defence portfolio budget statements 2009-2010 · 2014. 10. 21. · defence portfolio budget...

PORTFOLIO BUDGET STATEMENTS 2009-10 BUDGET RELATED PAPER NO. 1.4A & 1.4C

DEFENCE PORTFOLIO

BUDGET INITIATIVES AND EXPLANATIONS APPROPRIATIONS SPECIFIED BY OUTCOMES

AND PROGRAMS BY AGENCY

© Commonwealth of Australia 2009

ISBN 978-0-642-29703-7

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MINISTER FOR DEFENCE THE HON JOEL FITZGIBBON MP

Senator the Hon. Alan Ferguson President of the Senate Australian Senate Parliament House CANBERRA ACT 2600

Mr Harry Jenkins MP Speaker House of Representatives Parliament House CANBERRA ACT 2600

9 May 2009

Dear Mr President and Mr Speaker

I hereby submit Portfolio Budget Statements in support of the 2009-10 Budget for the Department of Defence, the Defence Materiel Organisation and Defence Housing Australia.

These statements have been developed, and are submitted to the Parliament, as a statement on the outcomes for the Defence portfolio.

I present these statements to provide accountability to the Parliament and, through it, the public.

Yours sincerely

Joel Fitzgibbon Minister for Defence

Parliament House, Canberra ACT 2600 Tel: (02) 6277 7800 Fax: (02) 6273 4118

Defence Portfolio Budget Statements 2009-10

User Guide The purpose of the 2009-10 Portfolio Budget Statements (PBS) is to inform Senators and Members of Parliament of the proposed allocation of resources to Government outcomes by agencies within the portfolio. Agencies receive resources from the annual appropriations acts, special appropriations (including standing appropriations and special accounts), and revenue from other sources.

A key role of the PBS is to facilitate the understanding of proposed annual appropriations in Appropriation Bills No. 1 and No. 2 2009-10 (or Appropriation Bill [Parliamentary Departments] No. 1 2009-10 for the parliamentary departments). In this sense, the PBS are Budget-related papers and are declared by the Appropriation Acts to be ‘relevant documents’ to the interpretation of the Acts according to section 15AB of the Acts Interpretation Act 1901.

The PBS provide information, explanation and justification to enable Parliament to understand the purpose of each outcome proposed in the Bills.

As required under section 12 of the Charter of Budget Honesty Act 1998, non-general government sector entities are not consolidated into the Commonwealth general government sector fiscal estimates and, accordingly, these entities are not reported in the PBS.

Structure of the Portfolio Budget Statements

The Portfolio Budget Statements have been revised for the 2009-10 Budget, with significant changes made to reduce the workload on agencies and to provide Parliament with more targeted and comprehensive information on government expenditure.

The Defence Portfolio Budget Statements are divided into three parts: Defence, the Defence Materiel Organisation (DMO) and Defence Housing Australia (DHA). The sections of each part are outlined in the following table.

Portfolio Overview The portfolio overview outlines the responsibilities of the portfolio, list the relevant agencies and Ministers and the resources available. Department of Defence – Agency Overview and Resources

Section One: Defence overview and resources

Section One provides the strategic direction for Defence, the functions and responsibilities of Defence, its organisational structure, as well as information about its contribution towards its outcomes for the budget year and the resources available. This section also provides information about Defence management reforms, its capital budget and workforce.

Section Two: Outcomes and planned performance

Section Two provides a brief overview of Defence’s outcomes and programs for 2009-10. Each outcome has an outcome resource statement which provides resourcing information by program. The deliverables and performance indicator information for each program follow the outcome resource statement

Section Three: Explanatory tables and financial statements

This section includes explanatory tables and budgeted financial statements. The explanatory tables include: · an explanation of any differences between the information included in the

Budget Papers and the PBS arising from the use of the Government Financial Statistics and Australian Accounting Standards accounting methodologies

· supplementary information on the reconciliation between total available appropriation and outcome attribution, the rephasing and use of appropriations, special account flows and Australian Government Indigenous Expenditure.

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Defence Materiel Organisation

Section One: DMO Overview and resources

Section One provides an overview of the DMO’s functions and responsibilities, including the strategic priorities for 2009-10 and organisational structure, as well as information about its contribution towards its outcome for the budget year and the resources available. This section also provides summaries of the DMO’s reform initiatives and governance activities, and the DMO workforce.

Section Two: DMO Outcomes and Planned Performance

Section Two provides an overview of the DMO’s outcome and programs, including the Top 30 Projects.

Section Three: DMO Explanatory tables and financial statements

This section includes explanatory tables and budgeted financial statements. The explanatory tables include: · an explanation of any differences between the information included in the

Budget Papers and the PBS arising from the use of the GFS and AAS accounting methodologies

· supplementary information on the reconciliation between total available appropriation and outcome attribution, the re-phasing and use of appropriations, special account flows and Australian Government Indigenous Expenditure.

Defence Housing Australia This section provides an overview of Defence Housing Australia (DHA), including performance forecasts for 2009-10, DHA’s outcome and program, and its 2009-10 budgeted financial statements.

Appendices A glossary and list of acronyms and abbreviations.

Abbreviations and conventions

The following notation may be used:

NEC/nec not elsewhere classified - nil

.. not zero, but rounded to zero na not applicable (unless otherwise specified) nfp not for publication $m $ million $b $ billion

Figures in tables and in the text may be rounded. Figures in text are generally rounded to one decimal place, whereas figures in tables are generally rounded to the nearest thousand. Discrepancies in tables between totals and sums of components are due to rounding.

Inquiries

Should you have any inquiries regarding this publication please contact:

Director Ministerial and Parliamentary Reporting R1-5-A036 Department of Defence CANBERRA ACT 2600

Telephone: (02) 6265 6277 Email: [email protected]

A copy of this document can be located on the Australian Government Budget website at www.budget.gov.au and the Defence website at www.defence.gov.au/budget.

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References

Previous years' Defence Portfolio Budget Statements, Portfolio Additional Estimates Statements and Annual Reports can be found at: www.defence.gov.au/budget.

The Defence White Paper 2009 Defending Australia in the Asia Pacific Century: Force 2030 can be found at: www.defence.gov.au/whitepaper.

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Table of Contents User Guide ............................................................................................................................................................iv Structure of the Portfolio Budget Statements ................................................................................................... iv

PORTFOLIO OVERVIEW

DEPARTMENT OF DEFENCE Section 1: Defence overview and resources................................................................................................... 11 1.1 Strategic direction.......................................................................................................................................... 11 1.2 Resourcing ..................................................................................................................................................... 15 1.2.1 Defence Resourcing.................................................................................................................................... 16 1.2.2 Capital Investment Program..................................................................................................................... 30 1.2.3 People ........................................................................................................................................................... 31 1.3 Programs for which Treasury is appropriated under the new Federal Financial Relations Framework............................................................................................................................................................ 35 1.4 Transition from outcomes and outputs to outcomes and programs ..................................................... 36 Section 2: Outcomes and planned performance ........................................................................................... 37 2.1 Outcomes and performance information................................................................................................... 37 Contributions to Outcome 1............................................................................................................................... 41 Contributions to Outcome 2............................................................................................................................... 88 Section 3: Explanatory tables and budgeted financial statements ........................................................... 95 3.1 Explanatory Tables ........................................................................................................................................ 95 3.2 Budgeted Financial Statements ................................................................................................................... 99 Notes to the Financial Statements ................................................................................................................... 112

DEFENCE MATERIEL ORGANISATION Defence Materiel Organisation .............................................................................................. 125 Section 1: Agency overview and resources .................................................................................................. 125 1.1 Strategic direction........................................................................................................................................ 125 1.2 Agency resource statement ........................................................................................................................ 129 1.3 Budget measures.......................................................................................................................................... 133 1.4 Transition from Outcomes and Outputs to Outcomes and Programs ................................................ 133 1.5 Programs for which Treasury is appropriated under the New Federal Financial Relations Framework.......................................................................................................................................................... 134 Section 2: Outcome and planned performance........................................................................................... 135 2.1 Outcome and performance information .................................................................................................. 135 Outcome 1 Budgeted Expenses and Resources............................................................................................. 136 Contributions to Outcome 1............................................................................................................................. 137 Section 3: Explanatory tables and budgeted financial statements.......................................................... 173 3.1 Explanatory tables ....................................................................................................................................... 173 3.2 Budgeted Financial Statements ................................................................................................................. 173

DEFENCE HOUSING AUSTRALIA Defence Housing Australia .................................................................................................... 182 Section 1: Agency overview and resources .................................................................................................. 182 1.1 Strategic Direction ....................................................................................................................................... 182 1.2 Agency resource statement ........................................................................................................................ 184 1.3 Budget measures.......................................................................................................................................... 184 1.4 Transition from outcomes and outputs to outcomes and programs ................................................... 185 Section 2: Outcomes and planned performance ......................................................................................... 186 2.1 Outcomes and performance information................................................................................................. 186 Section 3: Explanatory tables and budgeted financial statements.......................................................... 187 3.1 Explanatory tables ....................................................................................................................................... 187 3.2 Budgeted financial statements................................................................................................................... 187

APPENDICES Glossary............................................................................................................................................................... 194 Acronyms and abbreviations........................................................................................................................... 200

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viii

PORTFOLIO OVERVIEW


Ministers and portfolio responsibilities

THE HON JOEL FITZGIBBON MP—MINISTER FOR DEFENCE

As the senior Minister, Mr Fitzgibbon has overall responsibility for all matters covered by the Defence portfolio, including Cabinet matters.

