Australia Unveils $53 Billion Defence Boost Amid Strategic Shift

Australia faces its most complex and threatening strategic circumstances since the end of World War II.
— Defence Minister Richard Marles

Overview: A Decade of Military Investment

The Australian federal government has released its 2026 National Defence Strategy (NDS) alongside a 10-year spending plan that increases defence expenditure by $53 billion over the next decade. This includes $14 billion in additional spending over the next four years.

The government states this will bring defence spending to approximately 3% of GDP by 2033 when measured using NATO's methodology—a change in calculation that has drawn sharp criticism from opposition parties and analysts.

Where the Money Goes

Major Allocations

Most additional spending is scheduled for later in the decade, with $8.7 billion planned for 2033–34 and $9.8 billion for 2034–35.

Service Priorities Shift

The new plan marks a dramatic reallocation of resources:

• Navy: 41% of expenditure (up from 28% in 2020)
• Army: 17% (down from 20%)
• Air Force: 14% (down from 24%)

This represents the largest-ever peacetime rebalancing toward naval capabilities, driven by the AUKUS agreement and Indo-Pacific strategy.

Controversy Over Measurement Methodology

Historically, Australian defence spending has been measured at approximately 2% of GDP, with previous forecasts predicting a rise to 2.33% by 2033.

The government now uses NATO's methodology for international comparisons, which includes:

• Pensions for retired ADF members
• Defence-related funding in other portfolios
• Housing subsidies for defence personnel

Under this new calculation, defence spending rises from 2.8% currently to 3% in 2033.

Defence economist Marcus Hellyer estimated that using traditional methods, Australia would spend just 2.47% of GDP on defence by 2033.

"Accounting tricks do not make our country safer."
— Opposition defence spokesman James Paterson

The United States has reportedly urged Australia to reach 3.5% of GDP, with US Defence Secretary Pete Hegseth conveying this expectation to Minister Marles last year.

Funding Sources: Cuts and Asset Sales

Reprioritizations

The government has flagged $5 billion in cuts from existing defence programs over four years, and $10 billion over a decade.

Projects to be cut, reduced, or delayed include:

• The air force's fleet of 10 C-27J Spartan aircraft (described as expensive to maintain)
• Reduced acquisitions of infantry fighting vehicles and self-propelled Howitzers (announced three years ago)

Defence Real Estate Divestment

The government is selling 67 to 68 Department of Defence properties nationwide to generate up to $3 billion in revenue, saving approximately $100 million annually in maintenance costs.

Key sites for sale include:

Strong heritage protections are in place. We are not planning to bulldoze those heritage locations.
— Assistant Defence Minister Peter Khalil

Community groups, veteran organisations, and heritage advocates have expressed concerns. Former Prime Minister Paul Keating criticised the plan, arguing Defence holds the properties in "virtual trust" for the nation.

A Senate inquiry is examining the proposed sale, with over 100 submissions received. The City of Melbourne has proposed a draft master plan prioritising heritage preservation, public open space, a school, and housing.

Strategic Context and Minister's Remarks

The previous NDS (2024) identified increasing strategic competition between the US and China and military build-up in the Indo-Pacific. Recent conflicts in the Middle East and Ukraine have influenced the new strategy.

Defence Minister Richard Marles, in excerpts from his speech at the strategy's release, stated:

"International norms that once constrained the use of force and military coercion continue to erode. More countries are engaged in conflict today than at any time since the end of World War II."

Marles emphasised that military spending decisions result from cabinet debates, not from "think tanks, or former generals, or washed-up bureaucrats." He warned that Australia stands "at the foothills of a new nuclear arms race" in the Indo-Pacific, citing China's increased military spending and enforcement of contested territorial claims.

The global rules-based order is under extreme pressure.

Political Reactions

Opposition defence spokesman James Paterson accused the government of using "accounting tricks" and "an entirely new measure" to calculate spending, arguing that cutting capabilities in one area to prioritise another does not enhance national security.

Greens defence spokesman David Shoebridge stated the strategy "is doubling down on the US alliance" and that budget increases are "primarily delivered by an accounting trick where defence pensions get rebadged as defence spending." He noted most increases go to the AUKUS submarine program.

Retired senior army officer Ian Langford also accused the government of using "accounting tricks" to inflate figures.

Australian Strategic Policy Institute executive director Justin Bassi praised Marles for rejecting claims that international rules are dead.

At a Glance

• Total increase: $53 billion over 10 years
• Spending target: 3% of GDP by 2033 (NATO methodology)
• Navy gets the largest share: 41% of expenditure
• Nuclear submarines cost: $71–96 billion over decade
• Property sales expected: $3 billion from 67–68 sites
• Program cuts identified: $5 billion over four years, $10 billion over ten