Forecast International,
MELBOURNE, Australia: The end of the commodities boom is severely affecting the Australian defense budget, with the AUD 1billion windfall delivered last year set to disappear.
As a result, ministers are increasingly nervous about the medium-term outlook for the economy and how the dismal global outlook could hinder Prime Minister Kevin Rudd's ambitious plans for a more robust defense force. They see Australia becoming a serious maritime power, capable of dealing with emerging threats and defending sea-lines of communication.
While Mr. Rudd is sticking to his election pledge to lift defense spending by 3 percent a year in real terms to 2019, the rapidly deteriorating global economy could force the government to pull back on firm commitments to future multibillion-dollar defense purchases including warships, submarines and fighter aircraft.
Current plans are for the Australian defense forces to spend at least AUD110billion on buying and maintaining military equipment out to 2019, with more than 80 percent of their major war-fighting assets due to be retired.
The end of the commodity boom means that internal savings of up to AUD20 billion over the next decade will be needed to carry out this program.
