|Brendan Nicholson From: The Australian March 20, 2010 12:00AM
DEFENCE officials have been caught short by a new report revealing that Australia and its closest ally, the US, are the world's most wasteful nations when it comes to buying and maintaining military equipment.
The US and Australia came at the bottom of a list of 33 countries ranked according to how efficiently they spent their defence budgets in the analysis prepared by global consultants McKinsey.
Brazil, Poland and Russia came out on top of the 33 nations which account for 90 per cent of global defence spending.
McKinsey is uniquely placed to compare the effectiveness of defence spending across nations because it had been invited to carry out comprehensive audits in many of the countries included in its latest research.
The US-based company was called in by the Rudd government to carry out a massive internal search for waste in the Australian Defence Force and the Department of Defence. It recommended that the government should force Defence to find savings of $20 billion over a decade to help pay for major purchases of ships, submarines, aircraft and guns.
That advice triggered an extensive waste elimination program within the department.
The latest McKinsey study says the US and Australia are the world's worst performing countries with regard to "equipment output for every dollar spent".
But Australia did much better than the US when the "tooth to tail" ratio was calculated to show how many personnel it took to keep fighting soldiers in battle.
Norway came out top with 54 per cent at the teeth end, 36 per cent considered non-combatants and 11 per cent in combat support.
The US had just 16 per cent of its personnel in front-line roles and 84 per cent in non-combat or support roles.
Australia had 34 per cent of its personnel in combat roles.
The average was 26 per cent in combat roles.
McKinsey says countries that support their own defence industries by building their own equipment rather than buying it off the shelf from international suppliers were likely to pay more for it.
The Australian government plans to have 12 submarines built in Adelaide to replace the Navy's six Collins Class boats. Analysts have warned that could cost at least $35bn, while submarines could be bought off the shelf for much less.
A spokesman for Defence Minister John Faulkner said the minister was aware of the report and that the government had made eliminating waste a high priority.
Analyst Andrew Davies of the Australian Strategic Policy Institute said "a long-term epidemic of over-optimism in Defence" was largely to blame for regular cost blowouts.
As an example, he said, at the start of the process of buying the US Joint Strike Fighter to replace the RAAF's F-111 bombers and F/A-18 fighter-bombers, the RAAF estimated that each JSF would cost $US50m. That had now blown out to $US90m each.