Boston, MA -- (SBWIRE) -- 09/25/2013 -- BMI View: The Australian defence industry is currently in a state of flux. Having planned swingeing defence-spending cuts as part of a cross-government deficit-reduction strategy, the administration of Julia Gillard made a dramatic U-turn in May 2013, pledging to increase the Department of Defence's allocation from AUD24.18bn this year to AUD30.7bn in 2016-17. A new Defence White Paper, also released in May, then retained the ambitious capabilities sought by Canberra in the previous 2009 White Paper. However, the ousting of Gillard a month later and the return to power of Kevin Rudd, combined with an impending general election this coming November, means that the new plans for Australian defence may soon change yet again.

Another Defence White Paper is now expected to be published in 2014-15, irrespective of which party wins the election. The new document will have to answer an all-important question that the 2013 document failed to address - the disparity between the government's defence procurement ambitions and its ability to finance them. A prominent think-tank has estimated that, even factoring in the budget increases announced in May, Australian defence still faces a AUD30bn spending black hole between now and 2022 based on the procurements programmes the government says it intends to pursue. Some difficult choices, therefore, still have to be made, especially regarding the country's two most expensive upcoming programmes: the procurement of the F-35 Lightning II Joint Strike Fighter, and the development of a next-generation submarine.

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Gillard's strategic legacy may prove to be longer-lasting. The 2009 Defence White Paper was quite hostile in tone towards China, but the new White Paper, together with a 2012 government publication entitled 'Australia in the Asian Century', set out a much more conciliatory platform for future Sino-Australian relations. Gillard also undertook an important visit to China in April 2013, during which she unveiled a 10- year plan for improving Sino-Australian ties - including boosting defence relations and trilateral military exercises involving American, Australian and Chinese forces. However, Rudd is known to be more hawkish towards China, and his return to power could see yet more shifts in policy.

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