THE HON WARREN SNOWDON MP—MINISTER FOR DEFENCE SCIENCE AND PERSONNEL

Specific responsibilities allocated to Mr Snowdon are:

• Defence Science and Technology Organisation

• Personnel policy, including:

- Recruitment and retention

- Defence families

- Superannuation

- Workplace equity

- Occupational Health and Safety

• Personnel support, including:

- Defence Housing Australia and housing support services (Except that the Minister for Defence is the joint shareholder Minister for DHA with the Minister for Finance and Deregulation)

- All aspects of Defence people management including health services and compensation

- Defence Community Organisation and Defence Families Australia

- Justice and fairness in Defence, including the Military Justice System

• Defence Legal matters

• Defence involvement in indigenous affairs.

THE HON DR MIKE KELLY AM MP—PARLIAMENTARY SECRETARY FOR DEFENCE SUPPORT

Specific responsibilities allocated to Dr Kelly are assisting the Minister for Defence on:

• Garrison services, the estate, facilities and infrastructure

• Reserves policy

• In respect of the Asia-Pacific Centre for Civil Military Cooperation, Defence aspects of civil-military cooperation, particularly involvement in whole-of-government initiatives

• Cadets

• Honours and Awards

• Defence education and training

• ADF Parliamentary Program.

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Minister for Defence The Hon Mr Joel Fitzgibbon MP

Minister for Defence Science and Personnel The Hon Mr Warren Snowdon MP

Parliamentary Secretary for Defence Support The Hon Dr Mike Kelly AM MP

Department of Defence Secretary: Mr Nick Warner Chief of the Defence Force: ACM Angus Houston

OUTCOME 1: The protection and advancement of Australia’s national interests through the provision of military capabilities and the promotion of security and stability OUTCOME 2: The advancement of Australia’s strategic interests through the conduct of military operations and other tasks directed by Government OUTCOME 3: Support for the Australian community and civilian authorities as requested by Government

The Defence Materiel Organisation (Prescribed Agency) Chief Executive Officer: Dr Stephen Gumley

OUTCOME: Contributing to the preparedness of the Australian Defence Organisation through acquisition and through-life support of military equipment and supplies.

Defence Housing Australia Managing Director: Mr Michael Del Gigante

Mission: To deliver total housing and relocation services that meet Defence operational and client needs through a strong customer and business focus.

Portfolio Overview

Portfolio structure and outcomes Figure 1: Defence portfolio structure and outcomes

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Portfolio resource statement Table 1: Portfolio resources made available in the Budget year

De p ar tm e n tal A p p r o p r iat io n

Bill No . 1 Bill No . 2

De p ar tm e n tal A p p r o p r iat io n Re tu r n to th e

OPA

A d m in is te r e d Sp e cial

A p p r o p r iat io n

No n -A p p r o p r iat io n

Re ce ip ts T o tal

$m $m $m $m $m $m De p ar tm e n t o f De fe n ce

A dminis tered appropr iations Departmental appropr iations

– 21,692.2

– 4,011.5

– -163.0

3,432.8 –

– 1,100.8

3,432.8 26,641.5

T o tal 21,692.2 4,011.5 -163.0 3,432.8 1,100.8 30,074.3




OPA




Re ce ip ts T o tal

$m $m $m $m $m $m De fe n ce M ate r ie l Or g an is atio n


– 851.1

– –

– –

– – 10,836.3

– 11,687.4

T o tal 851.1 – – – 10,836.3 11,687.4




OPA




Re ce ip ts T o tal

$m $m $m $m $m $m De fe n ce Ho u s in g A u s tr alia


– –

– 201.5

– –

– –

– 891.4

– 1,092.9

T o tal – 201.5 – – 891.4 1,092.9

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Portfolio Overview

Table 2: Consolidated Budget for Defence and the Defence Materiel Organisation

Budget estimate 2009-10

$m APPROPRIATIONS AND CAPITAL Appropriation (Bill 1) Appropriation - Contributed Equity (Bill 2) less Returns to the OPA Total Cash Available

22,543.3 4,011.5 -163.0

26,391.8 OPERATING ACTIVITIES Cash Received

Goods and Services Other Cash Received Including GST

Total cash received

547.2 1,353.4 1,900.6

Cash Used Employees Suppliers Other Cash Used Including GST

Total cash used

9,030.7 8,933.2 1,299.4

19,263.4 Net cash from or (used by) operating activities -17,362.8 INVESTING ACTIVITIES Cash Received

Proceeds from sales of land and buildings, infrastructure, plant and equipment Proceeds from sales of specialist military equipment

Total cash received

260.2 1.2

261.5 Cash used

Purchase of land and buildings, infrastructure, plant and equipment Purchase of specialist military equipment Purchase of inventory Other

Total cash used

1,517.5 6,273.9 1,360.9

104.6 9,256.8

Net cash from or (used by) investing activities -8,995.4 FINANCING ACTIVITIES Cash received

Appropriations - contributed equity Total cash received

4,011.5 4,011.5

Cash Used Repayment of debt Cash to the Official Public Account

Total cash used

34.7 223.0 257.7

Net cash from or (used by) financing activities 3,753.8 Net increase or (decrease) in cash and cash equivalents held

Cash and cash equivalents at beginning of the reporting period Effect of exchange rate movements on cash at the beginning of the reporting period

-1.0 62.3

– Cash and cash equivalents at end of the reporting period 61.3

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AGENCY RESOURCES AND PLANNED PERFORMANCE

Department of Defence Defence Materiel Organisation Defence Housing Australia

DEPARTMENT OF DEFENCE

AGENCY RESOURCES AND PLANNED PERFORMANCE

Section 1: Defence overview and resources 1.1 Stra tegic direction 1.2 Re sourcing

1.2.1 Defence resourcing 1.2.2 Capital Investment Program 1.2.3 People

1.3 Payments for which Treasury is appropriated under the New Federal Financial Relations Framework

1.4 Transition from Outcomes and Outputs to Outcomes and Programs Section 2: Outcomes and planned performance 2.1 Outcomes and performance information Section 3: Explanatory tables and budgeted financial statements 3.1 Explanatory tables 3.2 Budgeted financial statements

3.2.1 Analysis of Departmental Budgeted Financial Statements 3.2.2 2009-10 Departmental Budgeted Financial Statements 3.2.3 2009-10 Consolidated Defence/DMO Budgeted Financial Statements

Department of Defence

DEPARTMENT OF DEFENCE

Section 1: Defence overview and resources

1.1 Strategic direction

Defence’s primary focus continues to be to protect and advance Australia’s strategic interests by providing military forces for the direct defence of Australia and its unique strategic interests. To meet this focus, Defence prepares for and conducts military operations and other tasks as directed by the Government.

Apart from the conduct of current operations, the Government’s key initiative in 2009-10 will be the implementation of the new Defence White Paper. The White Paper, released in May 2009, articulates the Government’s policy, capability and funding settings for Defence in the period to 2030.

WHITE PAPER 2009

The 2009 Defence White Paper, Defending Australia in the Asia Pacific Century : Force 2030, explains how the Government plans to strengthen the foundations of Australia’s defence to ensure, firstly, that Australia is ready to meet the challenges of an uncertain strategic future and, secondly, that Defence is able to address capability and management challenges that demand long-term reform and remediation.

The White Paper provides a comprehensive, whole-of-enterprise program that links strategy, priorities and resources, based on a clear strategic framework and a long-term budget certainty. It identifies the strategic interests and policy goals that the Government expects to achieve, and sets out capability priorities for Defence, and the amount of funding required to deliver Australia’s Force 2030.

Australia’s most direct strategic interest remains the defence of Australia against armed attack. Our next most important strategic interest is the security, stability and cohesion of our immediate neighbourhood, which we share with Indonesia, Papua New Guinea, East Timor, New Zealand and the South Pacific island states. Beyond our immediate neighbourhood, Australia has an enduring strategic interest in the stability of the wider Asia-Pacific region, including a deep stake in the security of South East Asia. Beyond our region, Australia has a strategic interest in preserving an international order that restrains aggression by states against each other, based on a stable, rules-based global security order.

The defence policy articulated in the White Paper is based on the capacity to:

• act independently where Australia has unique strategic interests at stake, and in relation to which we would not wish to be reliant on the combat forces of any foreign power

• lead military coalitions where we have shared strategic interests at stake with others, and in relation to which we would be willing to accept a leadership role

• make tailored contributions to military coalitions where we share with others wider strategic interests and are willing to accept a share of the burden in securing those interests.

In response to these policy settings, and with due regard to the strategic risks outlined in the White Paper, Defence has revised its medium and longer term force structure plans. The changes ensure that the force will be capable of combat operations against sophisticated adversaries throughout our strategic approaches in order to deter and if necessary defeat military attacks on Australia, including our offshore territories and resources. This places a priority on being able to maintain sea control and air superiority over the ADF’s primary operational environment. Land operations to prevent hostile forces operating within the ADF’s primary operational environment are also likely to be required, as are stabilisation operations throughout the South Pacific and East Timor. Defence will also be able to respond to Government requirements on domestic security matters by supporting

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domestic security and emergency response efforts undertaken by civil authorities. Such forces will also provide a hedge against future strategic uncertainty.

