The mechanics of a Budget speech, and the Opposition reply

David Havyatt

Every year both the Treasurer’s budget speech and the Opposition Leader’s reply speech are criticised for what they didn’t say, almost as much for what they did. Most of this criticism is ill-founded.

On Tuesday, the Treasurer of Australia introduced the 2022-23 Budget. The formalities are that he moved the second reading of the Appropriation Bill (no. 1) 2022-23 and then spoke for thirty minutes to that resolution.

Josh Frydenberg on Budget day. Photo: Joseph Brookes

As soon as he completed the speech, the Assistant Treasurer tabled the Budget Papers; Budget strategy and outlook, Budget measures, Federal financial relations and Agency resourcing.

These papers are the meat of the Budget. These and associated papers are what journalists, advocacy groups, and others are ‘locked up’ to read before the Treasurer speaks; these are where the detail resides.

In days gone by, this is what journalists subject to great scrutiny, working through the detail to see how much expenditure on different functions of government had changed.

Reporting on the Budget is made much harder because there are now three timeframes that can be relevant. The first is the immediate year – the Budget is, after all, only an appropriation for 2022-23.

However, recognising that taxation and spending initiatives have implications for future years, the Budget includes three years of ‘forward estimates.’ Consequently, Treasurers will often announce the total amount over the four years as part of the speech.

In more extreme circumstances, Treasurers will announce funding plans covering a decade. This is what the Treasurer did in valuing the Defence capability plan at $270 billion and his cybersecurity announcement. The latter, described as the ‘biggest ever investment in Australia’s cyber preparedness’, was valued at $9.9 billion.

It is Budget Paper No. 2 where we look for more detail on the planned expenditure. Here we find (on page 3 of Part 2) two entries for REDSPICE; one is for a new program in ASD with expenditures of $680 million, $1,243.6 million, $1,260.6million and $1,033.1 million over each of the years of the budget and forward estimates.

Intriguingly, the Department of Defence shows negative expenditures of $688.7 million, $983.6 million, $981.4 million and $974.9 million. Labor spokesmen claimed these are cuts to other Defence programs meaning there is only $588.7 million of new money.

Since these are variations from MYEFO, and REDSPICE hasn’t previously been announced, an alternative explanation is that the initial REDSPICE funding was part of the $14 billion for decisions taken but not announced in MYEFO (page 202).

If this is the case, it means the decision was made at least three months ago, but estimates for the forward years grew by over half a billion dollars, though they declined by eight million dollars for the first year.

The Australian Signals Directorate has done its bit to help out the Treasurer and the Defence Minister by providing us with a nice brochure REDSPICE: A Blueprint for Growing ASD’s Capabilities.

As a blueprint, the document is a wonderful recruitment brochure. Unfortunately, what it doesn’t do is provide any more detail on the elements of the expenditure plan.

We can subtract the four forward years from the $9.9 billion total to reveal that the last six years’ expenditure reduces to an average of $947.1 million. We can also note that ASDs forecast for employee benefits grows from $309.7 million this year to $632.2 million in the last forward estimate year.

If we assume ASD has recruited all of the additional 1900 people total employee benefit per employee is over $169,000, while recruiters estimate the annual salaries of specialists are over $200,000.

But additional employee benefits only account for about a third of the near billion-dollar annual increase.

Annual ‘supplier payments’ grow by half a billion dollars over the forward estimates. This is consistent with the brochure’s statement that REDSPICE presents a $5 billion opportunity to local industry.

These suppliers will undoubtedly be competing with ASD for the same skilled staff. Yet as the Labor spokesmen and others have noted, we already have a shortage in these skills. Further, being defence projects, they can only be filled by citizens.

What we have then, despite the detail of the Budget documents, is scant information on a cybersecurity program that is possibly only $588 million of ‘new money’ over four years, is only $680 million in the first year and less than $4 billion over the forward estimates.

Furthermore, it is a program specifying a targeted recruitment number without a matching skills development program.

We are reminded that the leader of the Opposition didn’t mention ‘cyber’ in his speech. Whether it is because he was ‘taken by surprise’ by the announcement or just that he thought there wasn’t any need to respond directly is mere speculation.

As the Opposition leader reminded his party room on Thursday morning, he was delivering a speech, not an alternative budget. For his speech he had the same thirty minutes the Treasurer had. We can compare the 188 words in the Treasurer’s speech and the 54 words in the Leader of the Opposition’s speech on the subject of defence.

The Treasurer said:

We must invest more in the defence of our nation. This is what we are doing after those opposite allowed defence spending to fall to its lowest level since 1938.

We have put in place a 10-year defence capability plan worth more than $270 billion supporting more than 100,000 jobs. Hobart Class Air Warfare Destroyers, built in South Australia, now in the water. Combat vehicles, maintained in Queensland, now in service. And F-35A Joint Strike Fighters with parts made in Western Sydney, now in the air.

In this Budget, we continue to make record investments in our Navy, Army and Air Force. Expanding the size of our Defence workforce, at a cost of $38 billion. Deepening strategic partnerships through agreements such as AUKUS and the Quad.

And tonight I announce a new 10 year, $9.9 billion investment in Australia’s offensive and defensive cyber capabilities. This is the biggest ever investment in Australia’s cyber preparedness. Creating 1,900 jobs, more data analysts, computer programmers, and software engineers to boost our capacity to prevent and respond to cyber threats.

Keeping Australians safe is part of our plan for a stronger future.

The leader of the Opposition said:

In this increasingly uncertain and unstable world, we will need to increase Australia’s defence spending, but that spending needs to lead somewhere. It needs to actually improve technology and capabilities and deliver them when they are needed. Spending billions to rip up contracts and blindside our allies is no way to enhance our security.

The Opposition leader did not so much ignore the defence spending, including cyber, as repeat the commitment to increase spending. But in doing so, he highlighted the failure of the LNP Government to spend money well, something they fail to do across all portfolios but especially Defence.

Can we expect an ALP government to invest in cybersecurity and develop the same capabilities as the LNP would? How about we take our queue from Labor having a Shadow Assistant Minister for Cybersecurity, while that word doesn’t appear anywhere in the titles of the Morrison Ministry.

The focus of the ALP can also be expected to be different, as Labor associates cybersecurity with the Communications portfolio and recognises that cybersecurity is something that includes all users of communications.

Secondly, and this is only supposition, Labor will spend less on developing offensive cyber capabilities, whereas REDSPICE plans to increase Australia’s offensive capability by a factor of three.

Other things not said in both speeches could be a focus of concern. Not least of these is that in the 3545 words of the Treasurer’s speech and the 4,453 words of the Opposition Leader’s, the word ‘innovation’ (or any word starting ‘innov-‘) did not appear once. At least ‘productivity’ got a run six times by Labor, though not once by the Treasurer.

Do you know more? Contact James Riley via Email.

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