Defence set to do well from budget

Defence can expect to be a big winner from this year's budget even if the government hasn't yet spelled out just how big.

But it will certainly lift funding to take defence spending closer to the promised two per cent of gross domestic product by 2023-24.

The coalition has big plans for defence that will be spelled out in a new white paper to be released later in 2015.

With that will come a new 10-year defence capability plan - essentially a shopping list for new equipment - plus a new defence industry policy.

Past capability plans have set out acquisition prospects, but with no certainty the necessary funds would be there.

That guidance, combined with the government's commitment to return defence spending to two per cent of GDP within the decade, will improve industry confidence to plan for projects, including development of infrastructure, skills and capabilities for the future, Defence Minister Kevin Andrews said in April.

As one government insider put it: "The only way (for defence) is up."

The 2014-2015 budget took defence funding to $29.3 billion or 1.8 per cent of GDP - a six per cent increase.

Australian Strategic Policy Institute analyst Mark Thomson says the government has created a credible path to take defence funding to two per cent of GDP.

But it still faces a historical challenge. Of the previous six defence white papers just one - in 2000 under John Howard - delivered in full on its promises.

That came at the start of the resources boom which doesn't exist in 2015.

Dr Thomson says the government's two per cent promise was likely to be squeezed by falling revenues and a restive electorate.

"Every dollar extra spend on defence has to come from a deterioration in government service delivery somewhere else," he told a defence conference.

Otherwise it has to come from raised taxes.

"That a hard thing for any government to achieve."