Defence has undergone significant change over the past two decades. While these efforts have led to significant improvements to the organisation, further reforms are needed in areas such as procurement, the quality of advice to the Government and financial management to align Defence with evolving best practice. As part of the White Paper, the Government has endorsed a Strategic Reform Program (see below), which will fundamentally overhaul the entire organisation, driving efficiencies and creating savings that will be reinvested into remediation and new capability for the ADF.

Force Structure Review In order to determine the nature, size and structure of the armed forces Australia requires to undertake the Defence strategy articulated in the White Paper, the Government commissioned a Force Structure Review. This review examined plausible defence planning contingencies, the capabilities required for successful operations in those contingencies, the systems and equipment that would deliver the necessary capabilities and the resources likely to be available for long-term defence planning purposes.

As a result of the decisions in the White Paper, the Force 2030 will be a more potent force in certain areas, with sufficient capacity to undertake foreseeable security tasks and provide a hedge against future uncertainty.

The future force will see a more capable Navy with an increase in the number of submarines from 2030, enhanced anti-submarine warfare capabilities for the surface fleet, a new class of flexible small ships class capable of performing lower level combat operations throughout our region and a robust strategic land strike capability.

The Army will be capable of providing a higher level of combat power through increased levels of protected combat and mobility vehicles, modern networking across the battlefield down to the section level and enhancements to various weapons programs.

The Air Force will continue the numerous projects already underway to enhance its combat effectiveness including purchasing the Joint Strike Fighter, realising the force multiplying capabilities provided by airborne early warning and control as well as air-to-air refuelling aircraft and improvements to the way in which information is fused from military and commercial sources to produce a comprehensive picture of Australia’s airspace.

Underpinning the three Services’ capabilities will be a continuation of the improvements in joint command and control, networking across the joint force over reliable communication bearers, intelligence collection and analysis and logistics support. Combining the capability improvements will ensure that the ADF maintains a quality edge to offset our numerical limitations.

White Paper Companion Reviews Eight White Paper Companion Reviews (information and communication technology, logistics, preparedness personnel and operating costs, estate, workforce, science and technology, capability development and industry capacity) were commissioned as part of the development of the White Paper, as well as an Intelligence Capability Review (Brady Review).

The Companion Reviews analysed the 'backbone' of the business of Defence against a backdrop of the emerging commercial, technology and business trends out to 2030 to position Defence to meet future needs and improve capability outcomes for the ADF. The Strategic Reform Program (see below) harmonises the recommendations of a Defence Budget Audit with the recommendations of the Companion Reviews and the Brady Review to create a comprehensive reform package.

STRATEGIC REFORM PROGRAM

The Government has endorsed a Strategic Reform Program (SRP) comprising a comprehensive set of reforms that will fundamentally overhaul the entire organisation, driving efficiency and creating over $3b of savings across the Budget and Forward Estimates. These savings incorporate and build on the savings already identified for reinvestment as part of the Minister’s Defence Savings Program. The Strategic Reform and Governance Executive, located in the Office of the Secretary and CDF Group,

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will work with Groups and Services to oversee, integrate and coordinate the implementation of the SRP. This will deliver Australia a genuinely strategic national advantage: significantly enhancing capability while constraining the call on national resources. The implementation of the White Paper and the deep reform of how Defence does business is a critical national priority.The Government will closely monitor the implementation of the program and progress will be regularly measured and assessed by independent auditors as part of the five-year White Paper process. The program will:

• provide a vehicle for deep and enduring reform within Defence

• enhance management performance within Defence

• ensure that productivity within Defence is increased and able to be sustained, so that the maximum possible level of resources are directed to the front end of capability

• improve the way that Defence does business, in terms both of efficiency and effectiveness

• help ensure that the goals set out in the White Paper are delivered.

ORGANISATIONAL STRUCTURE

The following changes have happened since the Portfolio Additional Estimates Statements 2008-09.

Senior executive changes Following the release of the White Paper :

• the temporary position of Deputy Secretary White Paper was disestablished and Mr Michael Pezzullo returned to his permanent position of Deputy Secretary Strategy

• a Deputy Secretary Strategic Reform and Governance is currently being recruited to fill a newly established position (with a three-year sunset clause) designed to oversee, integrate and coordinate the implementation of the SRP

• a Chief Audit Executive is also currently being recruited as part of the process to strengthen Defence’s audit capability.

Organisational structure The following changes to Defence’s organisational structure will be implemented to better align Group objectives and responsibilities:

• Strategy, Coordination and Governance Executive will become Strategy Executive within the Office of the Secretary and CDF Group

• a Strategic Reform and Governance Executive will be formed within the Office of the Secretary and CDF Group once the Deputy Secretary Strategic Reform and Governance has been appointed

• International Policy Division will transfer from Intelligence, Security and International Policy Group to Strategy Executive

• Intelligence, Security and International Policy Group will become Intelligence and Security Group.

Figure 2 depicts the expected organisational structure as at 1 July 2009.

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Minister for Defence Hon Joel Fitzgibbon MP

Office of the Secretary & Chief of Defence Force Group Minister for Defence Science Parliamentary Secretary

and Personnel Defence Support The Hon Warren Snowdon MP The Hon Dr Mike Kelly MP

Judge Advocate General MAJGEN The Hon Justice

Richard Tracey ** (1) (2)

Chief Military Judge BRIG Ian Westwood

* (1) (2) Secretary Chief of the Defence Force

Mr Nick Warner ACM Angus Houston Director Military Prosecutions **** **** BRIG Lyn McDade

* (1) (1) (1) (2)

Inspector General ADF Mr Geoff Earley

** (1) (3)

Inspector General Mr Ray Bromwich

(acting) ** (4)(5)

Defence Materiel Organisation

Chief Executive Officer Dr Stephen Gumley

(7)

Chief of Joint Operations LTGEN Mark Evans

***

Chief of Navy VADM Russ Crane

*** (1) (6)

Deputy Secretary Strategic Chief of Army Chief of Air Force Reform and Governance LTGEN Ken Gillespie AIRMRSHL Mark Binskin TBA

*** *** *** (1) (6) (1) (6)

Deputy Secretary Strategy Mr Michael Pezzullo

***

Vice Chief of the Defence Force

LTGEN David Hurley

***

(1)

Deputy Secretary Defence Chief Capability Development Chief Finance Officer Chief Information Officer Deputy Secretary Intelligence Deputy Secretary People Chief Defence Scientist Support and Security Strategies and Policy VADM Matt Tripovich Mr Phillip Prior Mr Greg Farr Professor Robert G. Clark Mr Martin Bowles Mr Stephen Merchant Mr Phil Minns

*** *** *** *** *** *** ***

Figure 2: Defence Organisational Chart

Defence P

ortfolio Budget S

tatements 2009-10

* Stars refer to ADF Star rank or SES Band levels. (6) Section 9(3) of the Defence Act 1903 requires the Service Chiefs to advise the Minister on matters relating to their (1) Statutory appointment. command. (2) Reports directly to the Minister for Defence in accordance with Section 196A of the Defence Force Discipline Act 1982. (7) Under the agreed business model for DMO as a prescribed agency, the CEO DMO Ministerial Directive identifies that the (3) The Inspector-General ADF is directly responsible to the Chief of the Defence Force (CDF). CEO DMO is directly accountable to the Minister for DMO’s performance but remains accountable to the Secretary and CDF. (4) The Inspector-General reports directly to the Secretary and CDF. A full organisational chart for the DMO is on p128. (5) Pending recruitment of Chief Audit Executive, there will be further organisational changes involving Inspector General’s (IG) Division.

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1.2 Resourcing

PORTFOLIO RESOURCE STATEMENT

The Government has provided Defence with additional funding of $146.1b to fully fund the White Paper over the 21 years to 2029-30. This funding amounts to $104.4b over the Budget year and Forward Estimates and $308.2b over the decade to 2018-19.

Defence's funding will be based on the following funding principles:

• 3 per cent average real growth to 2017-18

• 2.2 per cent average real growth from 2018-19 to 2029-30

• 2.5 per cent fixed price indexation from 2009-10 to 2029-2030, with the 2.5 per cent to be calculated from 2009-10 but applied from 2013-14

• agreement that Defence will reinvest all savings from the SRP and other initiatives into higher priority Defence capabilities

• agreement that Defence will make savings of $2b which will be returned to Defence beyond 2015-16 in line with the revised funding requirements

• an extension of the efficiency dividend of 1 per cent of the administrative activities for the life of the White Paper.

This new Defence funding package provides Defence with greater funding stability and certainty while requiring Defence to drive efficiencies and improve productivity. The 2.2 per cent real growth funding is consistent with the inherent long-term cost of defence. and the 2.5 per cent fixed price indexation is consistent with the long-term Non-Farm GDP Deflator. An efficiency and savings regime to free up resources for reallocation to higher, critical priorities will be combined with a reprogramming of funds to future years, ensuring Defence can fund capabilities outlined in the White Paper as they are required.

