TRANSCRIPT: INTERVIEW WITH BARRIE CASSIDY, INSIDERS
TRANSCRIPTION: PROOF COPY AND E & OE
DATE: 29 JULY 2012
TOPICS: Defence Budget; China; Leadership.
BARRIE CASSIDY: Minister, good morning. Welcome.
STEPHEN SMITH: Good morning Barrie.
BARRIE CASSIDY: What is the Obama administration telling you about the recent cuts in Australia's Defence budget?
STEPHEN SMITH: Well I've had three conversations with Secretary of State for Defense, Leon Panetta, one before the budget was brought down in May and two after, the most recent when I was in Honolulu during the week, and my conversations with him have been the same all the way through; that both Australia and the United States face fiscal constraints, face fiscal difficulties.
It's what Leon Panetta described at the Shangri La Dialogue in Singapore as the new fiscal reality, and we have to balance economic and fiscal reality with our national security constraints and demands.
And he is absolutely convinced, as I am, that the cuts that we have made in our Defence program continue to protect our long term capability but most importantly don't have any adverse consequences for our overseas operations, whether that's Afghanistan, the Solomon Islands or East Timor and don't have any adverse implications for what we're doing with the United States, our enhance practical cooperation, whether that's marines in Darwin or the prospect of enhanced aviation access to our air bases in the Northern Territory, or indeed down the track enhanced naval access in HMAS Stirling from my own home state of Western Australia.
So we both share a view which is we'd both like to be spending more, so far as defence is concerned, but we face these economic and fiscal constraints, and so far as the United States is concerned, they're taking out nearly $500 billion so half a trillion dollars over the next 10 years. So Leon Panetta is acutely conscious of these demands and difficulties because he more than anyone else faces them himself.
BARRIE CASSIDY: Yes, but as a percentage of GDP the United States spends three times what Australia spends, so it's not really a comparison to be made there, is it?
STEPHEN SMITH: Well the comparison is that all of us, whether it's the United States, Australia, the United Kingdom, New Zealand, Canada, Europe, we're all facing these challenges and GDP is not the only measure.
Yes, I would much prefer to be closer to two per cent of GDP than to 1.5, 1.6 per cent of GDP which is where the forward estimates are, but we continue to be in the top 13 or 14 defence spenders. We compete with Canada for that.
We continue to be the second highest per capita defence expenditure when you include the large countries, including China, and the Defence budget in Australia over the forward estimates years for the first time in 2009 topped $100 billion, and this year we're still at $100 billion. So we've managed that by making sure there's no cuts to Defence numbers, to Defence military personnel numbers, there is no cut to overseas operations and that we protect our long term key capability, whether that's landing helicopter docks to give us a ship to shore capability or whether it's our Air Warfare Destroyers or our air combat capabilities.
So yes, we're going through a tough time but we are managing that in a responsible way, and again that's the view that Leon Panetta shares.
BARRIE CASSIDY: Yes but Leon Panetta is the incumbent. Sometimes you get diplomacy from incumbents and you get the truth from predecessors. Richard Armitage, former Secretary of State, said on the record current spending in Australia is inadequate, and he said you're taking a free ride on the US and you're risking your credibility in the process.
STEPHEN SMITH: Well I reject absolutely the notion that somehow we're taking a free ride. In Afghanistan for example we are the tenth largest contributor, we're the largest non-NATO contributor, we're the third largest Special Forces contributor and we're also the country in our part of the world most active in enhancing our practical cooperation with the United States as the United States rebalances into the Pacific - into the Indian Ocean and the Pacific Ocean. So, I reject that analysis absolutely.
Now former officials are entitled to a view if they want to express it. Richard Armitage is a former official for the Reagan administration, a former official for the Bush junior administration, he's previously expressed views about Australia which has seen former Prime Ministers Fraser and Keating be critical of him. I'm not critical of him. He's entitled to a view. I just say on that analysis that he is wrong and we are managing a difficult financial period in the same way that I believe the United States is managing that same fiscal difficulty.
