Download - Dr Mark Thomson - Australian Strategic Policy Institute - 2015-2016 Defence budget outlook
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Defence Budget2016
Mark Thomson
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Outline:
• Defence Budget Past and Present
• Capital Investment and Industry
• Budget Prospects
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“Within a decade, the budget surplus will be 1 per cent of GDP,
defence spending will be 2 per cent of GDP, the private health
insurance rebate will be fully restored, and each year, government
will be a smaller percentage of our economy.”
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Fiscal problems represent political
rather than economic constraints
on the government’s freedom of action.
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• $29.3 billion = 1.8% of GDP
• 6% year-on-year real boost
• $1.5 billion brought forward over 4 years
2014 Budget
2015 Budget
• $32.1 billion = 1.93% of GDP
• 4.5% year-on-year real boost
• large forex and op cost increases
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0
5
10
15
20
25
30
35
40
45b
illi
on
20
15
-16
$
Operational supplementation
Baseline costs
Steady growth
actual spending
budget
estimates
projected
1.7
4%
1.7
7%
1.7
5%
1.7
8%
1.7
4%
1.9
4%
1.8
2%
1.7
0%
1.7
6%
1.7
6%
1.7
6%
1.7
9%
1.9
5%
1.9
3%
1.9
0%
1.8
7%
1.8
3%
1.7
8%
1.9
3%
1.8
7%
1.6
8%
1.6
0%
GD
P s
har
e =
2.0
0%
1.9
8%
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6
8
10
12
14
16
18b
illi
on
20
15
-16
$ (
bil
lio
n)
Personnel
Capital
Operating
Operating Costs
3.0% real growth
2019-10 to 2023-24
Personnel Costs
2.5% real growth
2019-20 to 2023-24
Capital Investment
6.9% real growth
2019-20 to 2023-24
Budget Estimates
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Capital Investment
and Industry
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Major acquisition announcements:
• Onesky air traffic (February 2015)
• 2 extra C-17 (April 2015)
• CRAM (June 2015)
• 2 extra KC-30 (July 2015)
• Styer upgrade (July 2015)
• OCV to ‘cut steel’ in 2018 (August 2015)
• Frigates to ‘cut steel’ in 2020 (August 2015)
• New grenade launcher (August 2015)
• Battlefield Communications (September 2015)
• Hawkei contract (October 2015)
• Pilot training system (December 2015)
• SEA1000 & SEA1179 set for 2016
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Budget Prospects
2% of GDP or not?
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0
10
20
30
40
50
60
0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10
Eff
ecti
ve
bu
yin
g p
ow
er
US$ - A$ exchange rate
$12.7 billion (-26%)
Base:
A$
1 =
0.8
0 U
S$
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0.0
0.1
0.2
0.3
0.4
0.5
0.6
IGR 2003 IGR 2007 IGR 2010 IGR 2015
20
14
-15
$ (
tril
lio
n)
$98 billion (-20%)
2% GDP 2% GDP 2% GDP 2% GDP
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The Economic Outlook
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The Fiscal Outlook
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Budget Forecasts
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Government Receipts
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Government Payments
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Nonetheless…
Fiscal problems represent political
rather than economic constraints
on the government’s freedom of action.
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The Electorate
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Source: Ray Morgan Research
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Falling
Revenues
Restive
Electorate
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Questions