Boston, MA -- (SBWIRE) -- 01/26/2013 -- BMI's Australia Defence & Security report for Q1 2013 examines the country's strategic position in the Pacific region and the wider world. It provides an overview of the contemporary geopolitical challenges facing the country, and the issues it may face in the future.

The report examines the trends occurring in the country's current and future defence procurement, and the order of battle across its armed forces. The report's general conclusion is that the Australian defence establishment is in a state of flux as the ambitious objectives set out in the 2009 Defence White Paper have now been put on hold - and in some cases now face cancellation - by cuts to the defence budget.

These have been enacted as part of a wider deficit-reduction programme set in train by the administration of Prime Minister Julia Gillard. The government had previously committed to increasing the defence budget by 3% annually; now, defence faces a 7% budget cut compared with 2011-12, and must save AUD5.5bn over five years.

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This means that the arrival of a new White Paper, due in the first half of 2013, cannot come soon enough. Indeed, according to some accounts, Australian defence is close to a state of crisis. A Senate committee report delivered in September 2012 flayed the Department of Defence for its mismanagement of major procurement programmes and for a failure to learn from past mistakes. Relations are understood to be tense between senior military and civilian personnel at the DoD. Meanwhile, senior defence industry figures and independent analysts have warned that the Australian defence sector is shedding thousands of experienced personnel and may lose the ability to manufacture certain capabilities domestically, let alone embark on ambitious new projects such as the development of a new class of submarine.

The holding pattern established by a new Defence Capability Plan is effectively to defer the turnkey decisions on some of Australia's biggest upcoming programmes, such as the F-35 fighter aircraft and the navy's new submarine fleet. The DCP, which was released in May, still anticipated AUD153m in defence procurements receiving first or second pass approval in the 2013-16 timeframe; however, that figure is likely to come down if the new White Paper rows back on some of the very ambitious objectives set out in 2009. Delays to the navy's air warfare destroyer programme have already been announced as a costsaving measure.

Meanwhile, the Australia has continued to strengthen its strategic ties with the US, Indonesia, India and Japan, while doing its best to reassure China - its main trading partner - that its activities are in no way aimed at China's containment.

Over the last quarter BMI has revised the following forecasts/views:

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