Defence is expensive and involves deployment in the most stressful conditions imaginable of some of the most complex artefacts the human race has created. Some big-ticket items, which have run over budget and over time, such as the F-35 Joint Strike Fighter, are without question the right choice for Australia. It is superior to anything in the air except the F-22. It will be superior to anything Australia might come up against in our region and the US, Japan, South Korea, Britain and Israel are making it their main fighter. Those countries do not choose second-best.
It also means development costs, which are enormous, are spread over many countries and thousands of planes. The latest F-35s are now coming in under $US80m ($116.2m) each. Part of the headline figure for cost increase in the audit reports comes from Australia ordering its latest 52 of the aircraft.
The problem with our total order of 72 is not that they’re expensive, but that 72 is just way too few to defend Australia with.
Despite all the cost overruns and the like, the Australian Defence Force is much more capable than it was 15 years ago. It is still nowhere near as capable as we need it to be.
The Defence budget is subject to three contradictory pressures. We are trying to increase capability, limit costs and establish an Australian defence industry.
Buying stuff off-the-shelf is the cheapest, most reliable way. Our Super Hornets, a regionally superior, extremely effective fourth-generation aircraft, came in ahead of schedule and under budget because they were coming off an established US production line and it suited the Americans to push our batch up the schedule a bit.
But off-the-shelf means almost no Australian industry involvement. Air force tends to be off-the-shelf, navy tends to be homemade. If you build big capabilities here — whether it’s Air Warfare Destroyers or submarines — they cost a lot more. This is partly because our production in the past has been so episodic you have to re-establish the whole industry every time you start off.
The government now plans to have a permanent naval shipbuilding industry in Australia. Still, some projects look like the wrong choice. The MRH90 multi-role helicopter suffered horrendous delay and never produced the Australian industry involvement that was advertised.
The exchange rate makes a huge difference too, as Defence Minister Linda Reynolds points out. But the bottom line is this:
if we’re going to make a lot of it at home, and keep going for cutting-edge technology, it will take a lot more money.
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It seems Australia’s Defence budget is a disgrace, with huge cost overruns and delays in project delivery. That is, of course, until you compare it with the defence budget of any other modern nation. Then it looks pretty reasonable.