OVERVIEW

Savings and Efficiency Measures

Since the White Paper was announced in 2000, Defence has returned $2,226.5m to the budget over the period 2003–04 to 2009–10 by way of savings and efficiency measures. In addition, Defence was required to find savings totalling $1,075.0m over the period as part of its Program of Administrative Savings in order to fund a number of cost pressures that the Government required it to absorb in 2005–06 and beyond. In total, Defence has found $3,301.5m in savings and efficiencies over this time as set out in Table 1.12.

White Paper Savings Program

The White Paper resourcing strategy required Defence to make efficiency savings of $50m in 2001–02 and $200m in 2002–03 and thereafter. The efficiency savings have been fully achieved and returned to Government as detailed in Table 1.13.

Table 1.12 Savings Returned to the Budget 2006–07

	2003–04 $m	2004–05 $m	2005–06 $m	2006–07 $m	2007–08 $m	2008–09 $m	2009–10 $m	Total $m
White Paper Savings requirement	200.0	200.0	200.0	200.0	200.0	200.0	200.0	1,400.0
2003 Defence Capability Review	–	–	80.0	73.9	85.3	76.4	99.2	414.8
Administrative Overheads	–	–	–	70.0	60.0	12.0	–	142.0
Efficiency Dividend (initial tranche)	–	–	3.4	11.9	25.0	39.0	55.5	134.8
Rationalisation of ADF Commandand Control Structure	–	–	–	5.9	12.7	20.5	31.0	70.1
Broadening of the Efficiency Dividend	–	–	–	4.5	11.2	20.1	29.0	64.8
Subtotal Savings Returned to the Budget	200.0	200.0	283.4	366.2	394.2	368.0	414.7	2,226.5
Savings Retained by Defence	50.0	100.0	150.0	175.0	200.0	200.0	200.0	1,075.0
Total Savings and Efficiencies	250.0	300.0	433.4	541.2	594.2	568.0	614.7	3,301.5

 

Table 1.13 White Paper Efficiency Savings

	$'000
Fringe Benefits Tax liability reduction	14.2
Savings in Travel	20.0
Reduction in, and improved management of, the Defence commercial vehicle fleet	0.0
Rebasing of Group budget allocations	69.0
Reduction in recruitment and advertising	10.0
Reduction in administrative spending	87.0
Total	200.2

2003 Defence Capability Review

These savings were to be achieved by paying off two FFGs by September 2006, retiring the F-111 fleet by 2010 and mothballing two Minehunter coastal vessels. Since these decisions were taken, Defence plans to retain HMAS Adelaide in service until December 2007. More recently, as part of the 2006–07 Budget, the Government decided to reactivate the two Minehunters for surveillance work. In doing so, it restored the funds to the Defence budget.

Administrative Overheads

As part of the 2005–06 Budget, Defence was required to find further savings in administrative overheads totalling $142m over a three-year period from 2006–07. These funds have been returned to the budget

Efficiency Dividend

During the development of the 2005–06 Budget, the Government decided that an Efficiency Dividend would apply to Defence for the first time. Operational and direct capability linked funding was exempted from the application of the dividend. The efficiency dividend which applies to all non-capability related areas of the budget grows from 0.25 per cent in 2005–06 and then increases by 0.25 per cent per annum to 1.25 per cent by 2009–10. These funds have been returned to the budget.

Broadening the Efficiency Dividend

As part of the 2006–07 Budget, the Efficiency Dividend was broadened to include 30 per cent of the Defence Science and Technology Organisation's budget, garrison support, estate upkeep and the sale and leaseback program. These funds have been returned to the budget.

Rationalisation of ADF Command and Control Structure

As part of the 2006–07 Budget measures Defence has returned $70.1m over a four-year period involving the transition to the new Headquarters Joint Operations Command building at Bungendore and a permanent reduction of 241 military positions in the command and control structure. Staffing numbers have been reduced and funds have been returned to the budget.

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