Defence spending hike gets big tick

Defence funding will rise, but it will also lose staff. Source: AAP

THE Australia Defence Association has given the defence budget increase a big tick and reckons it might help the government achieve a funding promise.

After several years of severe budget cuts, the six per cent spending increase gives the federal government a reasonable chance of lifting defence funding to two per cent of gross domestic product, association executive director Neil James says.

"They are at 1.8 per cent this year and as long as there is sufficient real increases over the forward estimates and then the following five years, they may get there," he told AAP.

Mr James said two per cent was an ideological target.

"We really should base our defence spending on our real strategic risks, not on arbitrary figures like two per cent," he said.

Defence gets an extra $800 million to take defence funding to $29.2 billion in 2014/15. With further increases over the next four years, funding will reach almost $33 billion in 2017/18.

That takes defence spending to 7.6 per cent of commonwealth outlays, compared with six per cent last year.

However, defence doesn't completely escape the budget pain. The organisation will shed more than 2000 public service jobs over the next four years, starting with 600 this year.

That will be achieved through natural attrition and changes to recruitment practices. There are currently more than 20,000 defence public servants.

The budget also includes a significant change to defence superannuation with the generous but expensive Military Superannuation and Benefits Scheme to be closed to new members by July 2016.

This is the last of the public sector defined benefit schemes, paying retirees a percentage of final salary as a fortnightly pension for life, indexed twice yearly in line with the consumer price index.

That's mostly unfunded, with pensions paid from future tax revenues. Closing MSBS will reduce the government's unfunded superannuation liability by $126 billion by 2050.

MSBS will be replaced by a new accumulation scheme which members can transfer to when they leave defence,

"Given that most people leave the defence force short of 10 years, most will probably be better off, but there will be some losers," Mr James said.

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