Australia Defence and Security Report Q3 2008

Australias internal security situation remained stable halfway through 2008. Recently, Prime Minister Kevin Rudd handed down his first budget. It afforded no real surprises with respect to defence spending, mandating a continuing programme of increasing defence funding by 3 per cent in real terms until 2017- 2018. The Rudd government stated that the 2008-2009 spending would focus only on programmes that were deemed urgent and unavoidable. However, defence expenditure and overseas operations were relatively insulated from this overall policy of fiscal tightening. Indeed, the Rudd government stated that the financial cuts would not affect the defence budget given Australias sizeable overseas peacekeeping commitments and planned acquisitions.

In June 2008, the Rudd Government honoured an election pledge to remove the 500-strong Australian troop contingent in Iraq.

Australias defence industry has experienced strong growth in recent years, mainly due to the Australian Defence Force (ADF= undertaking an ambitious development and upgrade programme. In the fourth quarter of 2006, Australias defence industry continued to grow, with the most significant development being the takeover of Australian Defence Industries (ADI), Australias largest defence firm, by Thales, whose share of ADI will increase from 50% to 100%.

Recently, the Minister for Defence Joel Fitzgibbon announced a US$72.1mn upgrade to the Robertson Barracks in Darwin, Northern Territory. The upgrade entails three separate projects, including redevelopment of the Robertson Barracks, a Replacement Tank Facilities project, and a Hardened and Networked Army project at the barracks. This latter project will command the lions share of the expenditure (US$35.2.mn), followed by the barracks upgrade redevelopment (US$30.2mn), and the tank facilities upgrade (US$6.7mn).

Another Hardened and Networked facility project has been announced for Edinburgh in South Australia.

Such facilities are geared toward improving the Armys protection, mobility, fire power and communications. The US$624mn project will be completed by 2011, and is expected to stimulate the South Australian economy.

On the macroeconomic front, Australias economy is sending mixed signals. On the one hand, the minerals boom continues, delivering economic prosperity to Australia on the back of unprecedented demand from China. Meanwhile, inflation and high interest rates are biting. These, coupled with rising petrol prices, are serving to lower consumer confidence. Under these conditions, the economy will require careful attention from the recently sworn in Australian Labor Party (ALP) party.