Defence Strategic Review will call for Army’s new fleet of infantry fighting vehicles to be slashed from 450 to 129 and self-­propelled howitzers cancelled

The Australian army faces deep cuts to planned armoured vehicle orders as a $42bn budget shortfall overshadows the Albanese government’s looming defence overhaul.

A High Mobility Artillery Rocket System (HIMARS) vehicle. Picture: Getty Images

The army faces deep cuts to planned armoured vehicle orders as a $42bn budget shortfall overshadows the Albanese government’s looming defence overhaul, which will fast-track new land-based missile systems to respond to heightened regional threats.

An unclassified version of the Defence Strategic Review, to be released on Monday, will warn that new ­capability requirements, sustainment and severe workforce pressures will require tough budget decisions.

It will call for the army’s new fleet of infantry fighting vehicles to be slashed from 450 to 129, and recommend plans for a second regiment of self-­propelled howitzers be cancelled.

The long-awaited review, led by former Labor defence minister Stephen Smith and former ­Defence Force chief Angus Houston, will herald the most significant overhaul of the nation’s defence posture in a generation.

Its recommendations, to be ­accepted by the government, will accelerate delivery of new missile capabilities to deter enemies at longer range, and expand the numbers of missiles and launchers to be acquired.

They include the HiMARS surface-to-surface rocket system used successfully in Ukraine, and a new land-based anti-ship ­missile capability that could be operated from the islands to Australia’s north in the event of a major conflict. The army will also get more landing craft sooner to strengthen its amphibious warfare capabilities.

The review’s release follows a major speech by Foreign Minister Penny Wong at the National Press Club this week, in which she warned China was modernising its military “at a pace and scale not seen in the world for nearly a ­century”, and that Australia “can’t just leave it to the US” to safeguard the region’s security.

The document will call for a new strategic risk calculus requiring more urgent preparations for conflict than under normal peacetime circumstances, and urging greater national self-reliance.

The review’s public version will include a chapter on “finances and resources”, which will reveal significant pressure on the ­defence budget as a result of “over-programming”, and transfers of funds outside the portfolio.

Programs will be delayed, scaled back or cancelled to ­reallocate funds to higher-priority capabilities, amid a 24 per cent shortfall in funding for promised defence capabilities over the next four years.

High Mobility Rocket Artillery System.

The review will put the size of the funding shortfall over the next decade – the period of greatest risk for a potential conflict between the US and China – at $42bn. That includes $7.9bn yet to be provided for the Australian Signals Directorate’s “REDSPICE” offensive cyber capabilities from 2025-26, $32bn for a planned domestic missile industry, and $1.9bn for advanced cyber capabilities under the AUKUS partnership.

The government will use the numbers to attack the Coalition’s record on national security.

“That is the legacy that those opposite have left us. It is literally all ­announcement and no delivery,” Defence Minister Richard Marles told parliament recently.

“It’s as if they thought they could walk onto the battlefield with a megaphone and announce our adversaries into submission.”

 

The document is expected to include chapters on national ­resilience, recruitment and the ADF’s readiness, and recommend a more sharply focused force tailored to deal with the most pressing strategic scenarios Australia could face in the region.

It’s understood it will also set out reforms for ­defence’s troubled procurement and sustainment arm, which will be required to be more nimble, ­reflecting heightened strategic risks.

The government is set to agree to all of the recommendations in the unclassified report, but some in the classified version will be rejected. The full cost of the review’s recommendations won’t be revealed until Defence has had time to analyse them.

Kongsberg Naval Strike Missile.

The smaller number of infantry fighting vehicles to be ­acquired will be used by single mechanised battalions, suggesting a reorganisation of the army’s multi-role brigades that brought together mechanised, light infantry and motorised infantry formations. Senior army figures will be disappointed at the reduced armoured vehicle order but the ­service will drive the development of the ADF’s land-based missile capabilities.

The infantry fighting vehicle cut will also weigh heavily on the short-listed bidders – South Korea’s Hanwha and Germany’s Rheinmetall – with the value of the contract to be significantly ­reduced from an original $18bn-$27bn. Hanwha, which is building the army’s Huntsman self-­propelled howitzers in Mr Marles’s electorate of Corio, will suffer a double blow, losing a potential order for an additional 45 of the vehicles. The report is expected to recommend accelerated acquisition of new sea mines, and may call for new corvette-style warships to act as fast missile boats.

The troubled Hunter-class frigate program could also face a cut to prioritise the acquisition of new guided missile platforms.

The full review is about 160 pages with 18 chapters and 108 recommendations. But the public version is believed to be about half the size and exclude many of the recommendations for national security reasons. It will be the most significant report on the nation’s defence posture since the Dibb Review in 1986, which called for a strategy of “denial” focusing on the protection of Australia and its immediate region.

The Smith and Houston review will also focus heavily on the region, recommending long-range capabilities to deliver what Mr Marles has termed “impactful projection”.

It follows last month’s AUKUS announcement setting out a multistage plan to acquire nuclear-powered submarines, starting with purchase of at least three US Virginia-class boats, followed by a new class of British-designed AUKUS subs.