Abbott wants to be go-between for America and China, but huge investment needed to update military

One of the least reported developments of Prime Minister Tony Abbott's visit to China this month may also be one of the most significant: Australia's ambitions to work in military harmony with the region's biggest and fastest-growing power.

Abbott took this even a step further, raising the possibility of acting as a broker between China and the United States to develop joint exercises involving the three countries in Australia's north, where a rotating US Marine task force already operates.

Australia wants to build on its existing high-level and exchanges to broaden co-operation in a bid to ease tensions between the great powers. "We will have exchanges and exercises between our respective militaries and also multilateral exercises," he said.

Finding a middle path between China, Australia's largest trading partner, and its extremely close alliances with the US and Japan, which Beijing views with suspicion, is paramount in developing foreign and defence policies.


The nation is in the midst of determining the shape and priorities of its Defence Force in the wake of Afghanistan and a neighbourhood packed with expanding militaries equipped with highly sophisticated hardware and cyber systems. Australia's technology advantage is rapidly vanishing.

Defence planners are faced with the need to replace and update warplanes, ships, submarines and army systems at massive cost, linked to fast-evolving cyber technologies that will require expensive integration.

Decisions need to be made soon on major assets that will see decades of service.

This comes as Australia struggles with a declining economy and a Government bent on austere budgets. Already, the earlier commitment to a new fleet of 12 submarines to replace the troubled Collins class is under review.

A defence white paper next year will outline what the Government intends. Abbott has promised it will be a fully-funded plan for maintaining a "more capable, well-equipped but affordable" military, and to restore defence spending to 2 per cent of gross domestic product within a decade.

Recent history is not encouraging. In the past 40 years only former Liberal Prime Minister John Howard's 2000 white paper reached its target.

In 2011-12 defence funding fell to 1.6 per cent of GDP, its lowest level since 1938. The Australian Strategic Policy Institute said lifting it to Abbott's goal would require real annual spending increases of 5 per cent.

But among the decisions that need to be made now are the replacement of the Air Force's ageing F/A-18 fighters, the Collins submarines, and the Anzac frigates.

With an ever-tightening belt and delays and cost overruns in major projects, defence is already struggling. It is now almost certain a fourth air warfare destroyer will not be built in a programme that is already more than A$300 million ($325 million) over budget. Most of the army's 59 Abrams tanks are mothballed or otherwise out of service. Training exercises have been pared.

Yesterday the Government announced a A$12.4 billion programme for 58 F-35 Joint Strike Fighters to replace the Air Force's strike jets. Australia wants up to 86 of the controversial American stealth fighters to maintain a powerful edge over its neighbours.

The US programme has been hit by delays and ballooning costs. The jets were originally expected to be flying with the RAAF by now: instead, Australia paid more than A$3 billion for a "fill-in" fleet of 24 Super Hornets, and A$1.7 billion for 12 Growler electronic warfare versions.

Australia has already bought 14 of the new F-35 fighters.

The Government is also planning a new submarine fleet to replace the Collins class, so unreliable that for long periods only one submarine was operational.

Large and expensive fix-it programmes have boosted performance and allowed the Navy to operate "two and frequently three" boats at a time.

This has given Abbott some breathing space. The life of the Collins fleet will be extended by at least five years, putting a retirement date back to about 2033.

But Defence Minister David Johnston said recently an early decision was needed to make sure replacements were ready. How many, and of what kind, have yet to be determined.

Johnston refused to confirm earlier plans for doubling the size of the submarine fleet to 12 boats or to choose between the options: an off-the-shelf boat modified to Australian requirements, an "evolved" version of an existing submarine, or an entirely new design.

"It is fair to say I am still working the problem," he said.