In addition to the new funding package, there are several measures and adjustments which affect Defence funding. These are:

• supplementation of $1.7b in the budget year and $2.1b over four years for Operations

• in response to the Mortimer Review, the transfer of the DMO service fee on an ongoing basis through a direct appropriation, which equates to $3.2b over four years to 2012-13 and $8.7b over the decade to 2018-19

• supplementation of $1.7m in 2009-10 for the Defence Science and Technology Organisation for its role in the National Crisis Coordination Centre

• a hand back to Government of $2.0m over four years and $4.9m over ten years as part of the rationalisation of medical costs in administering military superannuation schemes.

Other measures which will be absorbed by Defence (details are in Budget Paper No. 2) include:

• Expansion of the ADF Health Care Trial

• Australia United States enhanced defence cooperation - humanitarian assistance/disaster relief

• Navy Workforce - increased capacity

• Retention of Accommodation on Deployment

• Land Operations in Complex Environments

• Continuation of Critical Infrastructure Protection program

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2009-10 to 2012-13

estimate $m

2009-10 to 2018-19

estimate $m

Funding Available Savings

Gross Savings Cost of Savings

4,966.5 -1,463.2

20,682.2 -2,444.3

Net Savings Reprogramming New Budget Funding

3,503.3 4,404.6 1,626.6

18,237.9 7,852.9

18,796.3 Total Funding Available 9,534.5 44,887.1 Initiatives

Remediation Defence Capability Plan Budget Provisions Enterprise Backbone

750.6 4,058.6 1,449.8

5,970.4 17,647.6

5,721.4 Total Remediation Other Defence Initiatives Reprofiled Savings

$2bn Saving Payback of $2b Saving

6,258.9 1,275.6

2,000.0 –

29,339.4 13,909.4

2,000.0 -361.7

Total Reprofiled Savings 2,000.0 1,638.3 Total Initiatives 9,534.5 44,887.1


The SRP and other reprioritisation initiatives include the following:

• shared services

• non-equipment procurement

• smart maintenance

• workforce productivity initiatives

• other operating costs.

The savings from the SRP will be combined with other savings initiatives and Government funding to deliver:

• DCP remediation to fill critical gaps

• remediation of Budget provisions where inadequate budget provisions have been made in the past

• remediation of the enterprise back bone and critical support areas

• new Defence capability and initiatives.

1.2.1 Defence Resourcing

SAVINGS AND INITIATIVES

As announced in the White Paper, Defence has initiated a major reform program that will deliver gross savings of around $20b over the decade. Strategic Reform Program savings will be supplemented by further savings initiatives, reprogrammed funds and by new funding from Government to provide nearly $45b in total for investment in new initiatives.

The Government will invest $30b across the decade to fill the holes in the Defence budget, fix critical equipment and capability gaps, and remediate the enterprise backbone. Of the remaining $15b savings from the $45b savings program across the decade, a net $1.6b will be returned to the Budget (comprising $2b returned over the Forward Estimates and repayments commencing in 2016-17) with the balance ($14b) funding new capability acquisitions and other new initiatives.

The White Paper is fully costed and is affordable not only across the Forward Estimates and decade (as detailed in Table 3), but across the life of the White Paper to 2030.

Table 3: White Paper Savings and Initiatives

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Departm

ent of Defence

Table 4: Variation to Defence Funding

2009-10 2010-11 2011-12 2012-13 Total FE 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 TOTAL ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m)

Budget measures Expenditure measures The Defence White Paper - New Funding Model – – – – – 366.7 903.3 1,473.0 2,045.7 2,479.4 3,486.0 10,754.1 Enhanced crisis coordination facilities 1.7 – – – 1.7 – – – – – – 1.7 Critical Infrastructure Protection Program -continuation[1] – – – – – – – – – – – – Land Operations in Complex Environments -improved capacity – – – – – – – – – – – – Navy Workforce - increased capability – – – – – – – – – – – – Australian Defence Force Health Care Trial -Expansion – – – – – – – – – – – – Australia United States enhanced defence cooperation - humanitarian assistance/disaster relief – – – – – – – – – – – – Retention of Accommodation on Deployment – – – – – – – – – – – – Iraq-Australian Defence Force security detachment - funding 59.2 12.0 2.3 – 73.5 – – – – – – 73.5 Timor-Leste - continued funding to help maintain stability 191.8 18.9 0.4 – 211.1 – – – – – – 211.1 Coastal Surveillance - revised operational structure -0.3 2.0 – – 1.7 – – – – – – 1.7 Middle East Area of Operations - command and control enhancements 87.5 – – – 87.5 – – – – – – 87.5 Global Terrorism: Enhancing Australia's Commitment to Afghanistan 1,083.6 118.7 49.2 – 1,251.6 – – – – – – 1,251.6 Iraq-Australian Defence Force embedded personnel commitment in Iraq - cessation -49.5 – – – -49.5 – – – – – – -49.5 Regional Assistance Mission to Solomon Islands 29.3 – – – 29.3 – – – – – – 29.3 Superannuation Contributions for Operations -related allow ances 22.5 – – – 22.5 – – – – – – 22.5 Afghan National Army Trust Fund - contribution 59.3 59.3 59.3 59.3 237.4 59.3 – – – – – 296.7 Decisions taken but not yet announced 1.5 – – – 1.5 – – – – – – 1.5

1 Sub-total expenditure measures 1,486.8 210.9 111.2 59.3 1,868.3 426.0 903.3 1,473.0 2,045.7 2,479.4 3,486.0 12,681.7

17

2 Sub-total savings measures

Savings Measures Military Superannuation Schemes - reduced numbe o mr edi f ca reviel w s Defence savings in the forw ard estimates period[2]

-0.5 -0.5 – -100.0

-0.5 -100.5

-0.5 -200.0 -200.5

-0.5 -1,700.0 -1,700.5

-2.0 -2,000.0 -2,002.0

-0.5 –

-0.5

-0.5 –

-0.5

-0.5 –

-0.5

-0.5 –

-0.5

-0.5 –

-0.5

-0.5 –

-0.5

-4.9 -2,000.0 -2,004.9

3 Total budget m easures (1+2) 1,486.3 110.4 -89.3 -1,641.2 -133.8 425.6 902.8 1,472.5 2,045.2 2,478.9 3,485.5 10,676.7 Other Budget Adjustments Update of price indexation Foreign exchange movements Transfer of DMO Service Fee

-528.0 -197.4 138.1 147.7

-758.7 -775.2

-64.8 186.4

-802.9

-39.4 162.2

-832.2

-829.5 634.3

-3,169.0

71.8 168.6

-859.9

188.6 201.2

-882.5

317.6 230.4

-908.7

458.7 261.5

-941.6

653.1 304.6

-976.0

1,075.9 -288.8

-1,011.8

1,936.2 1,511.9

-8,749.5 4 Total other budget adjustments -1,148.6 -824.9 -681.3 -709.4 -3,364.2 -619.5 -492.7 -360.6 -221.3 -18.3 -224.7 -5,301.4 5 Variation to Defence funding (3+4) 337.7 -714.5 -770.6 -2,350.5 -3,498.0 -194.0 410.1 1,111.9 1,823.9 2,460.6 3,260.8 5,375.3

Notes 1. This is a cross-portfolio measure. 2. Savings will be reinvested in Defence.

Defence P

ortfolio Budget S

tatements 2009 -10

18

Table 5: Total Defence resourcing 2009-10

2008-09 2009-10 2009-10 2010-11 2011-12 2012-13 l

oN Estimated Previous Budget Forw ard Forw ard Forw ard

ia Actual estimate estimate Variation estimate estimate estimate

Ser

$’000 $’000 $’000 $’000 % $’000 $’000 $’000 Defence resourcing

1 20,268,308 Appropriation for departmental outcomes 20,993,282 21,692,203 698,921 3.3% 20,759,203 20,795,948 20,657,370 2 1,805,180 Equity injection appropriation 4,372,754 4,011,496 -361,258 -8.3% 5,309,269 5,271,614 4,808,067 3 – Appropriation for specif ic purpose payments – – – 0.0% – – – 4 22,073,488 Current year's appropriation (1+2+3) 25,366,036 25,703,699 337,663 1.3% 26,068,472 26,067,562 25,465,437 5 114,669 Draw dow n of appropriations carried forw ard 60,000 60,000 – 0.0% 65,000 30,389 – 6 -219,516 Return to OPA[1] -93,354 -222,972 -129,618 138.8% -82,339 -506 -132,577 7 -104,847 Funding from/to the OPA (5+6) -33,354 -162,972 -129,618 388.6% -17,339 29,883 -132,577 8 22,188,157 Funding from Government (4+7) 25,332,682 25,540,727 208,045 0.8% 26,051,133 26,097,445 25,332,860 9 285,178 Capital receipts 159,668 286,314 126,646 79.3% 160,705 75,075 169,669

10 811,187 Ow n source revenue (s31 receipts) 812,746 814,446 1,700 0.2% 816,249 829,172 835,401 11 1,096,365 Funding from Other Sources (9+10) 972,414 1,100,760 128,346 13.2% 976,954 904,247 1,005,070 12 23,284,522 Total Defence funding (8 + 11) 26,305,096 26,641,487 336,391 1.3% 27,028,087 27,001,692 26,337,930 13 23,300 Administered for specif ic purpose payments – – – 0.0% – – – 14 2,941,568 Administered special appropriations 3,056,244 3,432,834 376,590 12.3% 3,590,808 3,748,104 3,914,100 15 2,964,868 Total Administered Funding (13+14) 3,056,244 3,432,834 376,590 12.3% 3,590,808 3,748,104 3,914,100 16 26,249,390 Total Defence Resourcing (12 + 15) 29,361,340 30,074,321 712,981 2.4% 30,618,895 30,749,796 30,252,030

Appropriation carried forw ard 17 132,694 Appropriation Receivable 72,694 72,694 – 0.0% 7,694 1,305 1,305 18 – Appropriation Receivable - Others – 141,401 141,401 0.0% – – – 19 29,223 Cash in bank 29,223 29,223 – 0.0% 29,223 29,223 29,223 20 161,917 Total appropriations carried forw ard (17+18+19) 101,917 243,318 141,401 138.7% 36,917 30,528 30,528 21 26,411,307 Total Defence Resourcing (16+20)[2] 29,463,257 30,317,639 854,382 2.9% 30,655,812 30,780,324 30,282,558

Note 1. Cross Reference Table 17. 2. Cross Reference to serial 10 of Table 6.

