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Personnel, Budget issues to shape 2008 White Paper

28 April 2008

The newly appointed Chiefs of Australia’s three armed services must overcome critical shortages of trained manpower which threaten Australia’s ability to sustain major overseas commitments, according to minister for defence Joel Fitzgibbon. And even major departmental efficiency reforms are unlikely to meet a projected shortfall in funding to buy, man and maintain new defence equipment.

According to Fitzgibbon his Department needs to achieve internal savings of about $1 billion a year for 10 years in order to make up this shortfall.

These stark truths are likely to influence a re-alignment of Australia’s defence priorities and resources which will be set out in a new Defence White Paper, due to be published at the end of this year.

Announcing the appointment 19 March of new Chiefs of the Australian Army, Navy and Air Force, Fitzgibbon said the new senior defence leadership team will make the personnel recruitment and retention issue a major priority.

As part of the ADF’s three-year cycle of senior appointments, Fitzgibbon has re-appointed the current Chief of Defence Force, Air Chief Marshal Angus Houston, for a second term, but the current service chiefs will all retire when their three-year terms expire 4 July. Army Chief Lieutenant General Peter Leahy, who has already served two terms, will be succeeded by the current Deputy Chief of the Defence Force, Lieutenant General Ken Gillespie. Navy chief Vice Admiral Russ Shalders will be succeeded by his deputy, Vice Admiral Russell Crane; and Air Force Chief Air Marshal Geoff Shepherd will be replaced by the current Air Commander Australia, Air Marshal Mark Binskin.

“The single biggest challenge facing the Australian Defence Force in the future is our people and skills shortage,” Fitzgibbon told reporters in Canberra when he announced the appointments. “In addition to training and sustaining their respective services, each service chief will be directly responsible for ensuring that sufficient trained and skilled personnel are available.”

“Every three months, or more if required, [they] will spell out in detail the progress they have made in meeting the exacting requirements of their respective services for skilled trades and professions,” Fitzgibbon said.

In the 2007-08 financial year the ADF has 52,505 regular personnel with 19,530 reservists and 19,935 civilians (see table). The Hardened and Networked Army (HNA) initiative announced by then-prime minister John Howard in December 2006 envisaged the raising of two new infantry battalion groups and supporting arms and saw a revised manpower target for the 2010-11 fiscal year of 55,700, rising to a goal of around 57,000 personnel by 2016.

But the ADF is losing skilled engineers and technicians and struggling to meet recruiting targets as it competes for talent with Australia’s booming and cashed-laden mining industry.

The ADF’s recruiting problems are close to crisis point, Fitzgibbon said: “The need to crew three new Air Warfare Destroyers and two new amphibious ships while raising two new Army battalions, makes recruitment and retention a task of enormous proportions.

The ADF has some 3,900 personnel deployed overseas, he said; the rotation cycle means nearly 12,000 men and women will be either working up, deploying or recovering after returning home. “We achieve this with a relatively small force,” Fitzgibbon said. “The ADF is under significant pressure in maintaining this tempo and the requirement for frequent deployments is likely to continue for some years.

“When I attend NATO meetings and tell them that around half of our Infantry and Cavalry are currently tied to overseas deployments they respond with a look of shock and disbelief.”

Recruiting, training and retaining highly skilled service men and women is just one of four key objectives Fitzgibbon set out in an earlier speech 18 March to Canberra-based thinktank the Australian Strategic Policy Institute (ASPI). The others, he said, are producing the new White Paper; putting the Defence Budget back on track; and putting defence procurement back on track.

“The crucial starting point for the White Paper process will be a wide-ranging review of our security environment, our strategic interests, and determining the future tasks and roles for the ADF,” he said. “Unless we start from this base, future decisions about the ADF’s force structure and key defence capabilities will be neither rigorous nor disciplined.”

“The White Paper’s Force Structure Review will identify the likely future tasks for the ADF; recommend which capabilities will be needed to undertake these tasks; and recommend appropriate force structure and capability options to deliver these joint capabilities.”

Money and manpower remain the big stumbling blocks for force planners, and the cost of manning, operating and maintaining current and planned equipment has been “alarmingly under-estimated and under-funded”. Fitzgibbon warned: “I’m advised by my Department that the shortfall may be up to $6 billion over the coming decade.”

Subsequently, Fitzgibbon stated the Department of Defence needs to reap internal savings of about $1 billion a year for 10 years in order to transfer funds from the ‘tail’ to the ‘teeth’ of the organisation. He pledged that any budget cuts within the department won’t affect what he terms ‘capability’: in simple terms uniformed and acquisition budgets.

However, he hasn’t disclosed how these savings might be achieved and observers will scrutinise his, and the new Labor Government’s first budget carefully on 13 May for clues about Defence’s future direction. While there is the potential to capture administrative efficiencies and eliminate waste across the organisation, cost savings on the scale envisaged by Fitzgibbon would require a transformation of the department’s administration. His would be a disruptive and possibly painful process.

The 3 per cent annual defence budget increase which has been guaranteed until 2016 won’t be enough to pay for an expanded ADF and to buy and operate all the new equipment the ADF wants, warns defence budget analyst Derek Woolner of the Australian National University’s Strategic and Defence Studies Centre (SDSC) in Canberra.

He told Rumour Control that over-optimistic projections of equipment acquisition and operating costs, compounded by the wear and tear from intensive operations, and a lack of focus on efficiency and cost-saving within the department is blowing out the budget by more than 3 per cent each year. Adding more troops to the payroll will only make the problem worse.

More money will be needed because capturing internal efficiencies to free up funds for combat equipment and troops won’t cover the shortfall, he said.

The situation presented by Fitzgibbon 18 March is more serious than people had understood, according to Professor Alan Dupont. Director of the University of Sydney’s Centre for International Security Studies. The department will have to make cuts to its spending plans, and this will show up in the Defence White Paper, he told Rumour Control.

But there aren’t many large, open-ended programs which offer the scope for serious cost savings, he said, except for the Joint Strike Fighter: cutting the planned buy from 100 aircraft to about 60 or 70 could save a lot of money. Simply trimming a few per cent of each defence project and program across the board – or so-called salami-slicing – is rarely effective, he said.

* Australia’s financial year begins 1 July.

SOURCE: Australian Department of Defence 2007/08 Portfolio Budget Statement

© Rumour Control 2008

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