Australian budget: Historic defence spending, plus AU$1.2B on US-made missiles.

Photo: F-35 Lightning II aircraft from RAAF Base Williamtown fly off the coast of Newcastle. (Australian Air Force)

CANBERRA — Today’s rollout of the Australian budget shows the Australian Defence Force has big plans to buy US-made long-range strike capabilities, as Canberra pursues a strategy to deny an adversary easy access to Australia’s area of interest.

Overall, the defence budget for the next year is set at AU$52.588 billion (US$35 billion), the first time funding has exceeded AU$50 billion. That amounts to 2.04 percent of Gross Domestic Product (GDP). Defence spending of two percent of national GDP is an imperfect but widely used benchmark for the adequacy of a nation’s commitment to national defence.

Just how overwhelmingly reliant Australia is on US-sourced munitions is clear from the budget, unveiled Tuesday. For 2023-2024, the ADF disclosed is plans to spend AU$12.3 billion (US$8.3 billion) on new equipment — of which about AU$1.2 billion (US$800 million), or just under 15 percent of the overall annual total, will be spent on American precision-guided munitions (PGM).

Those missiles, to be equipped Australian warships, combat aircraft and land forces, will be acquired through the US Foreign Military Sales (FMS) system. Among key planned buys, as well as the projected five-year totals, are:

  • One project, titled AIR 3023 Phase 1, seeks to acquire a suite of maritime strike weapons to equip RAAF F-35A, Super Hornet and P-8A aircraft “to enable air-delivered strike against well-defended maritime targets in complex and littoral environments.” The missiles are the US LRASM and the Norwegian Kongsberg Joint Strike Missile. The plan is to spend AU$333 million this year, and a projected total of AU$751 million over five years.
  • Then there’s another project to equip RAAF F-35A and Super Hornet aircraft with JASSM-ER missiles. The price tag is AU$180 million to be spent in 2023-24, and a projected total of AU$558 million over five years.
  • Australia plans to acquire war and training stocks of AIM-9X and AIM-120D air-to-air missiles for F-35A and Super Hornet aircraft. AU$135 million will be spent in 2023-24, and almost AU$1 billion over five years.
  • Australia is also planning to acquire additional stocks of small diameter bombs and 500- and 1,000-pound guided bombs. AU$172 million will be spent in 2023-24, and AU$810 million over five years.

Australia’s problem is that it manufactures no PGMs, though it has ambitions to change that. And there is the potential Canberra could be for a long wait: US manufacturers like Lockheed Martin, Boeing and Raytheon are running at full production to restock inventories depleted by the war in Ukraine, for both the US and other allies.

The Australian Defence Force’s largest single equipment project remains acquisition of a fleet of 72 F-35A aircraft, with the last dozen to be delivered in the next year. Total cost of this long-running project is AU$16.4 billion, with AU$870 million to be spent in 2023-24.

It’s not just weapons that Australia is looking to invest in. The country plans to buy American tanks – 75 M1A2 Abrams Main Battle Tanks, plus 52 combat engineering vehicles to replace an older fleet of 59 M1A1 Abrams.

Ahead of the release of the recent Australian Defence Strategic Review, there was speculation that this project could face reduction or even cancellation. While there was surprise that the project survived, the budget spells out the reason why: it’s simply too far along to stop now.  These vehicles enter full rate production in the US this year with AU$971 million of the total AU$2.283 billion budget to be spent in 2023-24.

Despite the global economic headwinds affecting Australia and everyone else, the Australian economy remains in reasonable shape, with the government even recording a fleeting budget surplus of AU$4.2 billion, the first since 2007. That was on the back of high employment and strong sales of mineral resources, to, among others, China.

That allowed the government to sustain defence spending on its current trajectory — important, as the defence review shows plans for major increases in spending over the next decade.

Australia’s defence minister Richard Marles said defence spending as a proportion of GDP will lift above its current trajectory to be 0.2 per cent higher by 2032-33. By then Australia will be well on the way to acquiring nuclear-powered submarines under the AUKUS agreement.

It’s not all good news, however. The budget reveals a seemingly intractable structural problem with Australia’s defence force: Despite strenuous efforts, it has consistently failed to achieve recruitment targets. In all, the ADF has shrunk by around 2000 in the last two years.

The budget papers say the increase in separation rates and lower than expected achievement of recruitment targets means the ADF workforce is forecast to be below current guidance. The average permanent workforce for 2023-24 is 59,673.

To address these issues, Defence formed a Recruiting and Retention “Tiger Team” which identified a number of initiatives. One being funded in this budget is a two-year pilot of a $50,000 continuation bonus aimed at junior officers and non-commissioned in positions where the workforce is regarded as at greatest risk.


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