Does Australia’s big defence spending actually make any sense?

Australia has a bipartisan commitment to spend 2% of its GDP on defence. But how was that decided?

As this chart shows, by spending just under 2% on defence we are above the global median as far as share of the economy goes — but still mid-pack.

Australia has fallen short of the 2% target for several years, but this year, with GDP in retreat thanks to the coronavirus recession, we might finally achieve it.

The fact a recession can help us meet our defence targets shows just how silly it is to set defence spending as a share of GDP. It should be set by reference to strategic ambitions.

As this next chart shows, looking at spending as a per cent of GDP is misleading. Not only does it fail to acknowledge that Australia has the 13th highest military spending in the world, it means you fail to notice the elephants in the room.

The graphic shows the sheer size of the US military. The US spends more than twice what China does. (Although due to lower prices for wages and equipment in China, the ratio is probably not quite as substantial as it seems.)

Those two elephants — the US and China — are engaged in a great strategic battle for influence. We can’t ignore it. We must determine if we can affect it.

Either we face a real threat or we don’t. If we do, spending a fixed per cent of GDP is not a smart way to combat it. If we don’t, spending a fixed per cent of GDP is a waste.

And, possibly even worse, it can make us a target. But figuring out what is optimal is not simple.

The China question

I’d argue China did not pose a real threat as recently as a few years ago: under Hu Jintao it was publicly committed to a peaceful rise and, anyway, it was militarily weak.

That has changed fast. China has sharply ramped up its military spending, as this chart shows.

China under Xi Jinping is a different story. It’s richer and far bolder in its political rhetoric (antagonised, no question, by US President Donald Trump). It is also more aggressive and territorially ambitious. Hong Kong has been conquered. Is Taiwan next?

Xi changed the protocols around term limits. His Putin-style eternal rule removes an important check on his power and raises the risk that one man’s whims can create a war.

So China is aggressive and expansionist. Must that affect us?

Well, does it have ambitions beyond Taiwan? Perhaps a few border tweaks in South-East Asia and India. Perhaps a few islands. China is committed to a maximalist concept of what counts as its territory but the idea it will head off on a Napoleonic conquest beyond that is far-fetched.

The arguments in favour of China attacking Vietnam are dumb, and an invasion of Australia is certainly not a strategic ambition.

So our military investments are about reducing China’s influence and freedom to act against our interests, rather than our territory. We need to think carefully about our interests and the costs of defending or not defending them.

The paradox

Powerful enemies get the most attention. Australia has bought long-range ship-killing missiles that reduce the ability of the Chinese navy to operate with impunity in south-east Asia.

Why did Japan bomb Pearl Harbour? Because the US was strong, not because it was weak. Our increasing military strength makes Australia more pertinent to Chinese military planners.

While China doesn’t want to occupy Australia, it could attack our military targets if it felt they were blocking its goals. A military strike is not out of the question if we oppose Chinese interests in some third place.

What’s more, the stronger our military, the more likely we are to choose to oppose China. Politicians are easily emboldened. If we have the tools to defend Taiwan from Chinese attack we’re more likely to use them. In this way, beefing up our military could make us more likely to end up in armed conflict.

So should we shrink back, wash our hands of great powers’ conflict and let them run amok in their sphere of influence? New Zealand has done so and seems secure in its choices.

One reason to try to crimp China’s more aggressive ambitions before they manifest is it needn’t be an eternal struggle.

Countries can change, especially when they change leaders. Not everywhere is North Korea, where the leadership is dynastic and the philosophy just as rigid. The lesson of Deng Xiaoping and Gorbachev? Countries can turn moderate.

It’s also possible the world will get wise and revitalise international institutions it set up after the last big war, using multilateral methods to try to lock in peace. That’s an area where Australia’s interests are clear, and we could afford to commit a lot more money and effort.