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How much?
The Australian Government’s decision to pre-announce a significant uplift in defence spending ahead of the 2026 Federal Budget shows its priority status on the wish list.
The recently released 2026 National Defence Strategy and the accompanying Integrated Investment Program attempts to demonstrate that Australia is progressing towards focussed and sustained long-term defence investment, driven not by the political electoral cycles but by our sovereignty sustaining needs in an escalating global security landscape.
At the launch of the 2026 National Defence Strategy, Federal Minister for Defence, and Deputy Prime Minister, Richard Marles, highlighted that “we now live in a world where more countries are engaged in conflict than any time since the end of World War II”.
In response to this sobering observation and the US President’s unsubtle encouragement of allies to ‘step up to the plate’ on defence spending, the announcement commits an additional $14 billion over four years and $53 billion over the next decade. In total, since the 2024 National Defence Strategy, funding will increase by $30 billion over four years and $117 billion over the decade to 2035-36, taking total defence portfolio spend now to an ever-growing and eye-watering $887 billion over that ten-year period!
This is significant! By the early 2030s, Australia’s defence spending is projected to reach around 3 per cent of GDP. This is in the territory of Cold War era levels and well above Australia’s historical norms.
How did we get here?
The scale and timing of this uplift reflects a change in strategic assumptions, largely driven by the fast-changing world order of things. The 2026 National Defence Strategy frames the environment as the most complex and dangerous since the Second World War, shaped by accelerating great-power competition (think China,
Russia and the US), the erosion of international norms and the growing risk of conflict spilling our way.
Key lessons have been drawn from Russia’s invasion of Ukraine and ongoing conflicts in the Middle East. These wars have highlighted the speed at which advanced munitions are consumed, the vulnerability of global supply chains and the role of drones, missiles and autonomous systems. It would be naïve for Australia to assume that allies will always have surplus capability available in a crisis! They won’t!
Also, this is where geopolitics intersects with uncomfortable reality. While the United States alliance remains vital and is explicitly reaffirmed as the cornerstone of Australia’s defence, the documents also reflect a quieter recalibration. Recent “shoot-first” US actions in Iran, inconsistent and wavering political support for Ukraine’s defence against Russian aggression, and the unpredictability of the current US presidency have reinforced the need for Australia to be more self-reliant and to diversify its partnerships.
The answer is certainly not distancing from the US but reducing dependence through deeper regional alliances, stronger sovereign capability and a defence industrial supply-chain that can scale rapidly in crisis.
Bang for buck? What do we get?
The Integrated Investment Program shows where the money will flow. Around $425 billion of the decade-long funding is allocated to capability investment, with a primary focus on deterrence through denial, making it harder for any unfriendly state to project against Australia.
Major investment areas include:
- Undersea warfare, (strongly featuring AUKUS nuclear-powered submarines)
- Maritime strike and naval shipbuilding
- Long-range missiles and guided weapons
- Integrated air and missile defence
- Autonomous systems, cyber and space capabilities
- Northern base infrastructure, logistics and fuel resilience
Around $15 billion over the decade will be delivered through alternative financing mechanisms, including off-budget investment vehicles and private capital, reflecting the extra lengths government is going to in order to fund their desired outcomes.
A silver lining? Is there any good to come from this for local business?
Whilst building for defence and warfare is not a joyous topic, the silver lining may well be for local businesses in Australia. This spending uplift has the potential of being transformational for Australian industry.
Defence spending at this scale is no longer just about national security, it is now aspiring to be industrial policy. Advanced manufacturing, shipbuilding, aerospace, cyber, space and dual-use technology sectors are all expected to benefit from the long-term demand this kind of government spending creates.
The continuous naval shipbuilding programs in Western Australia and South Australia alone are touted to create and support tens of thousands of skilled jobs over decades. The establishment and consolidation of the Henderson Defence Precinct expansion of Osborne Naval Shipyard in these states indicate Australia’s ambitions to be a builder and sustainer of complex Defence assets.
In terms of advanced industry, it is expected that there will be further growth in guided weapons and explosives manufacturing, with domestic production of missiles and munitions reducing reliance on overseas suppliers while creating export opportunities.
In the same vein, uncrewed and autonomous development programs like Ghost Bat for air and Ghost Shark for underwater show how Australian-designed capabilities can move from niche projects to attracting broad
global interest and demand.
Smaller defence contractors and advanced manufacturers also stand to gain as supply chains expand and primes are required to source more local products and services. Broader overflow benefits to skills development, engineering, robotics, digital systems and materials science are also likely throughout the economy.
Defence readiness by the local supply-chain, to support the cause and benefit from this spending, will be the true challenge for government. There are still far too many barriers to entry, both real and perceived, by the non-prime market. This hinders the pace of uptake needed in the current plans.
This will require governments to ‘walk the talk’ and ensure resourcing of such processes as security certification assessments and clearances, as one example, is appropriate to need or unintended self-sabotage on the timeline could well be the result.
In short…
Pre-announcing these measures ahead of the 2026 Budget attempted to send a clear signal that Australia is planning for the 2030s now! It is bipartisan-seeking policy aimed at achieving long-term investment by Defence, industry and the workforce.
In a world where alliances are essential, but increasingly unpredictable, Australia is seeking to insure itself.
The government will tell us that the 2026 Defence uplift is not about preparing for war but about making conflict less likely through proactive dissuasion. It seeks to achieve this by setting up Australia to have strong, self-reliant capability, supported by a strong local industrial supply chain, but backed by a diverse global network of partners.
The spending increase is as much an economic and industrial strategy as it is a defence one and its impact should be felt well beyond the Defence portfolio.
