14/12/2015 3:41 PM AEDT | Updated 15/07/2016 12:51 PM AEST

The Security Implications Of Efficiency Dividends

The number of Australian police operating overseas is rapidly reducing due to the continuous erosion of the Australian Federal Police's budget by bureaucratic demands for financial efficiency dividends. This is likely to have short and long-term security implications for Australians abroad and at home.

In no uncertain terms, Australia's offshore capacity to respond to humanitarian and counter terrorism incidents has been, and is being, eroded.

Since 1987, the efficiency dividend has been a central principle in successive Australian government budgets. The efficiency dividend is an annual percentage reduction in available resources levied against Australia's commonwealth departments.

The government's efficiency dividend initially resulted in reductions to inefficient expenditure in non-operational areas within agencies, which was long overdue.

As the number of non-operational efficiencies available to decision-makers decreased, cuts to operational expenditure became inevitable and, finally, commonplace: even in agencies such as the Australian Federal Police.

To address the effects of reductions in expenditure, national security agencies developed new policy initiatives to obtain sufficient funding to offset risks to national security. For 10 or so years, a delicate equilibrium of cuts and 'just in time' policy initiatives was maintained.

In recent years the budget has seen a drastic reduction in the availability of new funding -- which is resulting in incremental reductions in Australia's national security capability.

This year's Commonwealth Counter-Terrorism Machinery Review found that our security agencies have identified risks to national security outcomes if their base funding continues to be eroded. Despite this, the Australian Federal Police has not been spared the ravages of efficiency dividends.

Further complicating and undermining the funding arrangements of organisations such as the Australian Federal Police is the new policy initiative offset methodology adopted by successive federal governments since 2008. In this approach, departments that submit new policy proposals to government must offset the expenditure from within their existing budget. The end result is a continuous erosion of funding for existing programs of work, such as the highly regarded Australian Federal Police international network.

One final complication is that the Australian Federal Police must also fund government directed operational activity out of base funding. Dutch authorities estimated that the first four months of the MH17 investigation cost their government the equivalent of over AUD$53 million. While the cost of Australia's Australian Federal Police contribution to MH17 will be substantially less, this figure will still affect available budgets for other international engagement activity.

With a decreased Australian Federal Police presence across the world, there is a real risk that our important international counter terrorism and policing relationships will be severed. This will impact on our access to intelligence exchanges and police-to-police cooperation.

Australian Federal Police posts in some countries, such as Myanmar, are already earmarked for closure, while others in terror and organised crime hotspots such as Thailand, Indonesia and Cambodia are reducing in size and budget.

Rebuilding police-to-police relationships in the future will require rebuilding trust, which in many cases has already taken years to establish and been lost due to our withdrawal of liaison officers.

Over the next four years it is possible that, despite government promises, increasing terrorism threats and ice epidemics, the Australian Federal Police's international network could shrink a further quarter, resulting in closure of more offices.

These reductions seem somewhat strange given the recommendations of the recently released final report from the National Ice Task Force: ice is argued to be Australia's number one crime threat. This report argued that international cooperation and improved intelligence sharing offer the best opportunities to tackle the supply of ice in Australia.

Strengthening international advocacy and engagement on cooperation and information sharing between law enforcement agencies will be increasingly more difficult with a reduced international network, especially in Asia.

The reduction in size of the Australian Federal Police's international network will impact on counter terrorism and enforcement operations in the short term and capacity development in the long term. More importantly, I would argue that there are real risks that these savings will put Australian lives in danger.

In line with the Counter-Terrorism Machinery Review recommendations the commonwealth government should cease applying the efficiency dividend and off-set provisions to the Australian Federal Police's operating budget.