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Defence Portfolio Budget Statements 2001-02

Section 1 Overview

RESOURCING

2001-02 BUDGET SUMMARY

Overview

Total resourcing available to Defence in 2001-02 is $20,750m. This comprises funding from the Government for outputs of $17,516m and own-source revenue of $325m, an equity injection of $11m and capital receipts of $1,099m, as well as $1,801m to be administered by Defence on behalf of the Government.

Defence has been provided with increased funding in the 2001-02 budget and the 2002-05 forward estimates to address a number of specific priorities. To enable the implementation of the Defence Capability Plan detailed in the White Paper, the Defence budget will increase by $507m in 2001-02 and $1,039m in 2002-03. In line with the White Paper, Defence funding will increase by an average of three per cent per annum in real terms over the next 10 years.

In addition to the White Paper funding increase, adjustments have also been made to:

• maintain the value of Defence’s foreign exchange ($146m in 2001-02);
• correct the previous levels of estimated savings expected to accrue as a result of abolition of the wholesales sales tax ($27m per annum); and
• allow Defence to make a one-time additional contribution (through a repayment of equity) of $263m to the 2001-02 budget from selected asset sales, including proceeds from the sales of Schofield’s Airfield, Lady Gowrie House and Endeavour House.

Summary of Planned Financial Performance

Defence’s budgeted financial statements are provided at Section Three of this document. The statements provide details over the budget and forward estimates period, together with comparative details of the expected 2000-01 result and the previous 2001-02 estimates published in the Portfolio Additional Estimates Statements 2000-01.

Defence is planning a $1,099m increase in expenses in 2000-01 (compared with the previous forward estimate), offset by an increase of $860m in operating revenues and a reduction of $239m in capital use charges.

Total Government funding for 2001-02 (excluding administered items) is expected to increase by $204m from the previous forward estimate. This is made up of a number of funding adjustments including:

• implementation of White Paper initiatives ($507m);
• acceleration of funding to 2000-01 to meet variations in capital spending and sales
  (-$320m);
• indexation to meet price growth and foreign exchange fluctuations ($184m);
• an increase to meet commercial leasing costs of accommodation to be sold ($16m);
• corrections to the previous forward estimate ($10m);
• inclusion of funding originally planned for 2000-01 in relation to enhancements to Reserves arrangements and improvements to management information systems ($45m); and
• a reduction in funding to meet a decline in the capital use charge expected of Defence (-$239m) primarily due to a decrease in the rate from 12 per cent to 11 per cent of net assets.

Detailed explanations of variations in operating performance from the previous 2001-02 forward estimates are set out in the notes to the budgeted financial statements.

Table 1.1 summarises Defence’s overall resourcing in 2001-02 and over the 2002-05 forward estimates period and provides a comparison between the previous and current budget estimates.

Table 1.1: Total Estimated Defence Resourcing for 2001-02 and the Forward Estimates

Of overall funding for Defence in 2001-02, $5,405m is expected to be returned to the Government as a capital use charge and repayment of equity. Removing the net effects of these items, total Government funding for Defence in 2001-02 is expected to increase by $442.6m, or 4 per cent over the previous estimate.

The following table compares budgeted levels of Defence departmental funding from the Government in 2001-02 with the previous two years’ results and the forward estimates period, as well as amounts anticipated in later years for implementation of the White Paper.

Government Payment for Outputs and Capital Injection⁽¹⁾

Description	1999-2000 Actual	2000-01 Estimated Actual	2001-02 Budget	2002-03 Estimated	2003-04 Estimated	2004-05 Estimated	2005-06 Projected	2006-07 Projected	2007-08 Projected	2008-09 Projected	2009-10 Projected	2010-11 Projected
Departmental Appropriation	11,811.89	12,370.23	12,754.44	13,653.48	14,300.40	15,090.80	15,549.00	16,646.00	17,391.00	17,896.00	18,978.00	20,311.00
Capital Use Charge	4,545.49	5,005.97	4,771.75	4,759.83	4,836.18	4,945.63	5,773.00	5,619.00	5,838.00	6,307.00	6,250.00	6,135.00
Total	16,357.38	17,376.20	17,526.18	18,413.31	19,136.58	20,036.43	21,322.00	22,265.00	23,229.00	24,203.00	25,228.00	26,446.00

Note

1. All amounts have been indexed in accordance with government parameters.

Defence funding is used to meet a variety of operating, investing and financing costs borne in delivering the Government’s outputs. This includes utilising much of the increase in the Government’s payment for outputs in 2001-02 to meet investments in specialist military equipment and other assets. Although $190m in capital investment has been accelerated to 2000-01, Defence plans to spend $3,293m on fixed assets in 2001-02.

Defence Expenditure - Departmental 2001-02 Budget

Defence’s net asset position is expected to increase over the forward estimates period. A one-off increase in assets of $1,600m has occurred since the position published in the 2000-01 additional estimates. The increase is due largely to a recent change in accounting policy, involving a reduction in the capital recognition threshold for spending on assets.

Other net increases in assets will occur due to the acquisition of assets in the capital investment program, including the implementation of the first stages of projects associated with the White Paper.

These increases will be partially offset by reductions resulting from the gradual end of life of existing assets and the enhanced property disposals program.

Non-Current Assets – Departmental Budget for 30 June 2002

The prices of Defence’s six outputs are summarised in Table 1.2. Further details relating to the outputs can be found in Section Two of this document.

Table 1.2: Price to Government of Defence’s Outputs

Note
1. The five-output structure in 2000-01 has been attributed on a six-output basis for comparison purposes.

The table below details the cost of ADF contributions to United Nations operations in East Timor. Estimates for 2001-02 are based on an ongoing deployment of approximately 1,600 ADF personnel and the generation of additional forces to sustain the deployment.

Table 1.3: ADF Contributions to United Nations Operations in East Timor

Notes

1. All East Timor deployment prices are shown against Output One as a part of United Nations peacekeeping operations.
2. Repayment of accelerated capital expenditure in 2002-03 and 2003-04.

Appropriations

The appropriations from the Government for Defence in 2001-02 total $20,770m. This funding is summarised in Table 1.4.

Table 1.4: Total Appropriations for the Department of Defence for 2001-02