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In the decade preceding 2001-02 Defence funding remained relatively stable in 'real' terms. Increases over this period, evident in graph 4.3, reflect maintenance of the Defence funding base after taking account of inflationary and foreign exchange influences.
Defence funding was increased in the 2001-02 budget and forward estimates to address a number of specific priorities detailed in the 2000 Defence White Paper. The White Paper provided a funding commitment for Defence of around $23.5b (in 2000 dollars) over the decade from 2001-02. This funding injection equates to an increase of some 3% of average real growth per year over the period.
In addition to the implementation of the White Paper, the Government has given Defence a number of specific directions to meet emerging strategic priorities. Key 2004-05 budget measures include:
Graph 4.4 reflects the significance of both employee costs and the investment in specialist military equipment and infrastructure in delivering Defence capability. The increased share for investment is consistent with initial progress towards acquiring the equipment capabilities outlined in the Defence White Paper. Longer-term projections indicate increases in personnel costs due to growth towards a larger ADF as specified in the White Paper.
From a regional perspective, Australia has tended to spend more on defence than its neighbours, in absolute terms, although some spend more as a proportion of gross domestic product (GDP). Australia spends more than various member countries of the Association of South East Asian Nations (table 4.5). Defence spending levels within the region were varied, but saw an overall increase in 2003. Some budgets neared or surpassed their previous 10-year high points (e.g. Singapore and China). After allowing for price changes, increases in 'real' defence expenditure were recorded by Thailand, Indonesia and Malaysia. Local political and economic conditions, as well as defence policies, affected the size of individual defence budgets and annual funding changes.
Defence spending by Australia’s traditional strategic partners, the United States and the United Kingdom, has declined as a share of GDP since the end of the Cold War. Over the period 1993 to 2003, United States defence expenditure as a share of GDP declined from 4.5% to 3.4%, but has begun to stabilise as a result of the events of 11 September 2001 and recent changes in the strategic landscape. Australia’s defence expenditure as a share of GDP is shown in graph 4.6.