Just 15% of Coalition’s cyber spy funding is new money: ASPI

Denham Sadler
National Affairs Editor

More Defence programs will likely be cut to help pay for substantial new cyber powers for Australia’s spy agency, with just 15 per cent of the funding set aside for REDSPICE by the former government being new, according to an ASPI report.

The Australian Strategic Policy Institute (ASPI) released its annual Cost of Defence report on Wednesday, showing that Defence funding is $48.6 billion in this year’s budget, or 2.11 per cent of GDP.

The report revealed that Defence spending on IT acquisition is set to pass $1 billion this year for the first time, and that the use of contractors by the Departments has jumped by more than 40 per cent in the last two years.

Defence’s overall tech acquisition and sustainment spending is set to hit $2.5 billion this year, more than the total budget of REDSPICE, the AFP and ASIO.

REDSPICE was a flagship announcement in the Coalition budget earlier this year, with nearly $10 billion to be poured into the ASD’s cyber capabilities over the next decade. This will see the ASD double in size and triple its cyber capabilities, with 1900 new personnel.

But it’s been later revealed that a large chunk of these funds will be redirected from Defence’s existing budget, and with all of this money accounted for, this means that programs will be cut to pay for the cyber spending.

One program has already been put on the chopping board to help pay for REDSPICE, with Defence drones program SkyGuardian slashed earlier this year.

While $9.9 billion has been committed over the next 10 years, $4.2 billion has been allocated over the next four years, and just $588.7 million of this is new funding, accounting for 14 per cent of the promised money.

A further $5.7 billion will be needed in the coming years to fully fund the scheme, the ASPI report found.

“If the plan is for there to be a similar split beyond the forward estimates between new money and transfers from Defence, that will be a very expensive exercise for the Department; it will need to find a further $4.9 billion for a total of around $8.5 billion over the next decade,” the report said.

“Since every dollar in the Defence budget is already spoken for, it can only do that by taking funding away from other priorities. It’s not surprising that Defence has had to cancel projects such as the SkyGuardian uncrewed aerial vehicle.”

The ASPI report also questioned how the ASD will go about filling 1900 new roles in the next 10 years.

“It will be interesting to see how ASD achieves that spend: you need people both to spend that money and to spend it on. Getting that number of people through the security vetting process will take time,” the report said.

“It’s good to be ambitious, but the Department of Defence’s efforts to increase its workforce have achieved less than 1 per cent average annual growth over the past six years. So, if ASD can find a way to do it, it should bottle it and give some to the Department.”

ASD director-general Rachel Noble said earlier this year that ASD was “very confident” that it will be able to fill all of the new roles.

The ASPI report also found that Defence’s IT acquisition spending is set to surpass $1 billion this year for the first time, but there is a planned decline in total ICT spending over the forward estimates.

“That might be because Defence has discovered the Holy Grail of ICT efficiencies and is realising savings. But there have only been two declines in total ICT spending in the past decade, and both were immediately followed by increases, so we’re entitled to remain somewhat sceptical that Defence has found the Holy Grail just yet. It may be that Defence doesn’t exactly know what its future requirements are,” it said.

The report shone a light on Defence’s reliance on external contractors. There was a 20.6 per cent increase in contractors at the Department from 2020 to 2021, and a further 22 per cent increase in the last year to 8,311.

“By Defence’s own definition, contractors are meant to fill roles usually performed by ADF or APS staff on a temporary basis. Based on that data, contractors alone are equal to nearly 50 per cent of Defence’s APS workforce, suggesting that there’s nothing temporary about this situation,” the ASPI report said.

There needs to be more transparency around the use of consultants and contractors at the Department, the report said.

“Defence has released next to no information or analysis on the cost of its contracted workforce. And, if you don’t understand the money you’re paying, you can’t assess whether you’re getting value for money,” it said.

“Currently, Defence seems to be using contractors because it has no choice, not on the basis of an informed, value for money decision. An early item of business for the incoming government will be to ensure that Defence understands the value for money calculus of its internal and external workforce, allowing it to adjust the balance between internal and external in the most efficient way possible.”

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