Australia Defence and Security Report Q2 2008

Australia's internal security situation remained stable halfway through 2007. The 2007-08 budget capped off a 13-month period that saw the government promise more than US$41bn worth of new defence initiatives over 11 years; around US$16bn in the last budget, US$14bn for this budget, and more than US$11bn in between. As a result, next financial year the defence budget will reach US$22bn. This is an increase of US$2.1bn over the funding for this year, and represents 2% of GDP. Under the new Government of Prime Minister Kevin Rudd, defence expenditure is expected to remain at similar levels of GDP in the foreseeable future. The Rudd government stated that the 2008-09 spending would focus only on programmes that were deemed urgent and unavoidable. However, this level of rigour is not expected to be strictly applied to defence expenditure and overseas operations. Indeed, the Rudd government stated that the financial cuts would not affect the defence budget given Australia's sizeable overseas peacekeeping commitments and planned acquisitions.

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

In Q108 the aerospace firm Boeing announced plans to establish stronger ties with Australian firms through the Office of Australian Industry Capability. This is an initiative led by Boeing and will be supported by the Australian Department of Defence. Both parties will work together to build ties between Boeing's aerospace and commercial programmes and Australian aerospace companies.

Australia's arms trade patterns remained largely unchanged and the country still imports a range of bigticket items, such as the purchase of the AGM-158 Joint Air-to-Surface Standoff Missiles (JASSMs) from Lockheed Martin's Alabama plant. The current production rate is 15-17 missiles per month, with 475 of the 779 missiles having been delivered. The decision to purchase the JASSMs was due to the reduction of unit cost if the missiles were purchased from the US.