Departm

ent of Defence

19


DEFENCE RESOURCE STATEMENT

Table 6: Defence Resource Statement[1]

Estimate of + Proposed at = Total Actual prior year Budget Estimate Appropriation

Seria

l No.

amounts Available available in

2009-10 2009-10 2009-10 2008-09 $’000 $’000 $’000 $’000

ORDINARY ANNUAL SERVICES Outcome 1 – 20,148,040 20,148,040 19,099,284 Outcome 2 – 1,533,544 1,533,544 1,119,066

1 Outcome 3

Total departm ental outputs[2] – –

10,619 21,692,203

10,619 21,692,203

12,863 20,231,213

2 Total ordinary annual services – 21,692,203 21,692,203 20,231,213 OTHER SERVICES Administered expenses

Specific payments to States, ACT, NT and local government Outcome 1 – – – 23,300

3 Total administered expenses[3] – – – 23,300 Departm ental non-operating

Equity injections – 4,011,496 4,011,496 1,805,180

4 Total Departmental non-operating (4+5) – 4,011,496 4,011,496 1,805,180

5 Total other services (3+4) – 4,011,496 4,011,496 1,828,480

6 Total Available Annual Appropriation (2+5) – 25,703,699 25,703,699 22,059,693 SPECIAL APPROPRIATIONS Special appropriations lim ited by criteria/entitlement

Defence Forces Retirement Benefits Act, 1948 Part VIC , s.82ZJ (1) – 91,430 91,430 91,430 Defence Force Retirement and Death Benefits Act, 1973 Part XII, s.125 (3) – 1,519,570 1,519,570 1,439,070 Military Superannuation and Benefits Act, 1991 Part V, s.17 – 1,742,000 1,742,000 1,360,200 Defence Force (Home Loan Assistance) Act, 1990 Part IV, s.38 – 5,353 5,353 11,000 Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84 – 74,481 74,481 39,868

7 Total Special Appropriations – 3,432,834 3,432,834 2,941,568 8 Total Appropriations (6+7) – 29,136,533 29,136,533 25,001,261

Other Available Resources Revenue – 877,788 877,788 876,849 Cash Available Previous year's outputs (appropriations receivable)

29,223

132,694

–

–

29,223

132,694

29,223

99,361 Previous years' outputs – 141,401 141,401 148,002

9 Total Other Available Resources 161,917 1,019,189 1,181,106 1,153,435 10 Total Resourcing (8+9) 161,917 30,155,722 30,317,639 26,154,696

Special Accounts Opening balance – 84,528 84,528 61,779 Appropriation Receipts – – – – Non-Appropriation Receipts – 21,747 21,747 88,353

11 Total Special Accounts – 106,275 106,275 150,132

Notes 1. All figures at GST exclusive. 2. Appropriation Bill (No. 1) 2009-10. 3. Appropriation Bill (No. 2) 2009-10.

20

Department of Defence Table 7: Third Party drawdowns from and on behalf of other agencies

2008-09 $’000

2009-10 $’000

Drawdowns Revenue received from the Defence Materiel Organisation for the provision of goods and services Payments made to the Defence Materiel Organisation for the provision of goods and services Payments made to Defence Housing Australia for the provision of services (Departmental) Payments made to the Department of Veterans’ Affairs for the provision of services (Departmental)

350,139 345,937

3,512,649 3,969,459

542,198 568,964

2,661 2,310

FUNDING FROM GOVERNMENT

Budget Measures Budget Measures relating to Defence are detailed in Budget Paper No. 2 Budget Measures 2009-10.

21


Table 8: Agency 2009-10 Budget Measures[1]

Program

2009-10 Budget

estimate $m

2010-11 Forward estimate

$m


$m


$m Expenditure Measures The Defence White Paper - New Funding Model Enhanced crisis coordination facilities Critical Infrastructure Protection Program -continuation[2]

Land Operations in Complex Environments -improved capacity Navy Workforce - increased capability Australian Defence Force Health Care Trial -Expansion Australia United States enhanced defence cooperation - humanitarian assistance/disaster relief Retention of Accommodation on Deployment Iraq-Australian Defence Force security detachment -funding Timor-Leste - continued funding to help maintain stability Coastal Surveillance - revised operational structure Middle East Area of Operations - command and control enhancements Global Terrorism: Enhancing Australia's Commitment to Afghanistan Iraq-Australian Defence Force embedded personnel commitment in Iraq - cessation Regional Assistance Mission to Solomon Islands Superannuation Contributions for Operations -related allowances Afghan National Army Trust Fund - contribution Decisions taken but not yet announced Sub-total expenditure measures

Various 1.7

1.5

1.2

1.9

1.5 2.2

2.2

2.2 2.1

2.2

2.2

2.2 2.1

Various 2.2

--

– 1.7

–

– –

–

– –

59.2

191.8 -0.3

87.5

1,083.6

-49.5 29.3

22.5 59.3

1.5 1,486.8

– –

–

– –

–

– –

12.0

18.9 2.0

–

118.7

– –

– 59.3

– 210.9

– –

–

– –

–

– –

2.3

0.4 –

–

49.2

– –

– 59.3

– 111.2

– –

–

– –

–

– –

–

– –

–

–

– –

– 59.3

– 59.3

Savings Measure Military Superannuation Schemes - reduce number of medical reviews Defence savings in the forward estimates period Sub-total savings measures

1.6 Various

-0.5 –

-0.5

-0.5 -100.0 -100.5

-0.5 -200.0 -200.5

-0.5 -1,700.0 -1,700.5

Total new Budget Measures 1,486.3 110.4 -89.3 -1,641.2

Notes 1. Measures are reported on a Government Financial Statistics basis. Where Defence absorbs the cost of a measure, the fiscal

impact is zero. 2. Lead agency for Critical Infrastructure is the Attorney-General's Department. The full measure description and package

details appear in the Budget Paper 2 under the Attorney-General's portfolio.

22


OTHER BUDGET ADJUSTMENTS

In addition to the above measures, the following adjustments will be made to Defence's Departmental estimates.

Table 9: Other budget adjustments[1]

2009-10 2010-11 2011-12 2012-13 Budget Forward Forward Forward

estimate estimate estimate estimate Total $m $m $m $m $m

Update of price indexation -528.0 -197.4 -64.8 -39.4 -829.5 Foreign exchange movements 138.1 147.7 186.4 162.2 634.3 Transfer of DMO Service Fee -758.7 -775.2 -802.9 -832.2 -3,169.0 Total other budget adjustments -1,148.6 -824.9 -681.3 -709.4 -3,364.2

Note 1. Cross reference to Table 4, serial 4.

Update of price indexation The Defence budget is price updated at each budget milestone to reflect movements in the non-farm Gross Domestic Product (GDP) deflator. Although this has now changed, as reflected in the measures, to fixed indexation of 2.5 per cent, there was an adjustment to price between the Additional Estimates and the pre-Expenditure Review Committee under the former arrangements. As a result, funding to Defence for price movements has been decreased by $528.0m in 2009-10, as part of a reduction of $829.5m over the forward estimate years.

Foreign exchange movements Under the 'no-win no-loss' arrangements, Defence is required to return to the Government any surplus foreign exchange supplementation for an appreciation of the Australian dollar relative to other currencies. Conversely, where the Australian dollar depreciates relative to other currencies, Defence is supplemented under these arrangements. Defence will receive $138.1 m in 2009-10, having taken into account movements in exchange rates since the Additional Estimates. Over the current year and forward estimates a total of $634.3m will be provided.

Transfer of DMO Service Fee The Government has agreed to the transfer of funding for the DMO Service Fee from the Defence appropriation to the DMO by direct appropriation. This will result in the transfer to the DMO of $758.7m in 2009-10 and $3,169.0m over the forward estimates.

