Australia orders post-crisis defence review

Australia's government ordered an emergency review on Thursday of defence projects worth A$100 billion ($65 billion) in the wake of the global financial crisis hammering down the country's dollar and spending coffers. Defence Minister Joel Fitzgibbon asked the military and officials to look at bringing forward some projects and keeping as much defence work as possible at home to try and contain the A$22 billion a year defence budget.
"While the full impact of the global economic crisis cannot yet be ascertained, there is no doubt that it will impact on all areas of government business, including Defence," Fitzgibbon told Reuters. Centre-left Prime Minister Kevin Rudd only last month warned of an arms race in the Asia-Pacific region and said Australia would rapidly beef up its naval strength and extend a 10-year, A$100 billion military build-up already underway.
On the shopping list are two large amphibious assault ships and missile destroyers already ordered, stealth fighter aircraft, cruise missiles, tanks and helicopters, as well as a larger army.
But since the financial tsunami crashed upon world markets last month, Australia's dollar has fallen 23.5 percent as markets expect weaker global demand for the country's commodities.
That in turn has delivered a whack to the military's ability to buy overseas-manufactured weapons, mainly from its close allies, the United States and Europe. "The uncertainty of these times highlights the need to ensure that every defence dollar is spent well and that we put an end to inefficiencies, waste and mismanagement," Fitzgibbon said.
Fitzgibbon was warned by his Finance Minister counterpart Lindsay Tanner that planned defence spending, so far quarantined from budget cuts and guaranteed 3 percent real annual increases, could outpace available funding. The centre-left government this week unveiled a A$10 billion stimulus package to guard against global recession, cutting deeply into this year's projected A$21.7 billion budget surplus.
Fitzgibbon, who told parliament last week he had a A$15 billion budget "black hole", must decide by mid-2009 whether to go ahead with a $16 billion buy of up to 100 F-35 stealth fighters in Australia's largest ever defence purchase.
"A combination of falling government revenues, a lower Australian dollar ... and potential rising capability unit costs will make our aspirations for defence much harder to achieve, but I am determined to meet these challenges," Fitzgibbon said. Australian military planners are wary of China's arms build-up and the expanding reach of India's military. Both neighbouring Indonesia and Malaysia are also building more powerful air forces equipped with modern Russian aircraft.