Leon Panetta: U.S. Takes No Issue with Aussie Budget Defence Cuts

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By Erik Pineda | November 14, 2012 6:17 PM EST

The U.S. appears supportive of the security policies outlined by the Australian government, including its recent decision to slash billions in defence budget spending, which is part of the Gillard government's ongoing efforts to realise a surplus in early 2013.

U.S. Defence Secretary Leon Panetta said on Wednesday that governments around the world now face what he termed as 'new fiscal reality' and both Canberra and Washington are not immune to 'budget constrictions'.

Mr Panetta is in the country for the yearly Australia United States Ministerial Consultation (AUSMIN) that brings together key officials of the two governments. The gathering in Perth is attended by the U.S. defence chief, U.S. Secretary of State Hillary Clinton, Defence Minister Stephen Smith and Foreign Minister Bob Carr.

In his opening remarks at the high-level bilateral talks, Mr Panetta pointed to a similar situation back home in the United States, in which its recovering economy forced the U.S. Congress and the White House to a budget compromise that will see steep cuts in military spending.

The reduction came in the aftermath of America's astronomical defence bills following more than a decade of two-front wars in Afghanistan and Iraq. The latter was already concluded and the former is winding down, with U.S. and NATO forces slated for complete pull out by late 2014.

In both arenas, Australia is actively involved and critics have scored the Labor-led government's move of cutting down the country's defence budget to historical lows despite its continuing role in the Afghan War and the emergence of security tensions in the Asia-Pacific region.

The downward adjustments, some security analysts said, defy the current developments in the area where China, India and other emerging markets are steadily gaining influence and raring to display their economic and military might.

Mr Panetta acknowledged that while financial problems were somewhat limiting, the challenge "is how do we ensure that we develop the kind of priorities that keep us strong, so that we can confront those challenges, protect our countries, and advance peace and prosperity in this region."

"Our biggest challenge now, as we rebalance to the Pacific, is to try to work with allies like Australia to try to help us in that effort so that we can do everything possible to promote security," the top U.S. defence official was reported by ABC as saying.

"As we face budget constrictions in both of our countries, we still confront threats in the world - threats that are real," Mr Panetta reminded.

He pointed to the Afghan Mission, the volatile situation in North Korea, the standoff between China and Japan, the disputes in the South China Sea and the lingering problem of global terror threats.

The U.S. position expressed by Mr Panetta only proved that Washington was not displeased with the lesser money allocated by Canberra for defence expenditures, Mr Smith said, insisting too that the cutbacks will not hobble Australia's involvement in Afghanistan.

He admitted though that it would have been better for the defence sector to enjoy higher budget, telling ABC "I would obviously prefer (defence spending) to be closer to 2 per cent of GDP than the 1.6 per cent we're at now."

Yet he asserted that amidst the not too-wide leeway for defence operations "we've made sure that we ring-fence our overseas operations so we don't have adverse implications for that . . . (and) we've also made sure that we ring-fence the activity that we do with the United States."

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