23


DRAWDOWN OF APPROPRIATIONS CARRIED FORWARD

Table 10: Appropriations Receivable

2008-09 Estimated

actual $'000

2009-10 Budget

estimate $'000


$'000


$'000


$'000

247,363 Opening Balance of Appropriation Receivable[1]

-114,669 Planned drawdown 132,694 -60,000

72,694 -65,000

7,694 -6,389

1,305 –

132,694 Closing balance of appropriation receivable 72,694 7,694 1,305 1,305

Note 1. As published in the Portfolio Additional Estimates Statements 2008-09 Table 1.2.1, serial 15.

FUNDING FROM OTHER SOURCES

Own Source Revenue Table 11: Variation in Defence’s own source revenue

2008-09 Estimated

actual $'000

2009-10 Budget

estimate $'000


$'000


$'000


$'000 811,187 Previous estimate

– Increase in the prices of goods and services sold

812,746

–

816,249

–

829,172

–

835,401

– – Variation in own source revenue 1,700 – – –

811,187 Own source revenue[1] 814,446 816,249 829,172 835,401

Note 1. Cross reference Table 5, serial 10.

Table 12: Variation in Estimates of Net Capital Receipts

2008-09 Estimated

Actual $'000

2009-10 Budget

estimate $'000


$'000


$'000


$'000 46,167 Previous estimate[1]

-94,956 Increased capital withdrawal associated with Property Disposals Program

114,451 Proceeds from property sales associated with the Property Disposals Program

66,314

-129,618

126,646

75,791

62,631

-60,056

52,476

31,542

-9,449

36,317

-111,581

112,356 19,495 Variation in net capital receipts -2,972 2,575 22,093 775 65,662 Total net capital receipts[2] 63,342 78,366 74,569 37,092

Notes 1. As published in the Portfolio Additional Estimates Statements 2008-09 Table 1.2.6. 2. Cross reference Table 17.

24


PURCHASER-PROVIDER ARRANGEMENTS

Payments to the DMO Table 13: Payments to the DMO


Seria

l


Defence Capability Plan (DCP) 578.5 1,285.6 1,912.2 1,895.8 5,672.1 Major Capital Equipment Projects 5,139.7 5,024.4 4,155.8 2,918.3 17,238.2

1 Total Major Capital Investment Projects 5,718.2 6,310.0 6,068.0 4,814.1 22,910.3 Approved Navy minor projects 14.7 15.3 9.2 7.6 46.8 Approved Army minor projects 64.2 32.4 25.2 8.5 130.3 Approved Air Force minor projects 25.0 18.2 0.6 – 43.7 Approved Joint Logistics minor projects Approved Chief Information Officer minor projects

5.9

–

2.6

–

2.3

–

–

–

10.8

– Approved ISIP minor projects 0.8 1.2 – – 2.0

2 Sub-total approved minor programs 110.6 69.7 37.3 16.1 233.6 Unapproved Navy minor projects 11.2 9.8 18.2 17.9 57.1 Unapproved Army minor projects 14.1 38.9 47.1 66.3 166.4 Unapproved Air Force minor projects 5.3 12.3 31.5 33.2 82.3 Unapproved Joint Logistics minor projects Unapproved Chief Information Officer minor

30.9 40.4 27.5 36.1 134.9

projects – – – – – 3 Sub-total unapproved minor programs 61.5 101.4 124.3 153.5 440.7 4 Total minor programs (2+3) 172.1 171.1 161.6 169.6 674.3

5 Total acquisition (DMO Program 1.1) (1+4) 5,890.3 6,481.1 6,229.6 4,983.7 23,584.6 Navy sustainment 1,316.1 1,363.6 1,354.6 1,386.0 5,420.3 Army sustainment 1,767.3 1,320.3 1,216.3 1,184.7 5,488.6 Air Force sustainment 1,447.1 1,415.9 1,476.9 1,433.4 5,773.2 Chief Information Officer sustainment 32.6 30.0 35.8 40.8 139.2 Joint Logistics Sustainment 33.9 35.1 35.9 35.6 140.5 IS&IP sustainment 16.4 14.1 12.4 11.2 54.1 HQJOC sustainment Operating costs for the Defence Capability Plan

2.3

256.1

2.4

427.4

2.5

544.6

2.5

678.0

9.7

1,906.2 6 Sub-total sustainment (DM O Program 1.2) 4,871.8 4,608.8 4,679.0 4,772.2 18,931.8

Global Supply Chain Opportunities Priority Industry Capability Centres of Excellence Australian Defence Force systems integration capabilities - improvements

1.4

0.9

1.0

3.0

2.1

4.6

5.1

3.1

4.6

5.8

3.1

4.7

15.3

9.2

14.9

7 Total Budget M easures (DM O Program 1.3) 3.3 9.7 12.8 13.6 39.4 8 Total planned payments to DMO (5+6+7) 10,765.4 11,099.6 10,921.4 9,769.5 42,555.7

25


Payments to Defence Housing Australia

Overview

Defence Housing Australia (DHA) provides housing and relocation services for ADF members. DHA has two formal agreements with Defence: the Services Agreement for Housing and Related Requirements (the Services Agreement) and the Relocation Services Agreement. These agreements formalise the relationship between Defence as purchaser and DHA as provider of housing and related services. The Services Agreement has been reviewed with the new agreement signed on 30 June 2006 and implemented on 1 July 2006. Under this agreement, DHA is to provide suitable housing for Defence members to meet the operational needs of Defence. Defence expects DHA to provide appropriate numbers of houses in suitable locations in accordance with Defence policy. The Relocation Services Agreement was reviewed in 2006 with an amended agreement signed on 1 October 2006. Under this agreement, DHA coordinates and administers domestic relocations.

Control Arrangements

DHA is a statutory authority responsible, through its board, to the Minister for Defence and the Minister for Finance and Deregulation. It was established in 1987, commenced operations on 1 January 1988, and provides a range of housing and housing-related services to Defence and other Financial Management and Accountability Act 1997 agencies.

The Defence Housing Authority Amendment Act 2006 took effect on 23 November 2006. This act enables DHA to expand the scope of its operations to provide services that are ancillary to housing and housing-related services to both Defence and other Australian Government agencies as defined in the Financial Management and Accountability Act 1997. These changes created a smaller, streamlined, more commercially focused board.

Information on the DHA Board and Advisory Committee is available in the DHA section on page 183.

Resourcing

The 2009-10 budget estimate for the purchase of services from DHA is $486.3m, compared with an estimated outcome of $457.6m for 2008-09.

OPERATIONS SUMMARY

The net additional cost of new and previously agreed operations measures in the forward estimates will continue to be funded under existing ‘no-win-no-loss’ arrangements. Table 14 provides details.

Table 14: Funding provided for current operations in the 2009-10 Budget

2008-09 Revised

2009-10 Budget

2010-11 Forward

2011-12 Forward

2012-13 Forward Total

Operation estimate estimate estimate estimate estimate $m $m $m $m $m $m

Operation Astute 169.1 213.8 18.9 0.4 – 402.2 Operation Slipper 661.0 1,381.1 180.9 108.6 59.3 2,390.9 Operation Resolute 12.8 12.6 15.3 – – 40.7 Operation Catalyst 348.9 2.3 – – – 351.2 Operation Anode 27.1 29.6 – – – 56.7 Operation Kruger – 59.9 12.0 2.3 – 74.2 Total Net Additional Costs 1,218.9 1,699.2 227.1 111.3 59.3 3,315.9

26

http:$486.3m

Departm

ent of Defence

Table 15: Net additional cost of operations from 1999-00 to 2012-13

1999-00 to 2004-05

Actual result

$m

2005-06 Actual result

$m


$m


$m

2008-09 Revised

estimate $m

2009-10 Budget

estimate $m


$m


$m


Total

$m $m Operation Astute Operation Bel Is i Operation Slipper Operation Resolute Operation Catalyst Operation Anode Operation Sumatra Assist Operation Acolyte Operation Deluge Operation Pakistan Assist Operation Outreach Operation Kruger

3,190.2 47.7

491.0 77.8

810.8 118.0

37.0 0.1

----

23.9 -

91.0 9.8

351.4 12.9

7.5 10.4

-9.8

--

191.4 -

223.3 9.3

398.5 17.3

--

2.7 ---

205.6 -

394.9 7.0

501.5 23.7

--

4.0 -

12.3 -

169.1 -

661.0 12.8

348.9 27.1

------

213.8 -

1,381.1 12.6

2.3 29.6

-----

59.9

18.9 -

180.9 15.3

-------

12.0

0.4 -

108.6 --------

2.3

- 4,013.3 - 47.7

59.3 3,591.1 - 144.6 - 2,413.4 - 228.6 - 44.5 - 10.5 - 6.7 - 9.8 - 12.3 - 74.2

Total Net Additional Costs 4,772.6 516.7 842.5 1,149.0 1,218.9 1,699.2 227.1 111.3 59.3 10,596.7 Sources of Funding for Operations:Government Supplementation Department of Foreign Affairs and Trade Department of Defence (Absorbed)

4,772.6 --

506.9 9.1 0.7

842.5 --

1,127.5 -

21.6

115.4 -

1,103.4

1649.6 -

49.7

227.1 --

111.3 --

59.3 --

9,412.2 9.1

1,175.4 Total Cost 4,772.6 516.7 842.5 1,149.1 1,218.8 1,699.2 227.1 111.3 59.3 10,596.7

27


OPERATION MEASURES

Combating Global Terrorism: Enhancing Australia’s Commitment to Afghanistan

The Government will provide $1,232.7m in 2009-10 for the net additional costs of Australia's contribution to additional military personnel and equipment, largely focused in Oruzgan province, until 30 June 2010. This includes funding for Force elements previously assigned to Operation Catalyst that have been re-assigned to coalition efforts in the Middle East Area of Operations, predominately coalition efforts in Afghanistan. As part of this contribution, the Government has agreed to provide support to the Afghanistan Presidential and Provincial Council Elections in August 2009.

