“The 2009 white paper is dead on the floor, butchered by the withdrawal of funds. There’s no way they can deliver it,” says professor Peter Leahy, director of the University of Canberra’s National Security Institute, on the $5.5 billion cut to Australia’s Defence budget and the impending 2013 white paper.

“On current funding levels, there will need to be dramatic changes to our defence capabilities into the future if that’s all the funding the government can provide.”

Professor Leahy believes that so far the government has failed to articulate the hard decisions required regarding which defence capabilities will remain, and which will be cut, under the new funding regime. He believes the inability to deliver the 2009 white paper will result in fundamental changes to the direction of Australia’s defence policy.

The Defence budget in 2011-12 was $26.5 billion, representing 1.78% of GDP. In May this year, the government cut $5.5 billion from the Defence budget over the next four years. The 2012-13 budget will be $24.2 billion, representing 1.56% of GDP. According to the Australian Strategic Policy InstituteDefence budget brief, this is the lowest percentage of GDP since 1938. As a comparison, current US expenditure on defence represents 4.7% of GDP.

During an address to the Lowy Institute in Sydney on August 9, Defence Minister Stephen Smith said he’d prefer a larger budget but it’s not possible in the current financial environment. “We are living in a new fiscal reality,” he said. “The public expects fiscal responsibility.”

Smith also explained why the government decided to bring the new white paper forward to 2013 from the scheduled year of 2014. He cited strategic circumstances as the reason for the change, in particular the ongoing effects of the global financial crisis. The new white paper will focus on structures, policy and defence relationships rather than equipment, according to Smith, signalling an increased emphasis on “soft power” measures to achieve security in Australia’s region.

But while Smith would like to focus on structures and policy, it’s unlikely the immense costs of the planned weapons purchases can be ignored. According to Leahy: “The cost of the JSF and submarines will exceed $66 billion, not including through life support costs; that sort of cost impacts on other parts of defence such as land forces, and constrains the options available to government.”

Andrew Davies, director of the Australian Strategic Policy Institute operations and capability program, says there may be advantages in lower operating costs from newer technology, citing the example of the smaller crews required for modern European submarines compared to the Collins Class. The concept for operational use of the proposed submarines remains vague. Resolving this may allow the purchase of a more reasonably priced option. “Australia needs to decide where and how we are going to operate the submarines,” he said. “That will affect a range of design choices and cost.”

Davies says capabilities such as the F-35 Joint Strike Fighter (JSF) or the envisaged submarines are at the high end of available technology and are therefore the top of military procurement lists. That doesn’t mean they are the only or the most practical choice for Australia. “A stealthy strike fighter like the JSF is a ‘first day of the war’ platform,” he said. “If Australia is only going to fight large scale wars in coalition we could use the Super Hornet as the US Navy does.”

Despite the voluminous detail of the 2009 white paper, it is unclear what enemy the JSF and submarines are intended to fight. Professor Leahy insists Indonesia was never Australia’s enemy, nor is China. The reason for purchasing so many submarines and advanced fighters therefore puzzles him.

He says it’s possible current and previous governments have associated the purchase of advanced weapons with being a “middle power”. “Australia might aspire to be a middle power but we’re a strategic minnow,” he said. “We should not be pushing up against China. We need to be building relationships to our north in terms of security, stability and development. The problem in the past has been going beyond the security or weapons aspect.”

Smith wants to see political and strategic relationships match the level of economic integration in the Asia-Pacific region, referring to the level of trade in resources and manufactured goods between Australia, the US and China. “Australia and the rest of the world needs to engage China, and China needs to do the same,” he said.

Professor Leahy agrees engagement and relationship building are important for the security of Australia. But that must go further than simply writing another white paper. He proposes a broader approach to defence expenditure, as part of a national security framework.

“Defence is supposed to work within a whole of government framework,” he said. “Let’s have a clear national security strategy, with a national security budget.” That way, he argues, the other agencies that work with Defence will also have a realistic level of funding to do their work, which contributes to regional security.

Whether the new funding levels will be adequate for Australia’s regional and global defence commitments remains to be seen. Professor Leahy agrees the fiscal constraints are likely to remain no matter who forms government in 2013. “The Liberals have said they will put the money back in the budget if they can,” he said. “That means that the money is coming out.”

Professor Leahy: “If Australia aspires to be a middle power, it has to fund to the level of a middle power and have its own strategic outlook.”