Australia’s defence budget has come under scrutiny, with critics arguing that it fails to align with the growing security challenges the nation faces. Rising geopolitical tensions in the Indo-Pacific region, particularly with the assertiveness of major powers like China, have highlighted vulnerabilities in Australia’s defence posture.
While recent investments in submarines, cyber capabilities, and missile systems signal progress, some experts contend that the scale of funding remains insufficient to address emerging threats. In a rapidly evolving strategic environment, Australia’s reliance on alliances, such as the AUKUS partnership and its close relationship with the United States, underscores the need for robust domestic defence capabilities.
The question remains whether Australia is adequately prepared for potential conflicts or disruptions. A comprehensive review of spending priorities, force readiness, and technological advancements could be necessary to ensure the nation’s security in the years ahead.
When Australian Treasurer Jim Chalmers stood at the dispatch box this evening to announce the 2025–26 Budget, he confirmed our worst fears about the government’s commitment to resourcing the Defence budget commensurate with the dangers Australia now faces.
A day earlier, Deputy Prime Minister and Defence Minister Richard Marles had advised that the government’s sole Defence initiative for the 2025–26 budget cycle would be to bring forward a paltry $1 billion from the 2028–29 financial year, shared across 2026–27 and 2027–28. So, the much vaunted ‘generational investment in Australia’s Defence’ has been put off for a few more years, at least.
This marginal reprofiling of funds ($900 million additional in 2026-27 and $237 million additional in 2027-28 – so, in fact a little more than $1 billion) has been applied to submarine and missile capabilities, which continue to take up an expanded amount of defence capital expenditure
Consolidated funding for Defence, the Australian Signals Directorate and the Australian Submarine Agency in 2025–26 is estimated to be $58,988.7 million. It’s a nominal increase of $2,380.5 million (4.2 percent) over expected 2024–25 spending. Adjusting for expected inflation, as expressed by the 1.0 percent GDP deflator, the real increase will be 3.2 percent.
And to our considerable frustration, a detailed reading of the defence budget highlights that the government continues to pay only lip service to the readiness and sustainability of the current force-in-being, with the largest spending increases on capability sustainment tied to the F-35 Lightning force ($190 million) and Collins-class submarines ($235 million). While $133 million is allocated to sustainment of a new Defence Logistics program, there is little to no change overall to sustainment funding, usage and workforce from last year’s budget.
As we noted in The cost of Defence: ASPI Defence budget brief 2024–2025, the urgency of our current security environment (eloquently expressed in the independent Defence Strategic Review in 2023, confirmed by this government in the National Defence Strategy (NDS) in 2024, and made manifest by the inability to properly track the Chinese naval flotilla’s circumnavigation of Australia just weeks ago) is not being matched by resources from the public coffers.
There are four possible reasons why the government continues to stint on resources that match the threat Australia faces.
Firstly, it may not really believe that the threat is as great as it spelt itself out in the NDS. The rhetoric of Australia ‘facing the most challenging strategic environment since the Second World War’ may conceivably have been used solely as a means of mobilising some action within the government but without any real concern that Australia was becoming increasingly vulnerable.
This would certainly be backed up by this government’s actions: a focus on military capability spending almost entirely as additions to the order of battle well into the 2030s and in the 2040s, while continuing to underspend on the readiness and sustainability of current forces.
A second possible explanation is that the government may not yet trust the Department of Defence’s ability to spend more. Marles has certainly been critical of Defence, claiming that it lacked the culture of excellence necessary to deliver on the government’s agenda.
The NDS speaks to the need for both strategic and enterprise reform of the Defence organisation, and for the organisation to become fit-for-purpose if it is to gain access to the resources needed to build the force set out in the 2024 Integrated Investment Program, the long-term spending plan. This would not be the first government to hold back on funding defence until it actually sees reform resulting in a more effective and efficient delivery of Defence’s outputs.
Thirdly, the government perhaps does not want to be seen responding to the Trump administration’s call for allies to increase defence spending. There has certainly been a huge spike in anti-US, anti-AUKUS commentary since the Trump administration came to office in January.
Fourthly, the government may not believe that the politics of additional funding to Defence make sense less than two months before the election due by May. At a time when average Australians are struggling with cost-of-living challenges, and this pre-election budget seeks to allay concerns within the electorate that the Albanese government has not done enough to meet its previous election commitments to making Australians better off, funding Defence may not be seen as an election winning strategy. A February Ipsos poll shows defence being quite far down the list of concerns that face Australians.
The 2025–26 budget is, sadly, an opportunity lost. In failing to adequately fund defence, the government has lost the opportunity for at least one year to convince our interlocutors in the US that Australia is doing enough to build up its forces. As defence funding will reach only 2.33 percent of GDP in 2033–34, we are still a far from the expectation of the nominated under secretary of defence for policy, Elbridge Colby: that we will spend at least 3 percent of GDP on defence.
The budget is also a lost opportunity for Australian industry, which is becoming increasingly frustrated at slow defence procurement. More and more companies are abandoning the defence market due to the risk averse, overly bureaucratic and delayed or abandoned project cycles they are forced to deal with. Without market signals that Defence is seriously investing in Australian industry and is committed to building the Australian national support and industrial base it needs to deliver capability, we stand to lose considerable expertise, workforce and sovereign industrial capability, that can never be replaced.
And finally, the budget is a lost opportunity for Australia’s defence and security. Since the 2020 Defence Update, successive Australian governments have warned that the security environment facing Australia is worsening exponentially. Recent events have demonstrated just how fragile peace and stability is and highlighted the need for Australia to have a force-in-being that is prepared and ready to defend Australia. The ministerial foreword to the NDS started with the axiom that there was no ‘greater responsibility for the Government than defending Australia’.
The failure of this year’s budget to meet that responsibility will make all Australians less secure.
