Saturday 09 Oct 2021 | 05:26 | SYDNEY
Saturday 09 Oct 2021 | 05:26 | SYDNEY

Financial crisis: Defence will suffer


Rory Medcalf


17 October 2008 09:42

Defence Minister Joel Fitzgibbon has been quick  to point out that the global economic crisis will make Australia’s Defence White Paper challenge ‘far greater’ – as if matching Australia’s military capability plans to an uncertain strategic environment and limited finances was ever going to be easy.

It looks like the Minister has smartly seized upon current financial woes to reel in the government’s stated ambitions for the White Paper. For one thing, we can no longer expect the process to be over by Christmas; all we can expect, it seems, is that by March-April 2009, Canberra will have produced ‘a strategic assessment’. As a White Paper veterans like Hugh White will tell you, and as those of us who have had a hand in strategic assessments will acknowledge, strategic assessments (which are themselves difficult and slippery creatures) are the relatively straightforward part of a White Paper process.

But maybe Mr Fitzgibbon is not being entirely disingenuous when he implies that even producing a strategic assessment by March-April is going to be quite a feat (ie. something that will only happen because he is 'determined' about it). The global security landscape was already in troubling flux; now we have to add the strategic implications of the financial crisis, which are only barely beginning to emerge.

Here are some sub-preliminary prognostications:

  • Australia’s defence budget will suffer: an annual 3 percent increase will be hard to sustain, and imported equipment (like the F-35 Joint Strike Fighter; the idea of buying those Super Hornets as a stop-gap is starting to look prescient) is likely to increase in price. Why? Because the devalued Australian currency will have less buying power, and US and European weapons orders could shrink along with their defence budgets, increasing per-unit cost.
  • If Asian economic growth declines, with potential for social dissatisfaction and unrest, will defence spending remain a priority? Whether or not Canberra’s defence establishment was beginning to worry about the possibility of growing defence spending in Southeast Asia, maybe it is now more likely that Australia will retain its regional combat capability edge a little longer.
  • Bad news for equipment purchases may be good news for defence recruitment. If unemployment rises, including in parts of the resources sector (which has reportedly poached so much technical talent from the Navy), then the financial security of a military job will start to look appealing again.
  • Declining defence budgets will not necessarily equate with a lessened risk of armed conflict. You don't need to draw a 1930s Depression-leads-to-war parallel to acknowledge that prolonged domestic economic dissatisfaction and social dislocation could make jingoistic adventurism just that little bit more attractive to desperate governments.
  • And, short of war, there could be geopolitical opportunity aplenty for authoritarian powers to expand their influence, if they are willing to pay — as Russia’s audacious offer to bail out Iceland has shown. Yet I agree with Greg Sheridan that the reflex of most Asian countries will not be to distance themselves from the US in these testing times, even if much of the present mess can be traced to the underside of American values.
  • Certainly the next US Administration will need friends – of the sort willing to share military and diplomatic risk — wherever it can find them. The expense of maintaining deployments far afield could weigh heavier  on Western governments.
  • Meanwhile the US itself, even if it maintains its overseas military commitments, may find its leadership simply too preoccupied with the economy to attempt diplomacy-intensive initiatives, like an Israeli-Palestinian peace accord or a much-needed salvaging of inclusive regional efforts to end North Korea’s nuclear mischief.

Whatever the new or revised global strategic assessment that the Australian government’s analysts end up producing, the challenge of marrying it to objectives, capabilities and dollars just got harder.