Defense projects have blown at least $6.5 billion, putting even more pressure on the federal budget, the government will reveal on Monday. The new figure – which comes before the promised nuclear-powered submarines have even been budgeted for – led the government to commit to “prudent” future management of defense projects. It will require monthly reports to ministers and apply “early warning” rules to trigger special scrutiny of projects that have run into trouble.
Labor is not expected to explain the defense budget cuts on Monday, but did not rule out changes to projects across the portfolio – even as it pledged to increase overall defense spending as set by the coalition. The government said 28 major projects were running behind schedule or a cumulative 97 years including Hunter-class frigates, coastal patrol vessels and a battlefield command system.
In addition, 18 projects were over budget with “variations of at least $6.5 billion from identified approved budgets.” The figure was based on a comparison with the amount set aside when projects received a “second go-ahead” from ministers. Officials said a large proportion of the changes in the budget were due to factors such as exchange rates and price indexation, but these still had a real impact on the defense budget.
The government will argue that the previous government “failed to provide the leadership needed to effectively manage” the risks and will pledge six new measures to manage projects of concern. These new steps include the creation of an independent office to manage projects and portfolios within defense and regular ministerial summits to discuss remedial plans.
Defense Minister Richard Marles said the Albanian government would “focus better on the quality of defense spending to ensure we provide the best capabilities for our ADF personnel”.”We are facing the most challenging circumstances since the Second World War, compounded by the fact that the economy is facing serious pressures – and reaching record defense spending as a percentage of GDP means we need to be more responsible in the way we govern,” he said.
Marles took aim at the former coalition government’s handling of defense projects, claiming money had been “flushed down the toilet”. “It’s not like we can go on the battlefield and overwhelm our adversary by running up to them and waving a copy of the budget papers in their face,” he said.
Plans for at least eight nuclear-powered submarines under the Aukus deal with the US and UK have yet to be budgeted as key details are part of a review due to be completed by March next year. The new figures will fuel debate about growing budget pressures, despite expectations that the government is unlikely to make changes to the third round of tax cuts in this month’s economic statement.
Equalizing tax rates is estimated to cost the budget $243 billion over 10 years, with the benefits going mostly to higher income earners. Treasurer Jim Chalmers said the government was “dealing with major budget pressures in critical areas such as national security and defence, compounded by botched projects and cost shortfalls that were not budgeted for by the previous government”.
Chalmers is due to fly to Washington DC this week for a series of meetings, including a meeting of G20 finance ministers and central bank governors, before delivering his first budget on October 25. He said he would “assess the rapidly evolving global situation and ensure that our budget is based on the best, most accurate and up-to-date assessment of the global outlook”. “Global economic storm clouds are receding with runaway inflation, skyrocketing energy costs and the threat of recession in some major economies,” Chalmers said. “We will not be spared from this worsening global outlook and Australians are already feeling the pinch – thanks to high and rising inflation, rising cost of living pressures and supply chain challenges.”
