Warp speed: Defence spending to accelerate ahead of election battle

Defence spending increases are set to be fast-tracked in next week’s federal budget as the Albanese government moves to shore up its national security credentials ahead of the May election.

Donald Trump’s return to office and last month’s circumnavigation of Australia by a Chinese navy flotilla have focused attention on the need to increase the nation’s military capabilities, with defence spending emerging as a key election issue.

Opposition defence spokesman Andrew Hastie has canvassed increasing defence spending to 2.5 per cent of gross domestic product (GDP) by the end of the decade in a key election pitch that would add around $15 billion a year to the defence budget.

Deputy Prime Minister Richard Marles has announced $50 billion in increased defence spending over the next decade.Credit: Alex Ellinghausen

The Coalition could also announce a long-term aspiration to increase defence spending to 3 per cent of GDP in one option under consideration.

The Trump administration has called on Australia to lift defence spending to 3 per cent of GDP, but both major parties see such a dramatic increase as too costly in the near term as this year’s budget returns to deficit.

Canadian Prime Minister Mark Carney announced on Wednesday that his nation planned to spend $6.6 billion to partner with Australia on an Arctic radar system in what would be the biggest defence export deal in Australian history.

Sources familiar with the government’s budget planning said it would accelerate its current defence spending timeline to speed up military purchases and tackle complaints about the slow pace of growth.

Military experts criticised the government last year when it announced a $50 billion defence funding boost over the next decade, with only $5.7 billion to be spent over the next four years.

Marles, who is also defence minister, said the government had already announced “the biggest peacetime increase in our defence budget really since the end of the Second World War”.

“You only need to look at the headlines overseas to see how difficult the world is at the moment,” Marles told radio 4CA on Wednesday. “And what we need to do is make sure that we’re responding and building our own capability so that no matter what the circumstance, Australia is in a position to look after itself and be able to pursue its interests.”

Defence spending is projected to rise from 2.02 of GDP per cent currently to 2.33 per cent by 2034 under the government’s plan.

Defence economist Marcus Hellyer said a major investment in drones would probably feature prominently in any plan to ramp up defence expenditure as they could be acquired quickly.

Opposition Leader Peter Dutton will deliver a speech to the Lowy Institute on Thursday, where he will outline the Coalition’s foreign policy agenda.

Dutton could also address defence spending in his budget reply speech next week.

Prime Minister Anthony Albanese spoke to Carney on Tuesday night, their first conversation since the former central banker replaced Justin Trudeau as Canada’s prime minister last week.

The pair discussed Carney’s desire to develop a version of Australia’s Jindalee Operational Radar Network, an advanced wide-area surveillance system.

The agreement would easily exceed Australia’s biggest export contract to date, a $1 billion agreement announced last year to provide 100 Boxer heavy weapon carrier vehicles to the German army.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.