Islamic State fight strains Abbott budget amid middle-power play

Australia's effectiveness as a key US ally in the Asia-Pacific is at risk as budget-sapping defence projects and increased commitments in the Middle East place strains on its capacity.

Prime Minister Tony Abbott announced on Tuesday he will deploy about 300 troops to combat Islamic State extremists in Iraq, thousands of miles away from the region where Australia acts as the eyes and ears of the US. His A$29.2 billion (US$22.7 billion) annual defence budget, rising from a 70-year low under the previous Labor government, is already under pressure as he tries to secure the next generation of naval and aerial combat power.

At stake is Australia's ability to influence Asia-Pacific affairs as it seeks to help the US check China's growing military influence in the region.

"Australia certainly likes to talk the talk of being an important middle power with global interests, but the resourcing picture is pretty lousy," said Peter Jennings, executive director of the Australian Strategic Policy Institute think tank.

"We're in a region where there's a whole bunch of countries becoming more powerful and influential. It's a more crowded market and Australia has to play harder to succeed."

Mr Abbott, 57, who's described Australia as a "significant, even a substantial middle power," has pledged to increase defence spending to 2 per cent of gross domestic product by 2024.

Vowing to end what he's called recalcitrant spending by Labor, Mr Abbott in April ordered 58 Lockheed Martin Corp-made F-35A Joint Strike Fighter aircraft for A$12.4 billion, on top of the 14 Australia pledged to buy in 2009.

NEW SUBMARINES

Another huge outlay looms when the government decides later this year on who will win a contract to replace its aging Collins Class diesel-electric submarine fleet in a project valued at A$50 billion.

Australia wants a new fleet of submarines by 2026 to patrol the Pacific Ocean and Indian Ocean. The area is part of Australia's jurisdiction as a partner in the Five Eyes arrangement - an intelligence alliance that takes in the US, UK, Canada and New Zealand.

The military's capability was pushed to the limit by the previous Labor government, said Neil James, who served with the army for more than three decades and is executive director with the Australia Defence Association, a non-partisan security watchdog. It postponed the introduction of modernised equipment and cut some programs altogether during its six years in power to 2013, he said.

Mr Abbott's challenges go beyond bolstering Australia's military capacity.

LEADERSHIP CHALLENGE

Since he won power in September 2013, he's been forced to abandon a target of returning the budget to surplus in 2018 as slowing growth and plunging prices for iron ore and other commodities erode tax revenue. The prime minister's personal ratings in opinion polls plummeted to the point where his leadership was challenged in a ballot of his Liberal Party lawmakers a month ago.

The federal budget in May may prove crucial for Mr Abbott to win back voters and shore up his leadership ahead of an election due by the end of 2016. He may be forced to delay defense spending increases so he's able to deliver more sweeteners to voters.

"The sad truth is no one changes their vote over defense issues," James said.

The Australian troops will be based at Taji, northwest of Baghdad, and train local forces, Mr Abbott said Tuesday. The mission, to start in May, comes at the request of the Iraqi and US governments and follows New Zealand's decision to send about 100 soldiers.

'DEATH CULT'

The extra deployment follows Mr Abbott's commitment last year to send 400 air force personnel and about 200 special forces soldiers to the Middle East to join President Barack Obama's coalition against Islamic State. Australia sent eight Super Hornet fighters and other aircraft, which have taken part in bombing raids against the extremists, which Mr Abbott refers to as a "death cult."

"This decision marks the next phase of Australia's contribution to the international coalition to disrupt, degrade and ultimately defeat" Islamic State, Abbott told reporters in Canberra. The extra troops don't represent "mission creep," with the decision made in the national interest, he said.

The nation may begin withdrawing the special forces soldiers it sent last year to Iraq - now numbering about 170 - in September, Mr Abbott said. He declined to rule out further missions for special forces in the region.

Australia also maintains about 400 soldiers in Afghanistan to help train and advise the nation's security forces.

The government has approved the deployment of 1,640 defence force personnel to 14 operations overseas, including a United Nations mission in South Sudan. Some 500 more help protect Australia's borders.

SPY NETWORK

Australia is also boosting its spy network in the Middle East, The Australian newspaper reported on Feb 19, without citing sources. The Australian Secret Intelligence Service is reopening its defunct Iraq station and will increase the number of officers it has in Jordan, Turkey and Lebanon, the newspaper said.

The renewed commitment to the Middle East means "it must be getting close to the limit of what Australia can sustain year-on-year," said Greg Barton, a professor at Monash University's School of Political and Social Inquiry in Melbourne. "We could say we will rely on our allies to help us out but if we're going to be involved in the region in the long term then we need some intelligence capacity there."

Australia's Department of Defence didn't immediately respond to requests for comment on whether it has the budget and military resources required to play a greater role in the Middle East or whether that may compromise Australia's ability to positively influence affairs in the Asia-Pacific.

Australia has long been regarded as a key ally of the US in the Asia-Pacific.

The US is deploying 60 per cent of its naval forces to Asia by 2020 as China expands its military reach and presses its claims to the South China Sea, where shipping lanes carry more than US$5 trillion in goods each year.

President Barack Obama in November 2011 pledged to strengthen the US alliance with Australia, including stationing as many as 2,500 Marines in the northern city of Darwin.

The alliance is one the US clearly values.

"Any time I serve anywhere, I want to look next to me and find a Digger," Army General Martin Dempsey, chairman of the US Joint Chiefs of Staff, told reporters in Sydney on Feb 24, using a slang term for Australian soldiers.

"We encourage Australians to maintain a global perspective," General Dempsey said, adding that Australian and US military chiefs were in discussions about the nation's focus on affairs in the Asia-Pacific and further abroad. "Issues that begin in one region rarely remain there."

SECURITY OPERATIONS

Since 1947, Australia has committed more than 65,000 personnel to more than 50 multilateral peace and security operations, according to government figures. As well as supporting the US in the Korean, Vietnam and Iraq wars, it's operated under the United Nations banner in hot-spots ranging from East Timor and the Solomon Islands on its doorstep to Cyprus, Afghanistan and South Sudan.

Under Mr Abbott, the nation has extended its diplomatic footprint beyond its Asia-Pacific doorstep.

In response to the downing of Malaysian Airline System Bhd. Flight 17, which killed 298 people including 38 Australians, Mr Abbott opened a new embassy in Kiev.

REGIONAL FOCUS

John Blaxland, a senior fellow at the Australian National University's Strategic and Defence Studies Centre in Canberra, said the interests of both the US and Australia would be better served if Mr Abbott concentrated on boosting the nation's military and diplomatic influence in the Asia-Pacific.

"Are we are middle power or are we pretending to be more than that?" Mr Blaxland said. "We should have a healthy check on what our aspirations are and how fair we can stretch. Being involved in these conflicts on the other side of the world comes at a cost, which is the level of flexibility in your own neighborhood."

Becoming a weaker player on the world stage wouldn't fit comfortably with Australia's self-image, said Mr Jennings of the Australian Strategic Policy Institute.

"Any Australian government would want the nation to be somehow consequential and that's going to ultimately call for some really tough choices, both in a budgetary sense and also on whether we're prepared to take forward steps with military activities," he said. "We're facing a hard environment and only just realizing we're going to have to up our act if we're going to be influential."

BLOOMBERG