Middle East Area of Operation - command and control enhancements

The Government will provide $87.5m in 2009-10 for the second stage of a two-stage process to consolidate ADF supporting assets to one location in the Middle East Area of Operations. Enhancement of the command and control arrangements for operations will be achieved by centralisation.

Afghan National Army Trust Fund - contribution

The Government has agreed to provide an annual contribution of $59.3m (US $40m) for five years to the Afghan National Army (ANA) Trust Fund. The ANA Trust Fund channels international efforts to develop and sustain the ANA and complements Australia’s training and mentoring efforts.

Iraq-Australian Defence Force embedded personnel commitment in Iraq - cessation

Force elements previously assigned to Operation Catalyst have been re-assigned to coalition efforts in the Middle East Area of Operations, predominately coalition efforts in Afghanistan. The Government will provide $2.3m in 2009-10 for the net additional costs of extending Operation Catalyst until 31 July 2009 when the operation will cease for the remaining force elements. As a result of the re-assignment of force elements, there is a net hand back of $49.5m previously approved by the Government for this operation.

Iraq-Australian Defence Force Security Detatchment - funding

The Government will provide $59.9m in 2009-10 for the net additional cost of Operation Kruger to provide security for Australian Embassy personnel in Iraq. The ADF security role will transition to a fully contracted security arrangement administered by the Department of Foreign Affairs and Trade.

Timor-Leste - continued funding to help maintain stability

The Government will provide $213.8m in 2009-10 for the net additional cost to provide assistance to the Government of East Timor in the restoration of stability, security and confidence to the country.

Coastal Surveillance - revised operational structure

The Government will provide $12.6m in 2009-10 for the ADF contribution to an Australian whole-of-government effort to protect Australia's littoral and offshore maritime areas. A review of resource requirements reflects a hand back to Government of $0.3m in 2009-10.

Regional Assistance Mission to Solomon Islands

Operation Anode is the ADF's contribution to the Regional Assistance Mission Solomon Islands in 2009-10. The Government will provide $29.6m to fund the contribution of the operation until 30 June 2010.

28


All Operations - nine per cent Superannuation contribution on Ordinary Times Earnings (OTE) The Government will provide $22.5m in 2009-10 for all ADF Operations as a result of legislative changes requiring OTE to be used as the basis for calculating the employee superannuation guarantee liability. The OTE has been included as part of the total cost against each operation shown above.

29


1.2.2 Capital Investment Program

Table 16: Capital Investment Program 2009-10 and forward estimates



Defence Capability Plan Planned Payment to DMO for projects awaiting Government Approval 578.5 1,285.6 1,912.2 1,895.8 5,672.1 Other Defence Groups[1] 53.0 148.1 319.7 375.9 896.7

1 Total Defence Capability Plan 631.5 1,433.7 2,231.9 2,271.7 6,568.8 2 Approved Major Capital Program 5,153.1 5,034.1 4,163.6 2,921.9 17,272.6 3 Major Capital Investment Program (1+2) 5,784.6 6,467.8 6,395.5 5,193.6 23,841.4

Capital facilities[2]

Approved Capital Facilities Projects 1,287.6 848.9 360.1 78.4 2,575.0 Unapproved Capital Facilities Projects 64.3 740.5 1,211.6 920.4 2,936.7

Total Capital Facilities 1,351.9 1,589.4 1,571.7 998.8 5,511.7 Total Operating 92.0 81.0 75.7 88.6 337.3

4 Total Major Capital Facilities Program 1,443.9 1,670.4 1,647.4 1,087.4 5,849.0 5 Other Investment 689.3 744.6 675.7 509.2 2,618.7 6 Total Capital Investment Program (3+4+5) 7,917.7 8,882.7 8,718.6 6,790.2 32,309.1

- capital component 7,351.3 8,275.8 8,078.4 6,796.7 30,502.2 - operating component 566.4 406.9 440.2 393.5 1,807.0

7 Net Capital Receipts[3] -63.3 -78.4 -74.6 -37.1 -253.4 8 Net Capital Investment Program (6+7) 7,854.4 8,804.4 8,644.0 6,753.1 32,055.8

Notes 1. Defence Science and Technology Organisation, Chief Information Officer Group, Defence Support Group and Capability

Development Group contribute to Defence Capability Plan projects. 2. Cross reference with Table 28 Major Capital Facilities Program 2009-10 and Forward Estimates. 3. Cross reference Capital Receipts Table 17.

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NET CAPITAL RECEIPTS

Table 17: Net Capital Receipts

2009-10 Budget

estimate $m


$m


$m


$m Total

$m

1

Property sales Proceeds from the sale of land and buildings Less capital withdrawal to Government Proceeds retained by Defence

229.6

-203.5

26.1

102.2

-62.3

39.9

17.7

19.8

37.5

112.4

-111.8

0.6

461.8

-357.8

104.0

2

Revenue from the sale of housing Less capital withdrawal to Government Proceeds retained by Defence

19.5 -19.5

–

20.0 -20.0

–

20.3 -20.3

–

20.8 -20.8

–

80.6 -80.6

– 3 Proceeds from sale of specialist

military equipment – – – – –

4 Proceeds from sale of infrastructure, plant and equipment

37.3 38.5 37.1 36.5 149.3

5 Net capital receipts[1] (1+2+3+4) 63.3 78.4 74.6 37.1 253.4

Note 1. Cross reference Table 12.

OTHER INVESTMENT

Other Investment consists of Minor Capital Investment projects, purchase of repairable items and other plant and equipment. Minor capital projects cover new equipment, modifications to existing equipment or enhancements to new equipment, and are generally valued at between $500,000 and $20m. After approval, funding for minor projects is transferred to the DMO for the acquisition phase. Defence plans to spend $689.3m on other investment in 2009-10, as part of the $2,618.7m in spending over the Budget and forward estimates period.

1.2.3 People

WORKFORCE OVERVIEW

The White Paper articulates the Government's requirements for Defence, which in turn guides our future workforce requirements both in size and capability options.

The primary challenge for Defence is to meet workforce requirements within the context of continuing high operational demand and skills shortages in a range of occupations, against a backdrop of an uncertain and challenging economic environment and outlook. Attracting and retaining the future workforce will be one of the most significant challenges facing Defence. Defence has introduced the Defence People Strategy to achieve the required outcomes.

The Defence People Strategy is articulated in the White Paper and is organised around four themes. The first theme requires Defence to build the policies and remuneration that will deliver a flexible, effective and efficient workforce. The second commits Defence to an appropriate level of investment to establish and sustain a healthy workforce. The third involves a remix of the employment offer to deliver a competitive package that reflects the contemporary labour market. The final theme recognises that the Defence workforce is under pressure and that we must, as a priority, ensure we maintain capability by investing and supporting our people to deliver capability today and into the future.

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Defence will focus on key areas of our workforce that need close attention. Defence will continue to seek new ways to recruit and retain technical trades as well as key professional groups such as tradespeople and health professionals. Defence will work with Indigenous Australians, and Australians from a wide variety of ethnic backgrounds to attract these groups to our workforce. Addressing trade shortfalls and ensuring Defence more closely reflects the make-up of the broader Australian community are key priorities.

To support and sustain the current and projected future force and the new capabilities described in the White Paper, Defence's ADF personnel growth targets have been increased to more than 57,000 and considerable resources have been invested towards improving ADF retention and recruitment. In recent years, the Defence APS workforce has expanded to support capability growth, sustain support to ADF Operations and support the growth in the ADF.

WORKFORCE SUMMARY

The total Defence workforce allocation, excluding the DMO, is forecast to be 93,394 in 2009-10, comprising

• Permanent Forces (60 per cent) of:

- 13,635 Navy Personnel

- 28,126 Army Personnel

- 14,010 Air Force Personnel

• 20,630 Reserve Forces (22 per cent)

• 14,828 APS staff (16 per cent)

• 1,156 Professional Service Providers (PSPs) (1 per cent)

• 1,009 (1 per cent) associated with the White Paper and Strategic Reform Program.

The total planned strength of the Defence workforce, excluding the DMO civilian workforce which is shown separately in the DMO section, is shown in Table 18. The planned strength of the total workforce in 2009-10 is 3,163 more than the projected result for 2008-09, including ADF permanent forces (+653), civilian APS staff (+294) and additional workforce associated with the White Paper and Strategic Reform Program (+1,009).