BARRIE CASSIDY: Well he is a former defence official but then there was a report in the Australian that the head of your department, Duncan Lewis, went to Pentagon and spoke with US Defense officials and they couldn't believe that you cut so savagely, and they wanted to make their concerns known.
STEPHEN SMITH: Well I've seen that report and it's postulated by a particular newspaper as US Defense officials registering concern. Well I make a couple of points; firstly, the US official that I'm concerned about is my counterpart, the Secretary of State for Defense and I've outlined to you his analysis.
Secondly, I saw that reference in the newspaper; I've spoken to the Secretary of the Department; I've also read the record of conversation at the meeting that he had with some officials in Washington a few weeks ago. Yes, in the course of a lengthy discussion about a range of strategic and defence matters, there were questions raised about how we were proposing to deal with our difficult financial situation in the forthcoming White Paper 2013. I don't in any way regard that as a registration of concern; it was simply asking a question.
If I asked Leon Panetta a question about how he's managing a half a trillion dollar reduction over ten years, I don't regard that as a registration of concern. It's an inquiry about how you are seeking to manage a difficult period in a responsible and appropriate way.
BARRIE CASSIDY: Well Tony Abbott has also raised the question of compromising your military capability. You say that you're not, but what are you doing? Is it simply a reordering of priorities? Are you adjusting to a less hostile period? What are you doing?
STEPHEN SMITH: Well we're going through a difficult period but here are the things that we are not doing: we are not reducing military numbers. That was a mistake made in the aftermath of Vietnam, so we're keeping the same military composition. We're protecting, as I said, our core capability, whether it's maritime or aerial. And at the same time we're saying, as we drawdown from Afghanistan with the orderly transition out of Afghanistan by 2013, as we see in the very near future the prospect of withdrawal of our stabilisation forces from East Timor and the Solomon Islands, we need to look at this carefully and strategically. And that's the main reason why we've brought forward the White Paper from 2014 to 2013.
Now yes, how that is done in a financial way, seeking to give Defence some longer term security, is a key challenge just as it was for the 2009 White Paper.
But at the same time as we draw down from these overseas operations, we have to look very carefully at how we are positioning ourselves in Australia itself. That's why I commissioned our force posture review from two former secretaries of the department, Allan Hawke and Rick Smith, and their report, which the Prime Minister and I released in March, makes it clear that we need to start to focus again on our northern and western approaches.
So all of these things will culminate in the White Paper next year, but in the meantime we've tried to ensure that we don't cut away at our key capability into the future; we don't cut away at our military numbers; we don't cut away at the resources and the supplies and the kit to our overseas operations, in particular Afghanistan; and importantly we don't cut away any of our commitment to those three contributions overseas until such time as there is an orderly transition or orderly withdrawal in place.
BARRIE CASSIDY: But when you say though that it is essentially because we're going through difficult times, by that you mean there's not a lot of money available to government. So essentially it is about making your contribution to what a lot of people regard as a politically motivated budget surplus.
STEPHEN SMITH: Well a strong economy helps a strong defence force and a strong Defence organisation. The two great requirements of a national government are to protect and defend our national security interests and protect and defend our economic interests.
It's unambiguously in Australia's interests that we have a strong and prosperous economy and a budget surplus is a key to that, and economic prosperity and economic security makes a better environment for national security and so the two things in a sense go hand in hand. But if you have a strong economy that benefits Defence and benefits the Defence organisation.
But Defence is not the only Australian government department or agency that has made a contribution to returning the budget to surplus. So it's not aimed at Defence.
Pretty much every agency or department has made a contribution. That's to ensure we continue to have a strong economy with GDP growth, with economic growth because that's the most important thing we can do to continue to make a contribution to not just prosperity and investment in our region but also to help create the environment for stability and for security and certainty.
BARRIE CASSIDY: The relationship with China now. I now want to ask you about Tony Abbott. He created or started up a discussion on foreign investment in Australia when he talked about it rarely being in Australia's interests for state-owned companies to control Australian businesses. That's essentially a bipartisan position anyway, isn't it?
