Defence spend a long-term turning point for budget

The call by Elbridge Colby, Donald Trump’s nominee for under secretary of defence for policy, for a big lift in Australian defence spending from 2 per cent of GDP to at least 3 per cent was no surprise. The Australian’s defence and strategic policy writers have been predicting such advice from the US since the President’s election victory in November 2024. As Mr Colby said in a written answer to the US Senate committee confirming his appointment: “Australia is currently well below the 3 per cent level advocated for NATO, by NATO secretary-general (Mark) Rutte, and Canberra faces a far more powerful challenge in China.”

While it is the first time a senior US official has targeted Australia’s $55.7bn defence budget as inadequate, it is no bad thing given the need to deter Chinese aggression across the Asia-Pacific. The Albanese government’s response has been disorganised. Anthony Albanese sounded lukewarm: “We determine our policy,’’ he said on Thursday. Defence Minister Richard Marles, speaking at The Australian’s Defending Australia summit in Adelaide on Wednesday, said the government had begun an “ongoing conversation” with the Trump administration about lifting spending. As he said, it was “completely reasonable that America is asking its friends and allies around the world to do more” to safeguard their security. But Jim Chalmers pushed back, saying: “We do pay our own way on defence.” Mr Trump has called on European nations to lift their defence spending to 5 per cent of GDP. Under Labor, defence spending is forecast to be 2.03 per cent this financial year, 2.02 in 2026-27 and 2.12 in 2027-28, eventually rising to 2.3 per cent in 2033-34 – about the time Australia is scheduled to receive its first Virginia-class nuclear-powered submarine from the US.

On that score, Mr Colby sounded a note of caution. He warned that the US faced “a very difficult problem” in meeting its pledge to supply three Virginia-class boats to Australia because of its slower-than-expected submarine production. That is problematic. Extending the operations of the nation’s six Collins-class submarines for another decade is high-risk, as Mr Marles says. In December 2024 the vessels were listed by Defence as a “product of concern” to enable extra oversight.

The Adelaide defence summit coincided with the National People’s Congress in Beijing, at which 5000 delegates set policy goals for the year ahead, including ramping up Chinese defence spending amid a “severe external environment”, as Will Glasgow reports. On Wednesday, Premier Li Qiang said President Xi Jinping’s government would “step up military training and combat readiness, speed up the development of new combat capabilities, and establish a framework of modern military theories with Chinese characteristics so as to firmly safeguard China’s sovereignty, security and development interests”. For no good reason other than to demonstrate the strength of the People’s Liberation Army and send a message to Australia, the trio of Chinese warships circumnavigating our continent have passed Perth and are travelling north along the West Australian coast.

Necessary as it is as the strategic outlook worsens, a substantial rise in defence spending will have serious budgetary consequences, especially for the care economy that has expanded to meet demand for better aged care, health, childcare and disability services. The Prime Minister and Peter Dutton must address the issue during the election campaign. They need to be upfront about why the nation can no longer get away with minimal defence spending. Voters are well aware of growing Chinese aggression in our region. They have also watched in dismay as Donald Trump and JD Vance have up-ended 80 years of post-World War II security understandings, abandoning Ukraine in its battle for survival against Russian tyrant Vladimir Putin. The latest US move, halting intelligence-sharing with Kyiv, is designed to ratchet up pressure on Ukrainian President Volodymyr Zelensky to co-operate in peace talks with Russia and reach agreement with the US on critical minerals.

The Opposition Leader needs to explain how the Coalition would pay for the additional F-35 fighter jets that would boost the RAAF’s fleet to a respectable 100, providing valuable firepower. Such challenges also make productivity gains to grow the economy and increase revenue more important than ever. Given the indifference of the Greens and some teals to defence, the situation makes the election of a minority government relying on crossbench support even more untenable.

Extra spending would be a challenge for the defence bureaucracy. In the short term the Australian Defence Force needs to be more nimble in addressing gaps in the nation’s defences. The lack of killer drones and counter-drone capability, as Cameron Stewart wrote in 2024, “has become the most serious and embarrassing hole in our national defence and one that needs ­urgent government attention”. Armed drones are at the forefront of the world’s conflicts, from the Middle East to Ukraine. Worth anything from several thousand to millions of dollars, they can inflict enormous, disproportionate damage. Greater investment in missiles, which can be acquired more rapidly than major projects, is essential. As Ben Packham reported in December, Defence’s biggest projects were running a combined 36 years late. These included the Hunter-class frigates (because of technical, workforce and cost problems), Joint Strike Fighters and combat reconnaissance vehicles.

“Delivering major projects on schedule continues to present challenges for Defence,” the Australian National Audit Office warned. In addition to increased defence spending, Defence leaders need to ensure their responses to current circumstances are as efficient as possible.