Federal Budget 2016 – Defence | KPMG | AU

Federal Budget 2016 – Defence

Budget 2016 – Defence

The 2016 Federal Budget has confirmed the promises made in the February 2016 Defence White Paper and signals a positive future for the defence industry.


Partner, Operations Advisory

KPMG Australia


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The 2016 Federal Budget has confirmed the promises made in the February 2016 Defence White Paper. Some $33.9 billion of spending in FY16/17, and a 3.4 percent increase compared to FY15/16. With the promise of $195 billion for new capability through to FY25/26, the signals to the Defence industry are positive.

Five highlights

  1. The Integrated Investment Plan (IIP) will invest $1.7 billion in the Major Capital Facilities program in 2016-17, and signals a much greater need to collaborate regionally with customers, suppliers and competitors. This new style of investment is beginning to flow, and those that can work nationally, across states and territories, and adopt a more collaborative mindset will benefit.
  2. $195 billion assigned to new Defence capability through to FY25/26, which will flow into the order books of prime systems integrators, small-to-medium-sized companies, plus infrastructure, information and communications technology (ICT) and services providers. While South Australia and Western Australia might get the largest direct share, the funds will eventually flow to all states and territories.
  3. $1.6 billion through to FY25/26 for a series of Defence Industry Programs including a new Centre for Defence Industry Capability based in Adelaide, a virtual Innovation Hub and Next Generation Technology Fund enabling Defence Industry growth and innovation across the nation.
  4. In the national security sector there has been a re-allocation of $195 million to implement recommendations of the 2015 Cyber Security Review. Although not new money, this is an aggregation of budgets that should benefit larger cyber service providers.
  5. The scale and complexity of regional infrastructure programs creates opportunities to work more closely with other ICT and infrastructure providers, plus the prime system integrators, to ensure the infrastructure is developed and delivered in unison with broader Australian Defence Force (ADF) capability.

The state and territory view

  1. The positive signs are not uniform across the country. For example, the $90 billion for naval shipbuilding programs will benefit South Australia and Western Australia the most, with further benefits rippling through national and global supply chains.
  2. The infrastructure investments (more easily discovered in the budget documents compared to other Defence investments) will logically follow the distribution of ADF personnel. Queensland and New South Wales in particular appear to have benefited in this regard.
  3. States and territories are investing in the capture of new defence work. From advocates to advisory committees and dedicated public servant teams, the various states and territories are effectively competing for dollars now. They are aiming to attract the programs and defence industry to grow employment, innovation and adjacent sector opportunities.

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