The claim
With increasing instability in the Asia-Pacific and beyond, defence spending has become an election issue.
Questioned about Labor's defence spending during its last term in government on ABC TV's Insiders, Shadow Defence Minister Brendan O'Connor said it was similar to the Howard government's.
"But let's be clear — and I think it does matter — the facts do matter, that when we compare the Howard years with the Rudd-Gillard years, both — all governments spent 1.7 per cent to 1.8 per cent of GDP on average," he said.
Did both the Howard and Rudd-Gillard governments spend 1.7 to 1.8 per cent of GDP on defence on average? RMIT ABC Fact Check investigates.
The verdict
Mr O'Connor's claim is a fair call.
Fact Check extracted defence spending figures from the Defence Portfolio Estimates Statements and Defence Annual Reports.
The figures showed the Howard government spent an annual average of 1.77 per cent of GDP on defence, compared with 1.72 per cent under the Rudd-Gillard government.
Assessing the claim
Mr O'Connor is not the only Labor politician to have made this comparison.
In an interview with Sky News a few days beforehand, Shadow Minister for Foreign Affairs Penny Wong made a similar claim:
"… if you look at the period I was a member of the Cabinet, the Rudd-Gillard governments, and the Howard government, defence spending as a proportion of GDP was on average, very similar. It was about 1.7 per cent of GDP," she said.
And Senator Wong made the same claim a few days earlier in her own appearance on Insiders, where she said spending by the Rudd-Gillard government and the Howard government was "broadly equivalent, broadly similar".
Though Mr O'Connor mentioned "all governments", it is clear he and Senator Wong are making a comparison between the Howard and Rudd-Gillard governments. Fact Check will assess Mr O'Connor's claim on this basis.
What is included in defence spending?
In 2016, the Department of Defence supplied Fact Check with defence spending figures for the Howard and Rudd-Gillard governments by financial year between the years 2000-01 and 2014-15.
However, when Fact Check contacted the department for analysis of Mr O'Connor's claim, to ask if these figures were still valid and what exactly they were measuring, the department was less forthcoming.
A spokeswoman directed Fact Check to the department's annual reports. However, the spokeswoman would not answer questions about which line items in the reports correspond with the department's interpretation of defence spending.
The spokeswoman also did not reply to repeated requests for a briefing from someone in the department on where to find the figures.
Figures before 2000-01, sourced to the Department of Defence, are available from the ABS, but the bureau does not make clear what is and isn't included in these figures. Fact Check has used these figures previously in conjunction with figures sourced directly from the department to assess claims stretching back to before WWII.
There is no publicly available or easily interpretable Australian government source for defence expenditure.
Peter Robertson, a professor of economics and dean of the University of Western Australia's School of Business, who has done research in international comparisons of defence spending, told Fact Check there are defence spending figures contained in the Gross Domestic Product data from the Australian Bureau of Statistics.
However, he said that this would include things like veterans affairs budgets, which would inflate spending numbers.
Professor Robertson's research used numbers from the Stockholm International Peace Research Institute, which has a narrower definition that seeks to make international comparisons and excludes "Civil defence and current expenditures on previous military activities, such as veterans' benefits, demobilization, conversion and weapon destruction".
However, SIPRI publishes figures on a calendar year basis sourced from "open sources only", which "is calculated on the assumption of an even rate of expenditure throughout the fiscal year."
The government typically reports data on defence spending by financial year. This means SIPRI's calendar year data may be somewhat distorted by Australia's financial year reporting.
The White Paper approach
Fact Check asked Marcus Hellyer, a senior analyst focusing on defence budgets and capability at Australian Strategic Policy Institute, a non-partisan think tank which is partly funded by the Department of Defence, for guidance on how to source a consistent set of figures from Australia's defence budget papers.
Dr Hellyer managed the defence investment program during the Labor government.
He suggested using "actual" spending figures contained in the Defence Portfolio Additional Estimates Statements, which are generally released in the February following the close of the financial year.
He favoured an approach which is consistent with the measurements of funding in the 2016 Defence White Paper, which is the government's long-term plan for defence funding.
This includes appropriations from the government, but excludes own-source revenue. An example of own-source revenue could be payments which defence receives from soldiers for meals.
It also excludes monies which are paid to retired soldiers, like pension payments, for example.
There is no consistent source for these figures for the period from the Howard government's first full financial year in office, 1996-97, to Labor's last full financial year, 2012-13.
Fact Check has taken government appropriation figures from tables headed "Total Defence Resourcing" in the PAES for figures between 2003-04 and 2012-13.
These tables were not present in earlier PAESs. Instead, Fact Check extracted equivalent figures from cash flow statements in the PAES between 1998-99 and 2002-03.
The remaining figures for the Howard government (1996-97 and 1997-98) did not exist in the PAES for any year and Fact Check has extracted them from the defence outlays line items of the 1997-98 and 1998-99 defence annual reports.
From these annual reports, Fact Check has chosen a figure which excludes payments made for the Defence Force Retirement Benefits Scheme and the Military Superannuation and Benefits Scheme, which succeeded and replaced the DFRBS.
Dr Hellyer noted that this inconsistency was unlikely to produce figures that materially changed the result of this analysis.
What happened to defence spending during the Howard and Rudd-Gillard years?
Below, Fact Check has graphed defence spending over the Howard and Rudd-Gillard governments.
Financial year 2007-08 has been designated the first year of Labor's government, given that Kevin Rudd was prime minister for most of that year.
Under prime minister John Howard, defence spending increased in real terms at a steady pace. When Mr Rudd took office, it continued at that pace until 2009-10, when it jumped significantly, and then bounced around for the rest of Labor's term.
