Annual Report 2004-05

Financial Overview

Defence's Cash Position

Status of White Paper Funding

Major Capital Equipment

The additional funding of $20.0 billion (in 2005-06 outturned prices) was allocated to the Unapproved Major Capital Equipment Program and now forms part of the overall investment program. The additional funding was not for the entirety of the Defence Capability Plan funding but represented a top-up of the existing Major Capital Investment Program, which covers both the Unapproved Major Capital Equipment Program and the Approved Major Capital Equipment Program. To the end of 2004-05, $3.6 billion of the $20.0 billion had been spent on new projects.

Through-life Support Costs for Defence Capability Plan Projects

The net through-life support costs of new capability acquired as part of the Defence Capability Plan are being progressively allocated as new equipment enters service. The funding is to ensure that sufficient trained personnel and operating costs are available to operate the equipment on delivery. The phasing of the funds has been adjusted to reflect revised delivery dates of the equipment and is now estimated at $2.9 billion over the decade. Of this amount, $90m has been spent to the end of 2004-05.

Two per cent Real Growth in Personnel Costs

The allocation of $4.9 billion for the two per cent real per capita growth in personnel costs commences in 2004-05. Of this, $2.9 billion has already been allocated over the period to 2010-11 to cover part of the cost of the new ADF Workplace Remuneration Arrangement and the Defence Employees Certified Agreement. Funding has also been allocated for the last Service Allowance increase and to cover cost increases in housing and health services, which are rising at higher rates than the non-farm gross domestic product deflator. An amount of $2.0 billion remains unallocated and has been quarantined to contribute to the funding of future salary, allowance and conditions of service increases as they arise, including health services, housing and fringe benefits tax. An amount of $238m has been spent to the end of 2004-05.

Operating Baseline Adjustment

An amount of $1.0 billion was allocated to meet cost pressures identified through the Defence White Paper process including logistics shortfalls, some of which were also required to be offset by the now-complete $200m Administrative Savings Program. On the basis that the allocations are now embedded in baseline allocations and will be spent in the years concerned, this aspect of the Defence White Paper is now considered complete.