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Table 18: Planned workforce allocation for the 2009-10 budget and forward estimates 2008-09

Projected result

2009-10 Budget

estimate




ADF Permanent Force Navy 13,227 13,635 13,721 13,718 13,723 Army 27,824 28,126 28,683 29,427 29,807 Air Force 14,067 14,010 14,060 13,954 13,990

1 Total Permanent Force 55,118 55,771 56,464 57,099 57,520 Active Reserve Force Navy 2,109 2,250 2,300 2,300 2,300 Army 14,600 14,600 14,600 14,600 14,600 Air Force 2,193 2,100 2,200 2,300 2,400

2 Sub-total Active Reserve Force 18,902 18,950 19,100 19,200 19,300

3

High Readiness Reserve Navy Army Air Force Sub-total High Readiness Reserve Force

– 510 614

1,124

– 1,080

600 1,680

– 1,360

600 1,960

–1,560

600 2,160

–1,605

600 2,205

4 Total Reserves (2+3) 20,026 20,630 21,060 21,360 21,505 5 Total ADF Employees (1+4) 75,144 76,401 77,524 78,459 79,025 6 7 8

APS PSPs[1]

Total Civilian Employees (6+7)

14,534 553

15,087

14,828 1,156

15,984

14,841 1,155

15,996

14,822 1,155

15,977

14,821 1,155

15,976 9 [2] White Paper and Strategic Reform Program - 1,009 1,252 621 242

Total Workforce Strength (5+8+9) 90,231 93,394 94,772 95,057 95,243


Notes 1. PSPs are individuals under contract filling line positions. PSPs are not APS employees. 2. Allocation of workforce by component yet to be finalised.

Over the forward estimates, the total workforce is funded to grow by 1,849 from the forecast of 93,394 in 2009-10 to 95,243 in 2012-13.

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Table 19: Breakdown of personnel numbers by Service and rank 2008-09 2009-10

Projected Result Budget Estimate

[1] NavyOne Star and above 43 45 Senior Officers[2] 469 481 Officers 1,916 1,969 Other Ranks 10,609 10,932 Gap Year Participants[3] 190 208 Sub-total: Permanent Navy 13,227 13,635 Reserve Forces[4] 2,109 2,250 Total Navy 15,336 15,885

[1] ArmyOne Star and above 76 77 Senior Officers[2] 744 755 Officers 5,293 5,377 Other Ranks 21,314 21,623 Gap Year Participants[3] 397 294 Sub-total: Permanent Army 27,824 28,126 Reserve Forces[4] 15,110 15,680 Total Army 42,934 43,806

[1] Air ForceOne Star and above 51 51 Senior Officers[2] 596 596 Officers 3,838 3,838 Other Ranks 9,486 9,429 Gap Year Participants[3] 96 96 Sub-total: Permanent Air Force 14,067 14,010 Reserve Forces[4] 2,807 2,700 Total Air Force 16,874 16,710 APS[1]

Senior Executives[5] 121 123 Senior Officers[2] 3,925 3,995 Other APS Staff 10,488 10,710 Total APS 14,534 14,828 PSPs[6] 553 1,156

[7] White Paper and Strategic Reform Program - 1,009 Total Workforce 90,231 93,394


Notes 1. Permanent Forces and APS numbers are forecasts of the average strength for 2009-10. Numbers for the APS and PSPs

exclude the DMO. 2. Senior Officers are of Colonel or Lieutenant Colonel rank equivalent and substantive APS Executive Level 1 and 2. 3. ADF Recruitment and Retention Initiative. 4. Reserve figures represent the actual numbers of Active and High Readiness Reservists who render service. Reservists on

full-time service are reported in the Permanent Force. 5. The figures for Senior Executive Service include the Secretary of the Department of Defence. 6. PSPs are individuals under contract filling line positions. 7. Breakdown by service and rank yet to be finalised.

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WORKFORCE EXPENSES

Table 20: Workforce Expenses

2009-10 Budget

estimate $m


$m


$m


$m Military Employee Salary, Allowances, Superannuation and Leave Housing Health Services Fringe Benefits Tax

6,297.0 562.7268.2 379.6

6,382.9 599.6

294.5 403.5

6,522.5 602.0 307.8 423.9

6,828.5 615.4 333.1 444.2

1 Total military employee expenses 7,507.4 7,680.6 7,856.3 8,221.2 Civilian APS Employee Salary, Allowances, Superannuation and Leave Other Expenses including Fringe Benefits Tax

1,369.8

9.2

1,411.6

10.1

1,451.9

10.6

1,509.4

11.5 2 Total civilian APS employee expenses 1,379.1 1,421.7 1,462.5 1,520.9 3 Total employee expenses (1+2) 8,886.5 9,102.3 9,318.7 9,742.0

1.3 Programs for which Treasury is appropriated under the new Federal Financial Relations Framework

The Council of Australian Government has agreed to a new framework for Federal Financial Relations that is being implemented in a staged manner from 1 January 2009. Under these arrangements specific purpose payments will now be made through combined monthly payments from the Commonwealth Treasury to and through State and Territory Treasuries.

Details of payments which were previously the responsibility of Defence and are now being made by the Treasury are summarised below, along with resources that continue to be held by the agency. Further information on the Federal Financial Relations arrangements can be found in the Portfolio Budget Statements of the Treasury and in Budget Paper No. 3, Australia’s Federal Relations 2009-10.

Table 21: Programs for which Treasury is appropriated under the new federal financial relations framework and remaining agency resourcing

2008-09 2009-10 2010-11 2011-12 2012-13 Revised Budget Forward Forward Forward

estimate estimate estimate estimate estimate $'000 $'000 $'000 $'000 $'000

Amounts appropriated to Treasury under the new FFR Act 1.17 Treasury payment to/through States Kings Highway[1] 23,300 – – – – Sub-total Treasury resourcing 23,300 – – – – Agency resourcing (Table 1.1) – – – – – Totals 23,300 – – – –

Note 1. Refer to Administered Program 1.17 Kings Highway Upgrade on page 86 for further detail.

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1.4 Transition from outcomes and outputs to outcomes and programs

As part of the Government’s ‘Operation Sunlight’ initiative, coordinated by the Department of Finance and Deregulation, the Defence Outcome and Output structure has been changed to a Program reporting structure. The Defence outputs have been renamed as Programs with Output 1.14 (Superannuation and housing support services for current and retired Defence personnel and other Administered items) being split into three Administered programs: Defence Force Superannuation Benefits, Defence Force Superannuation - Nominal Interest, and Housing Assistance. Program 1.17 (Kings Highway Upgrade) has been created as a one-off program for 2008-09.

36


Section 2: Outcomes and planned performance

2.1 Outcomes and performance information

Agencies deliver programs which are the Government actions taken to deliver the stated outcomes. Agencies are required to identify the programs which contribute to Government outcomes over the Budget and forward years.

Each outcome is described below together with its related programs, specifying the performance indicators and targets used to assess and monitor the performance of Defence in achieving Government outcomes.

Figure 3: Structure of Defence’s Outcomes

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Outcome 1: The protection and advancement of Australia’s national interests through the provision of military capabilities and the promotion of security and stability

OUTCOME 1 STRATEGY

Outcome 1 addresses the strategic objectives set out in the White Paper, namely:

• shaping and building a defence capability that provides options for a credible response wherever Australia’s security interests are engaged

• building strong security relationships both regionally and globally.

The primary focus of Outcome 1 is on maintaining the capacity to support current commitments and provide response options to the Government to meet the range of potential future security contingencies. It also covers working collaboratively with our neighbours and the broader international defence community, and contributing to coalition operations in support of Australia’s national interests. As well as the provision of military capabilities, this outcome encompasses all of the policy, command and support functions undertaken by the organisation.

Defence’s administered appropriations relating to superannuation, housing support services for current and retired Defence personnel, and the Kings Highway upgrade are covered by Outcome 1.

Apart from supporting current operations, which are described in detail under Outcomes 2 and 3, the priorities that will be progressed under Outcome 1 in 2009-10 are:

• working towards delivering the capabilities identified in the White Paper that will form the foundation of our future Defence capabilities

• continuing the strong commitment on the recruitment and retention of ADF personnel

• implementing Defence reform to improve effectiveness and efficiency and to enhance governance

• implementing a program of efficiency and economy measures to ensure that all areas of Defence are fully able to support and deliver future military capability requirements.

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OUTCOME 1 BUDGETED EXPENSES AND RESOURCES

Table 22: Total expenses available for Outcome 1

2009-10 Budget

estimate $'000

Outcome 1: 2010-11 Forward estimate

$'000


$'000


$'000 Program 1.1—Office of the Secretary and CDF Revenues from other sources 883 Departmental outputs 71,494

905 71,166

919 68,683

941 68,951

Program 1.2—Navy Capabilities Revenues from other sources 45,019 Departmental outputs 3,613,126

47,221 3,577,457

50,413 3,580,627

52,601 3,653,943

Program 1.3—Army Capabilities Revenues from other sources 66,095 Departmental outputs 4,729,836 4,688,001

70,163 4,756,250

73,766 4,811,116

77,837

Program 1.4—Air Force Capabilities Revenues from other sources 106,641Departmental outputs 4,201,143

113,289 4,197,145

119,1034,258,825

125,768 4,334,545

Program 1.5—Intelligence Capabilities Revenues from other sources 2,146 Departmental outputs 686,130 682,113

defence portfolio budget statements 2009-2010 · 2014. 10. 21. · defence portfolio budget...

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