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Chapter 2

OUTCOME PERFORMANCE

This chapter explains each of Defence's outcomes and outputs, including our achievement against performance targets and the cost to the Government of our outcomes.

Overview of the Defence Outcomes and Outputs

Defence outcomes are the results that the Government seeks from Defence, and are achieved through the successful delivery of outputs, to the standards set in the Portfolio Budget Statements 2005–06 and, where applicable, revised in the Portfolio Additional Estimates Statements 2005–06. The Defence Annual Report 2005–06 reports our achievement against these targets, in both financial and non-financial terms.

The outcome and output structure has remained consistent for 2005–06 and covers 28 departmental outputs and three administered outputs.

Defence's departmental outcomes exceeded the revised estimate by $123.9m as detailed in TABLE 2.1. The variation is a reflection of the operating loss which is described in the financial overview and results mainly from significant accrual adjustments, in particular the write down of assets through impairment reviews of specialist military equipment, revaluation of building and infrastructure assets, and inventory adjustments following stocktaking activities and revaluation to meet AIFRS requirements.

The seventh outcome, Superannuation and Housing Support Services for Current and Retired Defence Personnel, covers activities not directly connected to the delivery of the capability outcomes and outputs. Outcome Seven and its three outputs are described on p. 144.

Defence continues to refine its cost attribution rules in order to improve the accuracy of its output costs. There are a number of variables that can influence output costs, including changes to preparedness levels and activity rates, operations, and redirecting funds to meet changing priorities and emergent cost pressures. Changes in the distribution of the workforce and technical adjustments aimed at improving the accounting for Defence's assets and liabilities can have a major impact.

Some of the variations evident between the revised estimate and actual result reflect accounting adjustments and refinements to attribution rules. There have been few changes to preparedness and activity levels from that which were planned, and few significant real variations between the revised estimate and actual result.

Table 2.1 Total Cost of Defence Outcomes and Outputs
  Budget Estimate(1) Additional Estimate(2) Actual Result Variation(3) Variation(3)
  2005–06 2005–06 2005–06 2005–06 2005–06
Outcome/Output $'000 $'000 $'000 $'000 %
1. Command of Operations in Defence of Australia and its Interests
1.1—Command of Operations 371,713 554,315 465,084 –89,231 –16.1
1.2—Defence Force Military Operations and Exercises 499,032 526,433 492,549 –33,884 –6.4
1.3—Contribution to National Support Tasks 10,178 23,724 18,251 –5,473 –23.1
Sub-Total Outcome 1 880,924 1,104,472 975,884 –128,588 –11.6
2. Navy Capability for the Defence of Australia and its Interests
2.1—Capability for Major Surface Combatant Operations 1,605,701 1,601,949 1,680,156 78,207 4.9
2.2—Capability for Naval Aviation Operations 504,698 507,188 649,394 142,206 28.0
2.3—Capability for Patrol Boat Operations 277,648 282,488 282,476 –12 –0.0
2.4—Capability for Submarine Operations 779,765 776,763 824,639 47,876 6.2
2.5—Capability for Afloat Support 214,290 224,558 251,950 27,392 12.2
2.6—Capability for Mine Warfare 355,832 365,741 354,212 –11,529 –3.2
2.7—Capability for Amphibious Lift 370,160 381,772 438,500 56,728 14.9
2.8—Capability for Hydrographic, Meteorological and Oceanographic Operations 241,063 253,537 229,717 –23,820 –9.4
Sub-Total Outcome 2 4,349,157 4,393,997 4,711,044 317,047 7.2
3. Army Capability for the Defence of Australia and its Interests
3.1—Capability for Special Operations 500,281 499,767 489,658 –10,109 –2.0
3.2—Capability for Medium Combined Arms Operations 926,273 841,130 816,120 –25,010 –3.0
3.3—Capability for Light Combined Arms Operations 1,030,887 983,791 964,166 –19,625 –2.0
3.4—Capability for Army Aviation Operations 577,197 544,755 527,805 –16,950 –3.1
3.5—Capability for Ground Based Air Defence 129,625 109,898 107,658 –2,240 –2.0
3.6—Capability for Combat Support Operations 384,632 372,252 378,485 6,233 1.7
3.7—Capability for Regional Surveillance 124,492 130,832 127,481 –3,351 –2.6
3.8—Capability for Operational Logistic Support to Land Forces 575,652 570,362 556,601 –13,761 –2.4
3.9—Capability for Motorised Combined Arms Operations 550,510 549,217 535,943 –13,274 –2.4
3.10—Capability for Protective Operations 613,377 574,783 673,261 98,478 17.1
Sub-Total Outcome 3 5,412,926 5,176,788 5,177,177 389 0.0
4. Air Force Capability for the Defence of Australia and its Interests
4.1—Capability for Air Combat Operations 1,769,462 1,768,420 1,790,833 22,413 1.3
4.2—Capability for Combat Support of Air Operations 761,662 776,988 741,906 –35,082 –4.5
4.3—Capability for Surveillance and Response Operations 1,104,931 1,132,276 1,081,070 –51,206 –4.5
4.4—Capability for Airlift Operations 1,018,846 1,004,695 986,457 –18,238 –1.8
Sub-Total Outcome 4 4,654,901 4,682,379 4,600,266 –82,113 –1.8
5. Strategic Policy for the Defence of Australia and its Interests
5.1—International Policy, Activities and Engagement 188,067 190,039 190,445 406 0.2
5.2—Strategic Policy and Military Strategy 43,262 42,975 45,803 2,828 6.5
Sub-Total Outcome 5 231,329 233,013 236,248 3,234 1.4
6. Intelligence for the Defence of Australia and its Interests
6.1—Intelligence 467,384 494,291 508,255 13,964 2.8
Sub-Total Outcome 6 467,384 494,291 508,255 13,964 2.8
 
