. The terrible troubles that plagued the Collins Class for the first decade after it was commissioned were a case in point. The fact that we have made so little actual progress on the Collins replacement more than 15 years after the replacement project was first announced is further testament to that fact. Australia is now looking at a path of manufacturing nuclear submarines, an even more complex industry development task than the one we embarked on in the 1980s with the Collins. If Australia wanted to a see an actual return from investing money in industry development, we'd be better off committing to improving the US supply chain for Virginia Class submarines. At least, we'd know from the beginning that those companies can build and deliver a submarine. This is not at all guaranteed should we commit to building an entirely new sub here. Given the risks of cost and time blowouts are well known, why do governments like Australia persist with such a risky procurement strategy? The answer is simple: politics. When it comes to defence spending, there is enormous political pressure from states like South Australia and Victoria to use defence dollars to conduct industry policy. In the case of the submarines, Australia's defence needs have been running a distant second to the need to commit to spending the money in Adelaide. Instead of focusing on how to get the best value capabilities for the money being invested, or ensuring that Australia can fulfil its required defence goals, the states compete to outbid each other for federal defence dollars to be spent in their state. The point is not that Australian defence industry is incapable of producing quality defence equipment; it's that spending the money in Australia for its own sake does nothing for defence. In fact, a disturbing percentage of our defence spending amounts to little more than money laundering handouts to the state governments. In that sense, we are right to push back against NATO and the US. Our approach shouldn't be to raise defence spending, it should be to improve defence capability to meet the tasks required of us. In practice, this means two things. First, Australians need far more clarity on what our defence force is actually for. Without greater clarity on what we are hoping to achieve in the defence space, it is all but impossible for people to understand whether we are headed down the right path. In a world where there is enormous competition for every dollar of government spending, the defence establishment must be as vocal as any other interest group as to why it needs more money. Second, we must genuinely commit to acquiring the capabilities that will best enable us to achieve the goals we have set for our defence force. This may mean some politically unpopular decisions need to be made. So be it. Our politicians are not elected to compete with each other over who can give the most money to the states. In an environment of genuine threats to Australia's safety, we must be ruthless in culling projects that are not meeting our needs. This change in approach should enable us to be far more agile in our defence planning. At the moment, because we are beholden to state government interests, we are committing to defence expenditure decades in advance that may or may not be wasted by the time it is spent. It is clear there has been a significant change in global attitudes to defence and, in particular, defence spending. This is an opportunity for Australia to start taking the issue of defence more seriously. However, throwing tens of billions more dollars at the existing system would be a terrible way to do that. The United States is again putting a full-court press on Western nations to boost defence spending. There were reports this week that NATO members are expected to raise defence spending until they spend 5 per cent of GDP on defence. This would include almost doubling spending on defence platforms and assets (from 2 per cent of GDP to 3.5 per cent of GDP) and committing a further 1.5 per cent of GDP on defence-related investments including cyber security. The Treasurer pushed back, saying Australia had already taken significant steps by boosting spending to 2.3 per cent of GDP. He is right to rebuff this target, but not because Labor's defence spending commitment is sufficient for the job. The better reason to reject arbitrary spending levels for defence against GDP is that they tell you almost nothing about the defence capabilities Australia has - or the appropriateness of our defence spending arrangements. In truth, if Australia was to expand its defence spending but continue to spend it in the same way, there is little guarantee of a genuine improvement in our position. Unfortunately, the reality is that both sides of politics have allowed industry concerns and state government parochialism to dominate defence needs when it comes to procurement. There is no better example than our submarine program. Defence ministers continue to insist it is imperative for Australia to have the capability to design and manufacture submarines. This has led to us adopting risky, bespoke submarine designs, creating expensive orphan submarine classes (ones that are used by only one country). Risky procurements like orphan submarines inevitably run over time and over budget. There is also the potential for significant redesign and development costs - especially when those designing and constructing the submarines are effectively learning on the job. The terrible troubles that plagued the Collins Class for the first decade after it was commissioned were a case in point. The fact that we have made so little actual progress on the Collins replacement more than 15 years after the replacement project was first announced is further testament to that fact. Australia is now looking at a path of manufacturing nuclear submarines, an even more complex industry development task than the one we embarked on in the 1980s with the Collins. If Australia wanted to a see an actual return from investing money in industry development, we'd be better off committing to improving the US supply chain for Virginia Class submarines. At least, we'd know from the beginning that those companies can build and deliver a submarine. This is not at all guaranteed should we commit to building an entirely new sub here. Given the risks of cost and time blowouts are well known, why do governments like Australia persist with such a risky procurement strategy? The answer is simple: politics. When it comes to defence spending, there is enormous political pressure from states like South Australia and Victoria to use defence dollars to conduct industry policy. In the case of the