Briefing: Australian industry sees tough times ahead after budget cuts

Australian defence industry officials are forecasting difficult times ahead for locally based companies following Canberra's decision to cut AUD5.4 billion (USD5.5 billion) from the country's military expenditure over the next four years.

Many of the country's defence firms - most of which constitute small and medium-sized enterprises (SMEs) - will come under increasing economic pressure that could force them out of the industry, say officials. There is, however, a continuing level of optimism centred on shipbuilding in the state of South Australia, where a number of major naval platforms will be built.

The plan to reduce defence spending - announced by the government on 8 May - includes a cut of AUD1 billion during 2012-13, which is intended to help the government achieve a budget surplus during the year. Total defence outlay for 2012-13 will be AUD24.18 billion: AUD1.8 billion less than the previous 12 months, when expenditure was also reduced.

A range of procurement programmes have been impacted by the decision to reduce expenditure over the next few years. Most notably, Australia has delayed the acquisition of 12 of an initial batch of 14 F-35 Lightning II Joint Strike Fighters (JSFs) by two years until 2016-17; cancelled a requirement for self-propelled 155 mm howitzers; and delayed a AUD1.2 billion programme to upgrade defence facilities.

Additionally, Canberra plans to "reschedule and re-scope" other as-yet unidentified projects in the Defence Capability Plan as well as defer the later stages of the F-35 programme, retire early Royal Australian Air Force Lockheed Martin C-130H transport aircraft and mothball Australian Army M1A1 Abrams main battle tanks and M113AS4 armoured personnel carriers.