Net Cost for Defence Departmental Outcomes 15,996,621 16,084,941 16,208,876 123,935 0.8
 
Approved Allocated Profit/Loss –18,900 48,600 –144,535 –193,135 –397.4
 
DEPARTMENTAL APPROPRIATIONS FROM GOVERNMENT 15,977,721 16,133,541 16,064,341 –69,200 –0.4
7. Superannuation Support Services for Current and Retired Defence Personnel
7.1—Superannuation Support Services for Current and Retired Defence Personnel 1,847,625 1,909,625 2,087,694 178,069 9.3
7.2—Housing Assistance for Current Defence Personnel –6,026 –5,276 –58,219 –52,943 1,003.5
7.3—Other Administered Revenues and Expenses –4,000 –4,000 –4,829 –829 20.7
Net Cost of Administered Outcomes 1,837,599 1,900,349 2,024,646 124,297 6.5
           
TOTAL COST TO GOVERNMENT 17,815,320 18,033,890 18,088,987 55,097 0.3

Notes:

  1. Budget Estimates are consistent with Portfolio Budget Statements 2005–06 (pages 90 and 91).
  2. Additional Estimates are consistent with Portfolio Additional Estimates Statements 2005–06 (pages 79–82).
  3. Variations reflect the difference between Additional Estimates and Actuals.

 

