1000 civilian jobs are expected to be cut from the Defence Department in the budget as the government attempts to save another $300 million.
News Ltd says military jobs will not be affected, and the government hopes a broad staff freeze and natural attrition will mean only small numbers of voluntary redundancies are needed to meet the target by 2013/14.
After recent record funding, Defence can expect to do it tough in this year's budget as the government moves to return to surplus by 2012/13 as promised.
The defence budget reached a record $26.8 billion in 2010/11 - an increase 3.6 per cent in real terms - but one leading analyst believes the headline defence budget figure for 2011/12 could be smaller.
Australian Strategic Policy Institute budget analyst Dr Mark Thomson said that would be influenced by the government's overall fiscal situation, with Treasurer Wayne Swan declaring it would be very tight with everyone needing to play a part.
"We can at least expect defence to make some additional token contribution to balancing the books," Dr Thomson said.
"The combined effect of the deferrals (of capital equipment spending), probably a bit less money spent on Afghanistan and the savings on foreign exchange movements I think will mean they will probably spend less money next year than they did this year."
Defence Minister Stephen Smith said returning the budget to surplus was the government's highest priority.
Mr Smith would not be drawn on budget speculation but gave an assurance that troops would continue to be appropriately resourced in all operational commitments in Afghanistan, East Timor and the Solomon Islands.
"We are looking at defence to make a contribution to our budget outcomes, consistent with our Strategic Reform Program (SRP) approach which sees $20 billion worth of efficiency savings over the next period," he said.
In the 2009 White Paper, defence was promised three per cent real growth out to 2017/18 and 2.2 per cent until 2030, along with indexation of 2.5 per cent for the entire period.
But the government can average that out, spending more in some years and less in others. As well defence hasn't managed to spend all its capital equipment budget in recent years, with significant spending deferred to around mid-decade.
The SRP was the big stick to the White Paper carrots, requiring defence to reform its processes and come up with big savings, on the principle that government generosity could not continue indefinitely.
The upcoming budget is likely to feature a report card on SRP progress.
It's been suggested Australia could save big money by deferring purchase of the new Lockheed Martin Joint Strike Fighter, a program worth around $16 billion.
But the priority is to get the budget into surplus in 2012/13, whereas major JSF spending won't start until mid-decade.
There is considerable logic in buying some equipment now and taking advantage of the strong Australian dollar.
On that basis the fifth $US200 million C-17 Globemaster aircraft costs a third less than in 2006 when Australia first ordered four and the Aussie dollar was worth around 77 US cents.
This is a saving for the government, not defence, under longstanding "no loss no gain" arrangements with the finance department.
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