submarines, Australia's defence needs have been running a distant second to the need to commit to spending the money in Adelaide. Instead of focusing on how to get the best value capabilities for the money being invested, or ensuring that Australia can fulfil its required defence goals, the states compete to outbid each other for federal defence dollars to be spent in their state. The point is not that Australian defence industry is incapable of producing quality defence equipment; it's that spending the money in Australia for its own sake does nothing for defence. In fact, a disturbing percentage of our defence spending amounts to little more than money laundering handouts to the state governments. In that sense, we are right to push back against NATO and the US. Our approach shouldn't be to raise defence spending, it should be to improve defence capability to meet the tasks required of us. In practice, this means two things. First, Australians need far more clarity on what our defence force is actually for. Without greater clarity on what we are hoping to achieve in the defence space, it is all but impossible for people to understand whether we are headed down the right path. In a world where there is enormous competition for every dollar of government spending, the defence establishment must be as vocal as any other interest group as to why it needs more money. Second, we must genuinely commit to acquiring the capabilities that will best enable us to achieve the goals we have set for our defence force. This may mean some politically unpopular decisions need to be made. So be it. Our politicians are not elected to compete with each other over who can give the most money to the states. In an environment of genuine threats to Australia's safety, we must be ruthless in culling projects that are not meeting our needs. This change in approach should enable us to be far more agile in our defence planning. At the moment, because we are beholden to state government interests, we are committing to defence expenditure decades in advance that may or may not be wasted by the time it is spent. It is clear there has been a significant change in global attitudes to defence and, in particular, defence spending. This is an opportunity for Australia to start taking the issue of defence more seriously. However, throwing tens of billions more dollars at the existing system would be a terrible way to do that. The United States is again putting a full-court press on Western nations to boost defence spending. There were reports this week that NATO members are expected to raise defence spending until they spend 5 per cent of GDP on defence. This would include almost doubling spending on defence platforms and assets (from 2 per cent of GDP to 3.5 per cent of GDP) and committing a further 1.5 per cent of GDP on defence-related investments including cyber security. The Treasurer pushed back, saying Australia had already taken significant steps by boosting spending to 2.3 per cent of GDP. He is right to rebuff this target, but not because Labor's defence spending commitment is sufficient for the job. The better reason to reject arbitrary spending levels for defence against GDP is that they tell you almost nothing about the defence capabilities Australia has - or the appropriateness of our defence spending arrangements. In truth, if Australia was to expand its defence spending but continue to spend it in the same way, there is little guarantee of a genuine improvement in our position. Unfortunately, the reality is that both sides of politics have allowed industry concerns and state government parochialism to dominate defence needs when it comes to procurement. There is no better example than our submarine program. Defence ministers continue to insist it is imperative for Australia to have the capability to design and manufacture submarines. This has led to us adopting risky, bespoke submarine designs, creating expensive orphan submarine classes (ones that are used by only one country). Risky procurements like orphan submarines inevitably run over time and over budget. There is also the potential for significant redesign and development costs - especially when those designing and constructing the submarines are effectively learning on the job. The terrible troubles that plagued the Collins Class for the first decade after it was commissioned were a case in point. The fact that we have made so little actual progress on the Collins replacement more than 15 years after the replacement project was first announced is further testament to that fact. Australia is now looking at a path of manufacturing nuclear submarines, an even more complex industry development task than the one we embarked on in the 1980s with the Collins. If Australia wanted to a see an actual return from investing money in industry development, we'd be better off committing to improving the US supply chain for Virginia Class submarines. At least, we'd know from the beginning that those companies can build and deliver a submarine. This is not at all guaranteed should we commit to building an entirely new sub here. Given the risks of cost and time blowouts are well known, why do governments like Australia persist with such a risky procurement strategy? The answer is simple: politics. When it comes to defence spending, there is enormous political pressure from states like South Australia and Victoria to use defence dollars to conduct industry policy. In the case of the submarines, Australia's defence needs have been running a distant second to the need to commit to spending the money in Adelaide. Instead of focusing on how to get the best value capabilities for the money being invested, or ensuring that Australia can fulfil its required defence goals, the states compete to outbid each other for federal defence dollars to be spent in their state. The point is not that Australian defence industry is incapable of producing quality defence equipment; it's that spending the money in Australia for its own sake does nothing for defence. In fact, a disturbing percentage of our defence spending amounts to little more than money laundering handouts to the state governments. In that sense, we are right to push back against NATO and the US. Our approach shouldn't be to raise defence spending, it should be to improve defence capability to meet the tasks required of us. In practice, this means two things. First, Australians need far more clarity on what our defence force is actually for. Without greater clarity on what we are hoping to achieve in the defence space, it is all but impossible for people to understand whether we are headed down the right path. In a world where there