‘BAD‘ INVESTMENTS REVISITED: $1 TRILLION ON DEFENCE???

Recently I wrote about ‘bad’ investments (‘Budgets, deficits and good and bad investments’). Yesterday the government announced a ‘commitment’ to increase defence spending to 2% of GDP (who said this was a good number? What is the ‘ right’ percentage for education, or health??), to build or buy 12 submarines ($150 billion!) and that defence spending would reach $1 trillion (yes that’s right) in 20 years (whenever that is).

These are classic examples of ‘ bad’ investments and also classic examples of poor information – a adding years of expenditure to get an attractive communications number that is, essentially, meaningless – do we add any other expenditure category for 20 years? And what chance is there that governments will adhere to these ‘decisions’ over the next 20 years without change? Answer:  None.So what do we get for our ‘defence’ spending?

Let’s take two items: increased patrolling of the South China Sea and 12 submarines.  I wasn’t aware that the South China Sea was anywhere near Australia.  Clearly this is not ‘defence’ of Australia.  It is a short term, American-driven interest  that happens to be their new defence ‘crisis’ which is therefore newsworthy.  How will taking on the Chinese in the South China Sea – off their coast – help ‘defend’ Australia??  Scrap that.  No value there.

And, apart from the fact that we know we build submarines badly, slowly and they cost way over original budget, can you tell me a single significant activity which any current Australian submarine has ever done?  Have they intercepted Asian fishing factories, Japanese whalers, drug hauls, refugee boats?  (Not to mention that it has recently been admitted that our Army had no strategy at all in Afghanistan…glad to know that money was well spent.)  Once again, no value will be created through most of this expenditure.

So why is defence spending– a classic example of ‘bad’ investment ‘ – to be increased, when ‘good’ spending on CSIRO, climate change, science, schools and health – most of which do have future benefits – are actually being cut?

And while we are at it, let’s examine the ‘2%’. Government spending is about 25% of GDP, so 2% of GDP sounds like a low number…but it is actually 8% of government spending, the third largest area of government spending and a figure the government would rather you didn’t focus on.

Am I angry? Yes I am!  This is exactly what I was referring to in my earlier blog.  This spending will add no value to Australia.  It isn’t even related to ‘defending’ Australia, which would have some value.  It’s being presented as a small increase, but it is a large increase and the timing of the amounts to be spent are hard to understand because many years are bundled together.  Is this a rational or political decision?  Clearly political, Once again, government is focussed on the wrong issues.

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