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During the (thankfully) now-concluded federal election campaign, the government faced mounting fiscal pressures, with commentators and economists questioning how increased defence spending is feasible alongside other pressing “public good” obligations.
Like many Western nations, Australia continues to slowly emerge from the hangover of economic, political and societal vandalism waged against it throughout the COVID-19 pandemic.
While certainly not alone in facing this reality, Australia and Australians are unaccustomed with confronting the uncomfortable reality of stagnating economic growth at both the macro and micro levels, mounting social atomisation and an increasingly precarious geopolitical position.
Yet if one were to take the example set during the course of the recent federal election campaign, you would be forgiven for thinking that everything was fine and that Australia was well placed to navigate the myriad of challenges looming on the horizon.
Front and centre of this is the national debt which is rapidly approaching and set to eclipse the national gross domestic product (GDP), which has only been further exacerbated by mounting concerns about our national credit rating and the ensuing second and third-order effects.
Despite this, both sides of Australian politics were at great pains to reassure the Australian public and using the national credit card to do so, as both sides were quick to tap the credit card with competing levels of spending across a range of areas including healthcare, education, nuclear reactors, road and rail infrastructure, housing and, of course, HECS debt relief.
The cynical among us will be quick to identify these overt attempts to buy and influence voting patterns and one would dare say that analysis is correct; it opened the door for a rather odd debate about just how both sides would pay for certain big ticket items.
Indeed while waiting in line to vote, I noticed the particularly pointed electioneering targeting the now-vanquished Liberal leader, Peter Dutton, with Labor volunteers shouting variations of “He cuts, you pay” slogans and pointedly asking Liberal volunteers how the Coalition intended to pay for the proposed nuclear reactors.
Ultimately, this vector of attack proved highly effective and cut through with the Australian population, but perhaps most curiously, few in the voting public stopped to ask just how both sides would pay for their promises.
But what does this have to do with defence and national security I hear you ask, well, defence and national security spending, has, especially in Australia, long been viewed as largely optional avenue for government spending, coming well behind spending like Medicare, education, public housing and social security.
Highlighting this is The Sydney Morning Herald’s economics editor, Ross Gittins, in response to the Coalition’s campaign announcement of an extra AU$21 billion dollar commitment to national defence spending and plans to increase defence spending as a proportion of GDP in an opinion piece titled Don’t be fooled. Ever-higher defence spending means ever-higher taxes.
Highlighting this, Gittins said, “By tacit agreement of both sides, election campaigns exist in a highly contrived fantasy world where the future holds nothing unpleasant. Government spending only ever goes up to meet our growing needs, while those nasty taxes only ever go down. Debt and deficit have been banished to the never-never land of Don’t You Worry About That.
“But last week Peter Dutton ripped a great big hole in the circus tent, through which you could see a frightening prospect: we seem to have strayed into a land where taxes just keep going up.”
At the core of Gittins’ thesis is the belief that tax increases to fund healthcare, schools, hospitals (both of which are largely state government responsibilities by the way), infrastructure, welfare and other “public goods” are fine, but raising taxes in order to enhance national security and the underpinning capabilities is somehow bad.
And herein lies the problem, defence and national security spending is the most important spending any government can deliver and while we should demand better quality spending, rather than simply throwing more money at the department – but the budget will have to increase, after all – the security of the nation is the primary responsibility of the state.
Defence spending needs to be discussed
I have often referred to and described defence spending as the national equivalent of home and contents insurance – essential spending that we need in order to secure our own interests and ensure that we cannot be invaded and occupied (less likely) or coerced and strong-armed through variations of “gun boat diplomacy” that is only going to become more frequent and closer to home.
First things first though, we need to establish where the current spending envelope sits, with Australia spending about 2 per cent of GDP on defence or about AU$56 billion annually, with that percentage long considered the minimum level of spending for NATO membership, yet the geopolitical and strategic circumstances we now find ourselves in have radically and irrevocably deteriorated.
As we are often reminded by the government, “we live in the most dangerous strategic times since the Second World War”, yet materially, defence spending hasn’t changed since the turn of the century, this comes despite ambitions outlined by the Albanese government in the 2023 Defence Strategic Review and the supporting 2024 National Defence Strategy and Integrated Investment Program to lift spending to 2.3 per cent of GDP by 2034–35.
Gittins said, “At present, we’re spending about $56 billion a year on defence, equivalent to 2 per cent of our national income (aka gross domestic product). Labor’s existing plan is for this to rise to $100 billion a year by 2034, or 2.3 per cent of GDP. But the Americans say we should be spending 3 per cent. So last week Dutton promised to raise it to 2.5 per cent by 2030, on the way to 3 per cent by 2035.”
This brings us to just how Dutton proposed to pay for this jump in defence spending, with Gittins detailing, “Dutton says getting to 2.5 per cent would involve additional spending of a cumulative $21 billion. How would he pay for this? Simple, he says. He’d repeal Labor’s promised tax cut of about $5 a week, rising to $10 a week the following year, which it has already legislated. This would save $17 billion over the next four years, and about $7 billion a year thereafter.
“What? Did you get that? Here’s a politician – a Liberal politician, no less – standing up in an election campaign and promising to increase taxes. By the standards of modern elections, that’s brave. Something Albanese would never dare to do. And that’s not all. If our politicians are serious about greatly increasing our spending on defence on the way to 3 per cent of GDP – and they seem to be – we’re talking really big bucks, not something we could just put on tick,” he added.
So why the willingness to rack up immense public debt on the national credit card for everything but defence and national security? Why the sudden concern about AU$150 billion worth of deficits over the forward estimates?
This reality is now something that is inescapable for both sides of Australian politics and requires an urgent, honest and concise conversation with the Australian public about the state of play, lest we find ourselves even more unprepared than we already are.
Final thoughts
As the world and, indeed, our region continues to become more competitive, it is becoming abundantly clear that Australia can no longer rely on an attitude and culture of “she’ll be right mate”.
While the Australian public have enjoyed the “easy” decades since the end of the Cold War and the ensuing “peace dividend” that continues to shape the nation’s consensus surrounding economic, political and strategic discourse, one can’t help but think back to the justifiable anger and frustration felt by the public at the height of the COVID-19 pandemic where the expectation of national preparedness was revealed to be the naked emperor.
Such anger and frustration will only become more pronounced should the nation, its interests or our current standard of living come under direct threat or assault and the Australian Defence Force and broader national security apparatus is shown to be woefully unprepared to independently face down such a threat.
For too long, our leaders have prioritised short-term economic gains over long-term strategic vision. That has to change. The issue isn’t whether we face challenges – the issue is when will Australia respond with clarity and conviction? When will our leaders set out a bold, coherent plan to keep us competitive and resilient?
The choices we make today will decide whether Australia thrives – or is simply swept along by the tide of history.
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at
Stephen Kuper
Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.