is enormous competition for every dollar of government spending, the defence establishment must be as vocal as any other interest group as to why it needs more money. Second, we must genuinely commit to acquiring the capabilities that will best enable us to achieve the goals we have set for our defence force. This may mean some politically unpopular decisions need to be made. So be it. Our politicians are not elected to compete with each other over who can give the most money to the states. In an environment of genuine threats to Australia's safety, we must be ruthless in culling projects that are not meeting our needs. This change in approach should enable us to be far more agile in our defence planning. At the moment, because we are beholden to state government interests, we are committing to defence expenditure decades in advance that may or may not be wasted by the time it is spent. It is clear there has been a significant change in global attitudes to defence and, in particular, defence spending. This is an opportunity for Australia to start taking the issue of defence more seriously. However, throwing tens of billions more dollars at the existing system would be a terrible way to do that. The United States is again putting a full-court press on Western nations to boost defence spending. There were reports this week that NATO members are expected to raise defence spending until they spend 5 per cent of GDP on defence. This would include almost doubling spending on defence platforms and assets (from 2 per cent of GDP to 3.5 per cent of GDP) and committing a further 1.5 per cent of GDP on defence-related investments including cyber security. The Treasurer pushed back, saying Australia had already taken significant steps by boosting spending to 2.3 per cent of GDP. He is right to rebuff this target, but not because Labor's defence spending commitment is sufficient for the job. The better reason to reject arbitrary spending levels for defence against GDP is that they tell you almost nothing about the defence capabilities Australia has - or the appropriateness of our defence spending arrangements. In truth, if Australia was to expand its defence spending but continue to spend it in the same way, there is little guarantee of a genuine improvement in our position. Unfortunately, the reality is that both sides of politics have allowed industry concerns and state government parochialism to dominate defence needs when it comes to procurement. There is no better example than our submarine program. Defence ministers continue to insist it is imperative for Australia to have the capability to design and manufacture submarines. This has led to us adopting risky, bespoke submarine designs, creating expensive orphan submarine classes (ones that are used by only one country). Risky procurements like orphan submarines inevitably run over time and over budget. There is also the potential for significant redesign and development costs - especially when those designing and constructing the submarines are effectively learning on the job. The terrible troubles that plagued the Collins Class for the first decade after it was commissioned were a case in point. The fact that we have made so little actual progress on the Collins replacement more than 15 years after the replacement project was first announced is further testament to that fact. Australia is now looking at a path of manufacturing nuclear submarines, an even more complex industry development task than the one we embarked on in the 1980s with the Collins. If Australia wanted to a see an actual return from investing money in industry development, we'd be better off committing to improving the US supply chain for Virginia Class submarines. At least, we'd know from the beginning that those companies can build and deliver a submarine. This is not at all guaranteed should we commit to building an entirely new sub here. Given the risks of cost and time blowouts are well known, why do governments like Australia persist with such a risky procurement strategy? The answer is simple: politics. When it comes to defence spending, there is enormous political pressure from states like South Australia and Victoria to use defence dollars to conduct industry policy. In the case of the submarines, Australia's defence needs have been running a distant second to the need to commit to spending the money in Adelaide. Instead of focusing on how to get the best value capabilities for the money being invested, or ensuring that Australia can fulfil its required defence goals, the states compete to outbid each other for federal defence dollars to be spent in their state. The point is not that Australian defence industry is incapable of producing quality defence equipment; it's that spending the money in Australia for its own sake does nothing for defence. In fact, a disturbing percentage of our defence spending amounts to little more than money laundering handouts to the state governments. In that sense, we are right to push back against NATO and the US. Our approach shouldn't be to raise defence spending, it should be to improve defence capability to meet the tasks required of us. In practice, this means two things. First, Australians need far more clarity on what our defence force is actually for. Without greater clarity on what we are hoping to achieve in the defence space, it is all but impossible for people to understand whether we are headed down the right path. In a world where there is enormous competition for every dollar of government spending, the defence establishment must be as vocal as any other interest group as to why it needs more money. Second, we must genuinely commit to acquiring the capabilities that will best enable us to achieve the goals we have set for our defence force. This may mean some politically unpopular decisions need to be made. So be it. Our politicians are not elected to compete with each other over who can give the most money to the states. In an environment of genuine threats to Australia's safety, we must be ruthless in culling projects that are not meeting our needs. This change in approach should enable us to be far more agile in our defence planning. At the moment, because we are beholden to state government interests, we are committing to defence expenditure decades in advance that may or may not be wasted by the time it is spent. It is clear there has been a significant change in global attitudes to defence and, in particular, defence spending. This is an opportunity for Australia to start taking the issue of defence more seriously. However, throwing tens of billions more dollars at the existing system would be a terrible way to do that.