During the Howard years, defence spending increased in real terms, by 4.6 per cent on average each year. This does not include the change from 1995-96 under the Keating government.
By contrast, Labor increased real spending by 0.6 per cent on average each year.
In his claim, Mr O'Connor mentioned defence spending as a proportion of Gross Domestic Product (or the size of the economy). This is a common way of accounting for increasing prices and international comparisons in defence spending.
Consistent with previous analyses, Fact Check has used GDP at "current prices" and the nominal defence spending figures to calculate defence spending as a share of GDP.
In the first full year of the Howard government, defence spending was 1.8 per cent of GDP.
It was as low as 1.72 per cent in 2000-01 and as high as 1.84 per cent in 2003-04. In Mr Howard's last three budgets, it stayed below 1.8 per cent.
The average for this term in office was 1.77 per cent.
Labor's first year of defence spending in the 2007-08 financial year gave a figure of 1.72 per cent of GDP. Its first full year in 2008-09 saw a figure of 1.73 per cent of GDP.
Spending then rose to 1.99 per cent of GDP in 2009-10, due to a large increase in defence spending combined with sluggish GDP growth, before declining to 1.52 per cent in 2012-13.
The average for Labor's term in office was 1.72 per cent, which is 0.05 per cent lower than under the Coalition.
ASPI's figures
Fact Check contacted Mr O'Connor to ask for the basis of his claim.
A spokeswoman responded: "As a share of GDP, Defence spending under the former Labor Government was the same as under the Howard Government – under Howard defence spending averaged 1.78 per cent of GDP and under the former Labor government it averaged 1.75 per cent."
The spokeswoman sourced her figures to ASPI's cost of defence database.
The database does not contain a set of figures for the first year of Mr Howard's government.
An average of the defence spending to GDP figures in the database shows the Coalition at 1.77 per cent, and Labor at 1.76 per cent.
A problematic measure
Defence spending is commonly expressed as a proportion of a country's GDP, which can enable simple comparisons across countries and time.
Fact Check has previously used this measure to test claims surrounding whether particular years of spending represented the lowest level since 1938.
In 2016, then prime minister Malcolm Turnbull claimed that Labor's last year was the lowest since then.
More recently, Defence Minister Peter Dutton has made this claim.
Fact Check found Mr Turnbull's claim to be not the full story. Although Labor's defence spending figure for 2012-13 was the lowest as a share of GDP since 1938, there were some caveats.
Mr Turnbull left out of his claim that Labor's 2009-10 figure was higher than any figure produced under Coalition prime ministers Mr Howard, Tony Abbott or Mr Turnbull.
And while defence spending figures are not revised, the GDP numbers are estimates, not actual figures, and the ABS continues to update them sometimes years after the event.
Perversely, this means that if a data revision shows worse economic performance than previously reported in a particular year, defence spending for that year will then look more favourable.
Fact Check previously noted that the government's policy, as outlined in the 2016 Defence White Paper, was to decouple defence spending from GDP to ensure "budget certainty" in a "more complex strategic environment".
What the experts say
Dr Hellyer said he agreed with Mr O'Connor's characterisation of defence spending under the Howard and Rudd-Gillard governments.
"Before the current government came in and increased defence spending, the Howard government and the Rudd-Gillard governments were broadly speaking on average, in that 1.7 to 1.8 per cent [range]".
"That cut that Labor did to the defence budget in 2012-13 shouldn't be regarded as kind of the result of a long term trajectory of cutting the defence budget. That was a specific measure, to make the commitment to return the federal budget to surplus," he said.
Experts spoken to by Fact Check agreed that looking at a single year of spending was not representative of the overall spending record of a government, and that averages over the term of government were a better measure.
UWA's Professor Robertson said: "Focusing on one year doesn't really mean much at all".
Stephen Bartos, an expert in public sector governance, finance, strategy and risk, who was formerly a deputy secretary in the federal Department of Finance said that "picking a single year is misleading — it's easy to pick the year that most favours one side of an argument or another."
Mr Bartos said there was little difference between the two sides of politics when it comes to defence spending.
"However, that needs to be qualified with recognition that both major parties have shown that they are prepared to change their policies in light of changes to the security environment that Australia faces. Both sides have published Defence White Papers that have tried to balance the strategic questions with the budget in light of these considerations," he said.
"Allocating enough funding to provide capability to meet the defence challenges we face, while not giving Defence a blank cheque, has been the abiding theme of defence budget decision-making for decades regardless of which party has been in power."
Nonetheless, Dr Hellyer said that big swings are still unhelpful for defence planning: "There is your people budget, there's your capital acquisition budget, and then there's your operating budget. When defence gets hit with cuts it disproportionately impacts its capital acquisitions. And so what that means is that projects get delayed, projects have their scope cut, so you will acquire less staff and occasionally projects get cancelled."
Principal researcher: RMIT ABC Fact Check Editor Matt Martino
Editor's note (April 20, 2022): A previous version of this fact check contained a graphic with incorrect calculations for defence spending in real terms and the text therefore contained incorrect figures for average increases in real spending. The graph and these figures have been corrected. This does not change our verdict.
Sources
- Penny Wong, Interview, Sky News, March 10, 2022
- Penny Wong, Interview, ABC Insiders, February 27, 2022
- Stockholm International Peace Research Institute, Military expenditure database, Sources and methods
- ABC Fact Check, Fact check: Did defence spending under Labor drop to its lowest level since 1938?, February 24, 2016
- Australian government, Directory, Military Superannuation and Benefits Scheme
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Department of Defence, Budget documents, PAES 1999-00 to 2013-14
- Peter Dutton, Twitter, March 8, 2022
