Defence

Wordsmith

Ric Smith, Secretary

Going into a new financial year

The increased funding for Defence was one of the highlights of the 2006–07 Budget. The Budget follows large Defence budgets of previous years and totals $19.6 billion. This figure represents about 1.9 per cent of Australia's growing Gross Domestic Product (GDP).

This funding comes with an obligation on us to spend that money wisely. Today we are looking forward to the start of a new financial year. We have a legal obligation to use our resources efficiently, effectively and ethically. This is also common sense. It is what both the Government and the taxpayers of Australia would expect.

The Budget

The Budget was addressed comprehensively in the last issue of the magazine, but I want to remind you of some of the highlights.

The Government has decided to continue to grow our budget by 3 per cent until 2015–16. This decision is pleasing because it can provide for Defence now and for the future. By providing a long-term funding commitment to 2015–16, the 2006–07 Budget offers the planning certainty we need to build Defence; fund projects such as the Joint Strike Fighters and Air Warfare Destroyers; attract, recruit and retain personnel; and develop coordinated approaches with other departments on national issues, such as emergency response and planning. All of this will be done while still maintaining priority for preparing forces to meet today's contingencies.

The Budget facilitates the varying spectrum of roles performed by Defence. Our Defence Forces do outstanding work on various fronts, including humanitarian assistance, peacekeeping and stabilising missions, defensive deployments and reconstructive efforts. Having a healthy funding base allows us to continue both our contribution to global affairs and our integral function in maintaining stability in our region.

The funding provided to Defence in the 2006–07 Budget includes sizeable amounts to meet prior Budget commitments and continue funding to initiatives for personnel, logistics, estate upkeep and operating costs such as living-in accommodation. It ensures that we get the appropriate balance between Defence capability, Defence people and Defence operations. Our Budget will also facilitate new measures such as the enhancement of Australia's Fisheries and Maritime Surveillance and improved ability to detect illegal foreign fishing vessels. Moreover, the Budget will provide for the Hardened and Networked Army initiative and enable the standing up of the High Readiness Reserve and an enhanced Conditions of Service Package for all Reservists.

This is the sixth successive Budget in which the Government has met or exceeded Defence White Paper commitments. There has been a real increase of $9 billion in Defence spending since 1995–96. Between now and 2015–16 the Budget will grow from $19.6 billion to $26.8 billion. It is a big Budget—indeed, the eleventh largest Defence budget in the world, according to our study.

Spending wisely

Now that the Government has trusted us with this money, it is important that we spend it wisely. From where I sit, this means three things.

Firstly, we must continue to focus on value for money in our decision making. This does not mean we always choose the cheapest option, but it does mean we should not go for the 'gold plated' option either. The option we choose must represent a sensible balance between the resources used and the value we gain. These judgments are difficult in Defence, where our outcomes are often intangible. Nevertheless, we still need to make such judgments as rigorously as possible.

Secondly, we should avoid waste. It is important that we spend the money we have been appropriated on the purposes identified; but spending the money isn't the objective, delivering the outcomes is.

Thirdly, we need to be continually looking for ways to be more efficient. This is hardly optional. We will need to become more efficient to fund future pay rises. With the aging workforce and a highly competitive labour market, I can expect that the pressure to attract and retain the best people will remain with us. Our future operating expenditure is going to be progressively reduced by what is called an Efficiency Dividend—other departments faced much more onerous demands for reduced administrative costs than we now do—and we will have to respond. Further, savings let us do more or do other things better. (See the feature article 'Making good progress with financial reform' in this issue.)

You may have heard the Minister's announcement about the creation of a Business Improvement Board to oversee a systematic review of Defence business processes. While this review will generate some efficiencies, it does not abrogate our responsibilities. It is the obligation of every manager to find better and more efficient ways to spend the money we have been given. I expect that details of the board will be released shortly.

The Government has shown a lot of faith in Defence; now when it comes to spending the money, we need to show that that faith was justified.

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