Plans to build new armoured vehicles in Australia for the army will be gutted to pay for new missiles and stronger cybersecurity after a major military review uncovered a $42 billion budget hole and warned of “difficult” trade-offs for defence spending.

The Defence Strategic Review, which the Albanese government will release on Monday, has uncovered significant underfunding of key defence projects, including $14.9 billion being clawed back from the budget over the next decade.