Canberra Times
2 days ago
- General
- Canberra Times
Arbitrarily increasing defence spending would be a tremendous waste of money. Here's why
The terrible troubles that plagued the Collins Class for the first decade after it was commissioned were a case in point. The fact that we have made so little actual progress on the Collins replacement more than 15 years after the replacement project was first announced is further testament to that fact.
The Guardian
02-06-2025
- Business
- The Guardian
UK defence review says Aukus is on schedule but fears remain over possible capability gap for Australia
The UK government has declared it will put the first of 12 Aukus-class submarines in the water on schedule in the late 2030s, despite its own major projects agency saying the plan to build the nuclear reactor cores needed to power the submarines is 'unachievable'. The prime minister, Keir Starmer, has released Britain's Strategic Defence Review, which argues the Aukus submarines are critical for the UK's defence, and declaring a landmark shift in Britain's deterrence and defence 'moving to war fighting readiness to deter threats'. The UK's capacity to design and build the first Aukus submarine on time and on budget is critical for Australia. The first Australian-built Aukus nuclear submarine – based on the UK design – will subsequently be built in Adelaide and is expected to be delivered in the early 2040s. Any delay or cost overrun in the UK program could leave Australia with a capability gap of no submarines, with the ageing Collins-class submarines already extended potentially decades beyond their scheduled service life, and doubts over the supply of US-built Virginia-class boats. The Strategic Defence Review says the first of up to 12 British Aukus conventionally armed, nuclear-powered submarines will be in the water and operational 'in the late 2030s' – the 'optimal pathway' timeline previously announced as part of the Aukus agreement. 'With new state-of-the-art submarines patrolling international waters and our own nuclear warhead programme on British shores, we are making Britain secure at home and strong abroad,' the UK defence secretary, John Healey, said. But the UK government's own major projects agency has described the UK's plan to build the nuclear reactor cores needed to power the Aukus submarines as 'unachievable'. In its latest annual report, released in January this year, the Infrastructure and Major Projects Authority (now the National Infrastructure and Service Transformation Authority), gave the nuclear reactor core project its lowest evaluation. 'Successful delivery of the project appears to be unachievable,' the report said. 'There are major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable. The project may need re-scoping and/or its overall viability reassessed.' Under 'Pillar One' of the ambitious – and controversial – Aukus agreement, the US will sell between three and five of its Virginia-Class nuclear-powered submarines to Australia, the first of these in 2032. However, legally, the US can only sell the boats if the then commander-in-chief – the US president – certifies that America relinquishing a submarine will not diminish its own undersea capability. The US navy already has a shortfall of submarines, expected to worsen over coming years, and shipyards in America are running up to three years late in building new Virginia-class submarines, a US navy report found. A recent US Congressional Budget Office report found America's submarine industry is building 1.2 Virginia-class boat a year – well below the 2.3 needed for the US to meet its own needs and fulfil its commitment to Australia. Aukus is forecast to cost Australia up to $368bn to the mid-2050s. Australia is providing significant subsidies to the industrial bases of both the US and UK. It has already paid $A798m – the first instalment of $A4.7bn pledged – to the US. It will pay A$4.6bn to the UK. Former senator Rex Patrick, an ex-submariner and Aukus skeptic, described the UK's shipbuilding program as a 'cluster-fiasco industry' trying to put 'unachievable reactors into unachievable submarines'. 'We get announcements from places like Westminster, or Canberra, or Congress, saying 'this is what we're doing'. But unfortunately, the politicians who are making those calls simply don't understand the complexity and difficulties of achieving what it is that they're setting out.' The US and UK, Patrick said, were 'embracing Aukus at a political level, but unable to achieve it at a working level'. Patrick said it was highly unlikely the US could sell Virginia-class submarines to Australia early next decade. And the implications for Australia were acute, Patrick said. 'We should have a plan B, but the current plan B is we will have no submarines. That is very disturbing, from the point-of-view of the taxpayer … forking out billions of dollars for a program that is likely not going to deliver, and from a national security perspective, where there's a massive hole in the defence of Australia.' Patrick said Aukus was diverting resources from other defence capabilities. Sign up for Guardian Australia's breaking news email 'It might be that we end up with no submarines and no other capabilities. And none of the people who are responsible for this program will be in the parliament when the whole thing runs aground.' Australia's defence minister, Richard Marles, told reporters at the Shangri-La Dialogue – an inter-governmental security conference – in Singapore at the weekend that Aukus was 'on track'. 'We are meeting all the timelines that are associated with it. We are very optimistic about how it is progressing in the here and now.' Males said Australia was seeing more visits from US nuclear-powered submarines to Australian bases, and was working on increasing the production and sustainment rates of Virginia-class submarines in the US, through financial contributions and having Australians working in US docks. 'We walk forward with a sense of confidence about the way in which Aukus is proceeding,' he said.
