Apr 3, 2011

Australia’s Defence Role and Budgeting

 ASD News report indicated that the Australian defense industry is expected to grow at a CAGR of 1.97% from a value of US$20.8 billion in 2009 to US$24.7 billion by 2015. The report indicated that the main focus of the Australian capacity building is on global terrorism, changing political dynamics in the Asia-Pacific region and the rising number of peacekeeping operations undertaken by the Australian forces. Defense expenditure as percentage of gross domestic product (GDP) is expected to increase from 1.9% in 2005 to 2.1% in 2015 but capital share is likely to come down from 29.4% in 2009 to 23.7% by 2015. [ http://www.asdnews.com]

Apparently Australia's participation in ISAF in Afghanistan and UN missions as well as its professed role for stability in Asia Pacific would necessitate investments in capital equipment. I find the capital investments as percentage of the defence budget at 23 percent pretty low and may have to be increased if the Australian armed forces have to carry out their envisaged role. Now that the Australian expenditure is also above the cut off 2 percent of the GDP as recommended by NATO and EU in general, any increase in the same may not be evident on the other hand with possible requirement of upscaling revenue costs in terms of compensations, there is very limited flexibility with the Australian government. This would imply either it reviews the role that Australia can undertake overall, go in for greater cooperative arrangements or increase the budget per se. What choice the Australians make remains to be seen? For similar analysis on various defence forces including budgeting and acquisitions, do Email rkbhonsle@gmail.com