Defence spending gets a rebrand

Even if the politicians, who have been fixed to their targets for arbitrary defense expenditures, mean redefining what ‘defense’ actually means, they follow the percentages according to practicality, Stephen Koukoulas.

A lot of defense expenditures of the Australian government, mainly from the perspective of the annual GDP is 2% of the “only” 2%.

There is call This is increased to GDP to 2.5%, 3% and even 3.5%. Even at the bottom end, these goals would be an impost of tens of billions of dollars per year to budget, tax and government debt for decades.

And why?

The calls for these extra defense expenditures are partially framed from the perspective of which supply and personnel levels will be needed to make our defense power as effective and efficient as possible, according to the threats and requirements of global geopolitical pressures. This is in the context of the perception that these threats to Australia have increased.

There is much more than soldiers, sailors, missiles, computer technology and submarines that need to defend Australia from an anonymous attacker on a numerical target issue for defense expenditures. (Let us put aside the idea that Australia does not need to increase defense expenditures to invade another country.)

A cheek increase for defense expenditures as a percentage of GDP

Let’s think about how “defense expenditures” can be defined.

What happens if the roads that lead to transportation-roads-roads are included in the definition of defense expenditures? They’re just there because of the defense facility. This modified definition can add a few hundred million dollars to defense expenditures without any impact on the budget.

What if a greater foreign aid share for the Pacific Islands and some Southeastern Asian countries is classified as Australian defense expenditures for defense and infrastructure requirements? A form of this is available under the current definitions, but the government may contain more current expenditures in this category without affecting the budget.

Some people can actually think of a wider definition of these expenses in a reasonable addition. This means that without any changes in politics, but with a change in labels, the rate of defense / GDP expenditures has increased.

Then there are a number of other problems – increasing housing subsidies for defense employees, more expenditure for the office, adapted to the Ministry of Defense. Russell Hill Or increases more than the nominal GDP growth ratio to help defense personnel to increase the numerical expenditure target.

Language samples on this cheek will see a defense for any increase in defense capacity or GDP expenditures without any changes in budget profitability. To show GDP how stupid the goal of spending.

But there is more.

Let’s live a stagnation!

There are other ways for defense expenditures to increase as a percentage of GDP.

At a macroeconomic level, Australia decreases export prices or if there is a deep and bad recession, the nominal GDP (measuring the defense / GDP ratio is measured).

This means that even if there is no flat defense expenditures and extra defense capacity for the dollar, the spending of GDP will increase as the share of GDP.

Here is a simple example of this:

1st Year: GDP $ 3,000 billion. Defense expenditures are 60 billion dollars. This is 2% of GDP.
Year 2: Australia, which was shot with a bad recession and decline in trade conditions, sees the decline of GDP up to 10% to $ 2,700 billion. If defense expenditures do not change to 60 billion dollars, it will still rise to 2.22% of GDP.

Higher spending rate without any stagnation, without any expansion of defense capacity!

Wonderful.

Or, the opposite may be a problem – an inflationary fluctuation, which sees a sharp 10% plus splashing in Nominal GDP (as in the period of 2022-2024).

Even if defense expenditures grow 5%, nominal GDP growth is 10%.

What is necessary for defense

Like all fields of government expenditures, defense should be responsible for the lowest cost, efficient and necessary expenditure measures.

Spending in a certain share of GDP is stupid, regardless of the need.

It is difficult to imagine a similar formula for elderly care, health or public debt expenditures.

It will never happen in these areas because these expenditures like defense are based on needs.

In the case of defense, it should be clear that expenditures should be associated with requirements – more, not less. And this is what GDP is whatever much.

Drones, cyber, missiles, aircraft or bayonets – whatever it takes to deal with real threats and risks for Australia, the defense department must have the requirements and agenda.

A arbitrary figure that is severely detached from the air is not only absurd, but also a large amount of government money at a time when education and skills, aging population, great progress in health, and advanced infrastructure require government spending in all decades.

Either this, or just redefine the existing expenses to increase the defense ratio.

https://www.youtube.com/watch?v=5rnvulz19s4

Stephen Koukoulas is one of the most respected economists of Australia, the former chief economist of Citibank and a senior economic advisor of the Australian Prime Minister. You can follow Stephen on Twitter/X @Thekouk.

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