STEPHEN SMITH: Well Tony Abbott went to China and in typical - literally - Tony Abbott bull-in-a-China-shop fashion made remarks about the South China Sea, which were at best inelegant, and he made remarks about foreign investment, which were at best seeking to gain some popular support for what he said. And on both those fronts, he's been widely criticised. And you've got to, if you are holding yourself out as being a potential Prime Minister of a country, when you go to a country like China you've got to be nuanced, you've got to be careful. You've got to be responsible and appropriate in what you say.
He essentially made a remark which would have the effect of China believing that investment from China into Australia from state-owned enterprises was not welcome. So the Chinese interpretation was that this was a change of Australian policy and aimed at China because the speech was made in China.
Now we have been a country which has been prosperous for a long period of a time as a result of being an attractive place for overseas capital investment, whether we start historically with the United Kingdom, the United States, Japan and now more recently China and, down the track, India. So that's essential to our ongoing economic well-being.
Tony Abbott tried to have his cake and eat it too, which was to try and send a message to the National Party and to other people in Australia that he was opposed to foreign investment and he did it in the worst possible place, in the worst possible way.
BARRIE CASSIDY: And yet your government has supplied more rigorous standards to state-owned companies though.
STEPHEN SMITH: We did that in 2008 and that was a very sensible thing to do because we saw over that period the rise of essentially future funds or state-owned wealth funds, and we needed to take a careful look at how that should be managed. And the Treasurer back in 2008 promulgated a range of changed arrangements where in the end judgements could be made about whether a particular investment was in the national interest, and both since we came to office and during that period we have seen billions of dollars of investment from overseas, a lot of that from China, but also continuing from traditional sources.
And the changed arrangements which the Treasurer put in place to ensure that these matters were considered carefully and appropriately and methodically haven't stopped investment coming to Australia because they were done in a sensible way and they weren't done in a way in which China believed they were aimed at China.
Mr Abbott's remark had the effect of China believing that it was aimed at China and the fact that this was a blue, this was an error of judgement, is really underlined by the fact that when he returned to Australia it was Joe Hockey who had to mop up for him. Now if Joe Hockey is mopping up for you, you know you've got a problem.
BARRIE CASSIDY: Can I just ask you one question on domestic politics to clear something up? We often read that if Kevin Rudd was to resume the leadership of the Labor Party as many as a half dozen ministers, perhaps more, would refuse to serve with him. Are you one of them?
STEPHEN SMITH: Well it's not going to arise in any hypothetical or real way. The Prime Minister was comprehensively returned to the office of leader of the Labor Party when she was challenged by Mr Rudd a few months ago. At that time Mr Rudd said that not only would he not challenge again but if he believed anyone else was going to challenge, he would effectively be a human shield to protect the Prime Minister.
No one else is challenging. Everyone else is out there supporting the Prime Minister, as she works through some significant reform, whether it's placing a price on carbon, whether it's disability, whether it's education reform and the like. So we've dealt with that matter and in my view it's not going to arise again.
BARRIE CASSIDY: Okay, just finally, and I have to ask you about the Olympics. You're based in Perth and Western Australia pretty much owns the hockey teams, at least they think they do, the Kookaburras and the Hockeyroos. What can we expect?
STEPHEN SMITH: Well as you say the Hockeyroos and the Kookaburras based in Perth. The Kookaburras coached by my predecessor Rick Charlesworth, led by Jamie Dwyer, the boys will be very disappointed if they don't come back with a gold medal, but it's a tough assignment and we shouldn't assume that. Germany, the Netherlands, Spain, Great Britain itself, so that's going to be a very tough competition. We've also had a couple of injuries, in particular Des Abbott at the last minute, but the boys will be very disappointed if they don't come back with gold.
The Hockeyroos? The Hockeyroos still in a rebuilding phase. The international ratings have them at sort of five or six. I'm a bit more optimistic. Fi Boyce has recovered from her injury. I think they'll do a bit better than that. I think we could be knocking on the door of a semi-final and maybe knocking on the door of bronze, but they're progressing well and we're looking forward to very big things from them in four years' time.
BARRIE CASSIDY: When it's all over, you can send your CV to Grandstand. Thanks for that.
STEPHEN SMITH: Thanks Barrie. Thanks very much.