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Implementing the White Paper

Released in December 2000, the Defence White Paper set the Government's long-term direction and capability enhancement framework for Defence.

In February 2003, in line with the Government's pledge to review Australia's defence periodically, the Minister for Defence released Australia's National Security: A Defence Update 2003. The major changes to the strategic environment identified in the review were the emergence of new and more immediate threats from terrorism and increased concerns about the proliferation of weapons of mass destruction.

The review canvassed the implications of an altered strategic environment for Australia's defence posture and concluded that the changed strategic environment called for an increased emphasis on readiness and mobility, interoperability, the development and enhancement of important new capabilities and, where sensible and prudent, a reduced emphasis on capabilities of less importance.

Partly as a consequence of the review, the Government directed that Defence review its capabilities and the Defence Capability Plan to ensure that the plan continued to reflect the requirements of the changed strategic environment. Defence was also directed to consider lessons learned from operations in this capability review.

Overview of 2002-03

The year in review saw Defence continuing to implement the capability enhancements outlined in the White Paper, while managing a heavy operational tempo. The ADF's capabilities were enhanced not only through the acquisition of equipment but through investment in personnel, facilities, training, doctrine, command and management, organisational and materiel support. A list of the acquisition projects approved by the Government in 2002-03 is at Table 1.5 .

Financial Summary

Defence's departmental funding in 2002-03, and beyond, was based primarily on the allocations approved by the Government in the context of the Defence White Paper. This funding totalled $23.5b in 2000-01 prices (and totals $27.3b in 2003-04 prices) over ten years commencing 2001-02 and represented the most specific long-term funding commitment for Defence for more than 25 years.

The additional White Paper funding was to be applied to:

Table 1.1 provides a breakdown of the original funding levels approved in the Defence White Paper.

Table 1.1: Original White Paper Funding Allocation
01-02
$m
02-03
$m
03-04
$m
04-05
$m
05-06
$m
06-07
$m
07-08
$m
08-09
$m
09-10
$m
10-11
$m
Total
$m
Major Capital Investment
Major Capital Equipment 500 1,000 1,375 1,378 1,464 1,926 1,981 1,857 2,234 2,688 16,404
Workforce
Two per cent real personnel cost growth - - - 214 324 436 550 667 786 908 3,884
Operating Costs
Operating Costs for DCP projects - - - 174 206 245 353 415 481 535 2,408
Operating Baseline Adjustment - - - 105 115 118 121 123 125 124 831
Total 500 1,000 1,375 1,870 2,109 2,725 3,005 3,063 3,626 4,255 23,526

Table 1.2 provides details of the White Paper funding allocations as they currently stand in 2003-04 prices. A description of the status of each element follows.

Table 1.2: Original White Paper Funding Allocation (updated to 2003-04 prices - outturned)
01-02
$m
02-03
$m
03-04
$m
04-05
$m
05-06
$m
06-07
$m
07-08
$m
08-09
$m
09-10
$m
10-11
$m
Total
$m
Major Capital Investment
Major Capital Equipment 510 1,050 1,475 1,509 1,633 2,193 2,302 2,200 2,698 3,312 18,882
Workforce
Two per cent real personnel cost growth - - - 233 361 496 638 790 948 1,158 4,624
Operating Costs
Operating Costs for DCP projects - - - 189 230 279 410 491 581 619 2,799
Operating Baseline Adjustment - - - 114 128 134 140 146 152 153 967
Total 510 1,050 1,475 2,046 2,352 3,102 3,489 3,628 4,378 5,241 27,272

Major Capital Investment

Of the total additional funding of $23.5b (2000-01 price basis) allocated in the White Paper, some $16.4b (2000-01 price basis) was earmarked for unapproved major capital equipment. The major capital investment program consists of both capital equipment and capital facilities elements. These elements are described in Chapter Three. As projects are progressively approved, funding is transferred to the approved major capital equipment program and the major capital facilities program. The overall funding is made up of the components of the capital investment program, including minor capital and repairable items, as described in the Budget Papers (Portfolio Budget Statements 2003-04, page 133 [PDF]).

In the 2003-04 Budget, the Government decided to reprogram $200m from the Defence Capability Plan to 2004-05 (subject to consideration in the 2004-05 budget) and to reschedule $642m from the forward estimates, with this funding to be added back in later years when required.

Since the White Paper, some 85 new projects have been approved with an all-up cost of around $16b.

Personnel Costs

The provision of $4.6b for two per cent real per capita growth in personnel costs has been programmed in Defence's forward estimates commencing in 2004-05 for the purposes intended in the White Paper. Of this, $1.2b has been allocated to partially cover the cost of the recent service allowance increase, the impact of which extends well beyond 2003-04, and for increases in housing, compensation and health costs, which are rising at substantially higher rates than the non-farm GDP deflator, the basis of Defence supplementation. An amount of $3.4b remains unallocated and will be used to fund salary and allowance increases from 2004-05 onwards.

The ADF is on track to grow from 50,000 to about 54,000 full-time members as specified in the White Paper. In the 2003-04 Budget, the Government provided an additional $103m over three years to accelerate the strength of the ADF towards this target in order to capitalise on better than planned ADF recruitment outcomes and lower separation rates, particularly in the Army and the Air Force.

Operating Costs for Defence Capability Plan Projects

The operating costs of new capability in the Defence Capability Plan are being progressively allocated as the new equipment enters service. The funding is to ensure that sufficient operating costs are available to operate the equipment on delivery. Given changed planning assumptions, revised costings and changes in the timing of projects, the operating costs provision is now estimated at $2.8b over the decade.

Operating Costs

The $967m included in the White Paper as an operating baseline adjustment was allocated to meet unavoidable cost pressures identified through the White Paper process. This included offsetting some shortfalls identified at the time through a $200m per annum savings program. The savings program is now complete and is addressed in more detail later in this section.

Summary

White Paper funding will continue to be allocated on the following basis: