Australia Pledges to Lift Defense Spending From 7-Decade Low

Australia, a military ally of the U.S. in the Asia-Pacific, will increase defense spending under Prime Minister Tony Abbott after it fell to a seven-decade low, the government announced in its budget today.

The Liberal-National coalition committed A$122.7 billion to military spending in the four years through June 2018, A$9.6 billion more than the amount earmarked by the previous Labor government, Defense Minister David Johnston said in a statement. The government will bring forward A$1.5 billion of spending to fund purchases, he said.

Abbott is seeking to build out the country’s military capacity at a time of China’s rising assertiveness in the region. He’s committed to building new Collins-class submarines at facilities in South Australia state, buying 72 F-35 Joint Strike Fighters and lifting defense spending from its lowest level since 1938 as a share of gross domestic product.

The government will provide defense with a “stable and sustainable funding growth path,” Johnston said in the statement.

Australia’s annual defense budget of A$25 billion will more than double in 10 years if the government increases spending to its target of 2 percent of GDP, according to a government-commissioned audit released this month.

Abbott’s government will allocate as much as A$90 million over two years to the search for the missing Malaysian plane, Flight MH370, it said today. It will provide A$467 million for military operations in Afghanistan, where Australia will provide about 400 personnel to train and assist the Afghan National Security Forces.

The government will set aside A$1.4 billion in the four years through June 2018 to pay for indexation changes to pension and death benefits programs for defense workers, it said.

U.S. Forces

Abbott has commissioned a policy paper to be released next year by a panel aiming to deliver an “affordable” structure for the defense force. He’s seeking to balance Australia’s interests between strategic ally the U.S. -- which has as many as 2,500 Marines based in the northern city of Darwin -- and top trading partner China, which it criticized last year for creating an East China Sea air defense identification zone.

“The coalition will ensure Australia has the military capabilities to deter threats and to project force in our neighborhood,” it said in a policy paper last September. “We will also ensure that Australia operates with our allies, particularly the United States, in the wider world when and where we judge that is in our national interest.”

South China Sea

Territorial tensions have flared in the South China Sea in the past week, with China and Vietnam accusing each other of ramming the other country’s boats near the disputed Paracel Islands, after China placed an oil rig in the area. The Philippines arrested 11 Chinese fishermen it said were in its waters.

Southeast Asian leaders meeting in Myanmar on May 11 called for all parties to show self-restraint and to work toward a code of conduct for the resource-rich area, through which some of the world’s busiest shipping lanes run.

Australia last month committed to buying a total of 72 F-35 Joint Strike Fighters, down from a 2009 plan to purchase about 100 of what has become the Pentagon’s most-expensive weapons system. It’s ordering 58 of the Lockheed Martin Corp.- made aircraft for A$12.4 billion, on top of the 14 it pledged to buy in 2009.

One of Abbott’s core pledges during the September election campaign was to “stop the boats” -- vessels filled with asylum seekers usually operated by Indonesian-based people smugglers. Australia, which now sends all asylum seekers arriving by boat to offshore detention centers in Papua New Guinea and Nauru, says its tougher policy has saved A$2.5 billion from the budget’s forward estimates.

Closing six onshore detention centers will save A$280 million, Immigration Minister Scott Morrison said May 9. The nation’s customs and immigration operations would be merged into a new body called Australian Border Force, he said.

To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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