The claim

"Under Labor, defence spending as a share of GDP dropped to its lowest level since 1938," Prime Minister Malcolm Turnbull said at a doorstop interview on February 24, ahead of the release of the Government's Defence White Paper.

Did defence spending under the former Labor government drop to its lowest level since 1938? ABC Fact Check investigates.

The verdict

Mr Turnbull's claim is not the full story.

In the 1938-39 financial year, defence spending was 1.5 per cent of GDP.

Since then, it has been at least 1.68 per cent of GDP in all but two years, on the most current available estimates from the Department of Defence and the ABS at the time of Mr Turnbull's claim - released in December 2015.

Under Labor in 2012-13, spending was 1.60 per cent of GDP, the lowest it has been since 1938.

Under the Howard government, defence spending was 1.62 per cent — only 0.02 per cent higher — in 2002-03.

But Mr Turnbull did not mention that defence spending also rose to 1.93 per cent of GDP under Labor in 2009-10, which was higher than at any time during the former Howard government and higher than it has been under the current Coalition Government.

It is the highest figure since 1994-95, when Paul Keating was prime minister and defence spending as a share of GDP was 1.96 per cent.

Whilst a share of GDP is commonly used by governments of all stripes to measure defence spending, GDP estimates are subject to quarterly fluctuations due to new economic data becoming available, whilst defence spending remains fixed after its final determination.

This can arbitrarily affect the appearance of defence spending in any given year, and there is no way to predict whether the figures for 2002-03 and 2012-13 will be estimated as higher or lower than each other in future releases from the ABS, as more information comes to light which could alter GDP estimates.

The Government itself has a policy of decoupling defence spending from GDP, as evidenced in the 2016 Defence White Paper, to address the problem of fluctuations due to revisions of GDP estimates.

Defence spending as a percentage of GDP from 1901-02 to 2013-14. ( ABC Fact Check )

Defence spending and GDP

The Australian Bureau of Statistics defines Gross Domestic Product as "the total market value of goods and services produced in Australia after deducting the cost of goods and services used up (intermediate consumption) in the process of production, but before deducting allowances for the consumption of fixed capital (depreciation)," and says that "the performance of the Australian economy is represented in the national accounts by such measures as growth in GDP."

The issue of defence spending as a proportion of GDP has been dealt with previously, when Fact Check tested a claim from former Palmer United Senator Jacqui Lambie.

Senator Lambie claimed in 2014 that defence spending under the current Coalition Government had dropped to its lowest level as a share of GDP since before World War II.

Fact Check used historical data from the ABS and data provided by the Department of Defence, based on treasury estimates of GDP, to compile a year by year summary of defence spending as a share of GDP.

Defence spending in 1938-39, the last financial year before World War II, was 1.5 per cent of GDP, whilst defence spending in 2013-14 was 1.71 per cent of GDP and was projected to be higher in 2014-15, so Senator Lambie was found to be incorrect.

Labor's record

Since Fact Check tested Senator Lambie's claim, GDP figures have been revised.

In April 2016 the Department of Defence provided Fact Check with a new list of defence spending in relation to GDP since 2001-02, with GDP estimates calculated by the ABS.

This list contained different estimates for 2012-13, among other years, from the list it provided in 2014 for Senator Lambie's claim.

The Labor government came to power in the 2007-08 financial year, and left office at the beginning of 2013-14.

The lowest defence spending in any of these years was in 2012-13, at 1.60 per cent of GDP.

However, in 2002-03, spending under the Howard government reached 1.62 per cent of GDP, which is only 0.02 per cent higher.

These two instances represent the lowest defence spending since it was 1.5 per cent of GDP in 1938-39.

These years stand out as unusual — the lowest level that defence spending has fallen outside of these years was in 2013-14, when it was 1.68 per cent of a revised estimate for GDP.

Furthermore, in making the claim, Mr Turnbull did not mention that defence spending also rose to 1.93 per cent of GDP under Labor in 2009-10, which was higher than at any time during the former Howard government and higher than it has been under the current Coalition Government.

It is the highest figure since 1994-95, when Paul Keating was prime minister and defence spending as a share of GDP was 1.96 per cent.

Gross Domestic Product and defence spending

Politicians commonly talk about defence spending as a percentage of GDP, but there are problems with this measure, as noted by independent think tank the Australian Strategic Policy Institute (ASPI) in its Defence Budget Brief for 2013-14.

"Of course, GDP share is a poor measure of the adequacy of defence spending; it's been trending down since the end of our involvement in Vietnam as the economy grew. What really matters is whether the government has committed enough money to deliver the defence force it says we need."

In 2013, the Reserve Bank of Australia noted in its publication GDP Revisions: Measurement and Implications, that "economic data are difficult to measure and subject to revision as more information is obtained ... As a result, early estimates of many economic aggregates may differ from subsequent, more informed estimates".

GDP estimates for Australia are updated and published quarterly by the ABS, and GDP estimates for earlier years are subject to fluctuations each quarter.

Defence spending, on the other hand, is not revised beyond the final budget outcome for that year.

As a result, spending levels remain constant in those years, but fluctuations in the estimations of GDP can cause defence spending as a share of GDP for any year to change from quarter to quarter, which can make the government responsible for spending in that year appear better or worse, irrespective of any policy decision.

Estimates of GDP for 2012-13 alone were updated no less than six times by the ABS in the 10 GDP estimates it released between the initial one in 2013 and the release available at the time Mr Turnbull made his claim.

Those updates led to defence spending as a proportion of GDP for 2012-13 ranging from 1.60 per cent to 1.62 per cent.

In the first release that GDP estimates for 2012-13 were available, defence spending as a share of GDP was higher for 2012-13 than it was for 2002-2003.

At that time, it could have been said that under the Howard government, defence spending as a share of GDP dropped to its lowest level since 1938.

There is no way to predict whether the figures for 2002-03 and 2012-13 will be estimated as higher or lower in future releases, as more information comes to light which could alter GDP estimates.

The Government itself sought to address the problem in its 2016 Defence White Paper, which set out defence funding for the next 10 years, with a goal of 2 per cent of GDP by 2023-24: "The 10-year funding model set out in this Defence White Paper will not be subject to any further adjustments as a result of changes in Australia's GDP growth estimates."

"The long-term nature of defence planning means budget certainty is essential to achieve the Government's objective of strengthening Australia's defence capabilities in a more complex strategic environment," the document said.

Sources

Editor's note (April 19, 2016): After this fact check was published, the Department of Defence advised that its historical numbers for GDP had changed since it provided Fact Check with data for the check of Senator Lambie's 2014 claim. In 2014, the department advised spending for 2012-13 was 1.62 per cent of GDP. Based on the new GDP figure, the department has subsequently revised its calculation for that year to 1.60 per cent. The dollar value of defence spending that year has not been revised.

Fact Check has amended this fact check to include the revised calculation for 2012-13, and to add information regarding alterations in GDP estimates which are made periodically by the ABS, as well as contextual statistics regarding the latest estimates for other years outside 2002-03 and 2012-13.

These alterations do not change our verdict.