Table 2.2 Overall Cost to Government of Defence Outcomes (Departmental and Administered)
  Outcome 1—Command of Operations Outcome 2—Navy Capabilities Outcome 3—Army Capabilities Outcome 4—Air Force Capabilities Outcome 5—Strategic Policy Outcome 6—Intelligence Total Defence Departmental Outcome Outcome 7—Superannuation and Housing Support Services for Current and Retired Defence Personnel Grand Total
  2005–06 2005–06 2005–06 2005–06 2005–06 2005–06 2005–06 2005–06 2005–06
  $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
DEPARTMENTAL
Income
Revenue
Goods and services 35,555 113,987 211,668 174,395 6,954 5,140 547,700 547,700
Interest 10 –17 12 –4 –1
Other revenues 4,949 23,974 23,442 30,726 1,188 3,413 87,693 87,693
Total Revenue 40,505 137,972 235,093 205,133 8,138 8,552 635,392 635,392
Gains  
Net foreign exchange gains
Assets now recognised 28,128 87,787 219,981 183,805 6,686 9,959 536,345 536,345
Net gains from sale of assets
Other Gains 936 3,793 4,055 3,813 301 402 13,300 13,300
Total Gains 29,064 91,580 224,036 187,618 6.987 10,361 549,645 549,645
Total Income 69,568 229,552 459,129 392,751 15,125 18,913 1,185,037 1,185,037
Operating Expenses
Employees 458,497 1,441,356 2,651,692 1,428,458 88,463 217,343 6,285,808 6,285,808
Suppliers 544,226 1,824,072 1,979,439 2,113,955 152,349 217,036 6,831,078 6,831,078
Grants 270 1,469 2,808 1,220 134 156 6,057 6,057
Finance cost 2,782 18,467 25,625 19,948 1,010 1,153 68,985 68,985
Depreciation and amortisation 26,937 1,233,701 721,576 1,208,528 6,604 69,965 3,267,310 3,267,310
Write-down and impairment of assets 13,110 419,014 264,252 218,549 2,934 9,921 927,780 927,780
Net foreign exchange losses –5 131 719 14 –83 17 793 793
Net losses from sale of assets –230 1,659 –11,473 1,587 –71 11,514 2,987 2,987
Other expenses –132 726 1,669 758 32 63 3,115 3,115
Total Expenses 1,045,454 4,940,596 5,636,306 4,993,016 251,373 527,168 17,393,913 17,393,913
Price to Government for Defence Departmental Outcomes 975,885 4,711,044 5,177,177 4,600,266 236,248 508,255 16,208,876 16,208,876
 
ADMINISTERED
Revenues   729,562 729,562
Expenses   2,754,208 2,754,208
Price to Government for Defence Administered Outcomes   2,024,646 2,024,646

 

Table 2.3 Cost to the Government of Departmental Outcomes
  Budget Estimate(1) Additional Estimate(2) Actual Result Variation(3) Variation(3)
  2005–06 2005–06 2005–06 2005–06 2005–06
  $'000 $'000 $'000 $'000 %
Income
Revenue
Goods and Services 186,682 374,716 547,700 172,984 46.2
Interest
Other Revenues 186,159 248,536 87,693 –160,843 –64.7
Total Revenue 372,841 623,252 635,392 12,140 1.9
Gains
Net foreign exchange gains
Assets now recognised 30,000 250,000 536,345 286,345 114.5
Revenue from sale of assets 95,063
Other gains 13,300 13,300
Total Gains 125,063 250,000 549,645 299,645 119.9
Total Income 497,904 873,252 1,185,038 311,786 35.7
Expenses
Employees 6,587,528 6,358,716 6,285,808 –72,908 –1.1
Suppliers 6,946,746 7,121,909 6,831,078 –290,831 –4.1
Grants 1,275 7,275 6,057 –1,218 –16.7
Finance cost 32,075 29,914 68,985 39,071 130.6
Depreciation and amortisation 2,771,838 3,145,023 3,267,310 122,287 3.9
Write-down and impairment of assets 60,000 275,356 927,780 652,424 236.9
Net foreign exchange losses 793 793
Net losses from sale of assets 95,063 2,987 2,987
Other expenses 20,000 3,115 –16,885 –84.4
Total Expenses 16,494,525 16,958,193 17,393,913 435,720 2.6
Price to Government for Defence Outcomes 15,996,621 16,084,941 16,208,876 123,935 0.8
 
Approved Allocated Profit/Loss –18,900 48,600 –144,535 –193,135 –397.4
 
Departmental Appropriation from Government for Outcomes 15,977,721 16,133,541 16,064,341 –69,200 –0.4

Notes:

1. Budget Estimates are consistent with Portfolio Budget Statements 2005–06 (page 93).

2. Additional Estimates are consistent with Portfolio Additional Estimates Statements 2005–06 (page 83).

3. Variations reflect the difference between Additional Estimates and Actuals.

Major Australian Defence Force Operations during 2005-06

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