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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 4.2, 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 Defence White Paper, Defence 2000 - Our Future Defence Force (Department of Defence). The 2000 Defence White Paper provided a funding commitment for Defence of around $23.5b over the decade from 2001-02. This funding injection equates to an increase of some 3% average real growth per annum over the period.
In addition to the implementation of the White Paper, the Government has given a number of specific directions to Defence to meet emerging strategic priorities. The 2003-04 budget measures provide funding for:
The Government also provided $103m over three years to accelerate the strength of the ADF towards the 2000 Defence White Paper target of about 54,000 personnel. The additional funding includes $50m in 2003-04 to capitalise on better than planned ADF recruitment outcomes and lower separation rates, particularly for the Army and Air Force.
Graph 4.3 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 2000 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 countries spend more as a proportion of their gross domestic product (GDP). Australia spends more than various individual member countries of the Association of South East Asian Nations (table 4.4). Defence spending levels within the region were varied, but saw an overall increase in 2002. Some budgets neared or surpassed their previous 10-year high points (e.g. Malaysia and Singapore). After allowing for price changes, increases were recorded by Thailand, Indonesia and the Philippines. 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 of America and the United Kingdom, has declined as a share of GDP since the end of the Cold War. Over the period 1993-2002, the United States of America and the United Kingdom defence expenditure as a proportion of GDP declined from 4.3% to 3.0% and from 3.6% to 2.5% respectively. These downward trends may stabilise as a result of the events in the United States of America on 11 September 2001 and recent changes in the strategic landscape. The United Kingdom, for example, concluded a spending review in 2002, which resulted in $4b in new resources for capabilities over the period 2003-04 to 2005-06. Australia’s defence expenditure as a proportion of GDP is shown in graph 4.5.