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Australian Government Plans $53 Billion Defence Increase, Partially Funded by Property Sales

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Australia Unveils $53 Billion Defence Spending Boost, Funded by Major Property Sell-Off

The Australian federal government has announced a $53 billion increase in defence spending over the next decade, partially funded by the sale of 67 Department of Defence properties.

The divestment of the defence estate, including several historically significant sites, is projected to generate up to $3 billion, which will be reinvested into the Australian Defence Force (ADF) to fund strategic priorities, including the AUKUS nuclear submarine program and upgrades to northern bases.

Defence Spending Increase and New Strategy

Spending Plan

On April 16, 2026, the government released its 2026 National Defence Strategy (NDS) and a 10-year spending plan. The plan outlines an additional $53 billion in defence spending over the next decade, which includes a $14 billion increase over the next four years.

To fund new priorities, the government will cut $5 billion from existing defence programs over the next four years, and $10 billion over a decade.

Allocations and Projects

The increased spending accounts for previously announced projects, including:

  • $12 billion for upgrades to the Henderson shipyards in Western Australia, which will be used to dock and maintain nuclear-powered submarines under the AUKUS agreement and construct Mogami-class frigates.
  • Between $2 billion and $5 billion for investments in drone technology.
  • Up to $36 billion for local missile manufacturing over the next decade, increased from a $21 billion estimate.
  • Up to $30 billion for missile defence systems over the next decade, increased from an $18 billion estimate in 2014.
  • Between $71 billion and $96 billion for the nuclear-powered submarine program under AUKUS over the next decade.

Service Funding Allocation

According to the spending plan, 41% of defence spending over the next decade will be allocated to the navy, 17% to the army, and 14% to the air force. This compares to 2020 estimates of 28% for maritime defence, 24% for the air force, and 20% for the army.

Spending Timeline

Most of the additional spending is scheduled for later in the decade, including $8.7 billion in 2033-34 and $9.8 billion in 2034-35.

Funding Sources and Measurement Methodology

Funding Sources

The government stated that not all increased spending will appear in the upcoming budget. Funding will come from multiple sources:

  • Larger defence appropriations
  • Sale of high-value defence real estate
  • "Alternative financing," which may include taking equity stakes in companies or investing in government-business enterprises
  • "Reprioritisations" within existing defence plans, where specific projects will be cut, reduced, or delayed (specific details have not been provided)

The government has stated it is pursuing "every avenue of increasing defence capability quickly: mostly through bigger defence appropriations but also through accessing private capital."

Program Reductions

Capabilities being reduced to free up funds include the air force's fleet of 10 C-27J Spartan aircraft, which sources described as expensive to maintain. The opposition Coalition has argued that defence capabilities should not be cut in one area to prioritize another.

GDP Measurement Methodology

The government projects that defence spending will reach approximately 3% of GDP by 2033 when measured using NATO's methodology.

This methodology includes defence-adjacent spending such as:

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

Australian defence spending has been typically measured at approximately 2% of GDP under previous methods, with forecasts indicating a rise to 2.33% by 2033. Using NATO's methodology, the government reports current spending at 2.8% of GDP, projected to rise to 3% in 2033. Defence economist Marcus Hellyer estimated that using traditional calculation methods, Australia would spend 2.47% of GDP on defence by 2033.

International Context

The United States has encouraged Australia to increase its defence spending as a share of GDP. At a meeting in Singapore last year, US Defense Secretary Pete Hegseth told Defence Minister Richard Marles that the US wanted to see Australian defence spending reach 3.5% of GDP. The US has placed similar pressure on other NATO allies.

Strategic Context

Strategic Assessment

According to excerpts from a speech delivered by Defence Minister Richard Marles, the 2026 NDS "affirms that Australia faces its most complex and threatening strategic circumstances since the end of World War II." The strategy states that "international norms that once constrained the use of force and military coercion continue to erode" and that "more countries are engaged in conflict today than at any time since the end of World War II."

Influencing Factors

The 2024 NDS warned of increasing strategic competition between the United States and China and an unprecedented military build-up in the Indo-Pacific. Recent conflicts, including those in the Middle East and Ukraine, have influenced the new strategy. Minister Marles cited China's increased military spending and its enforcement of contested territorial claims in the South and East China Seas as examples of pressure on what he described as the "global rules-based order."

New Capabilities

The government stated it will accelerate the introduction of air and missile defence capabilities, including a new medium-range, ground-based air defence system, with the program set to commence as a priority from 2026.

Government and Political Statements

Government Position

Defence Minister Richard Marles stated that the strategy responds to "intensifying" global risks. He said military spending decisions result from cabinet debates, not external commentary from "think tanks, or former generals, or washed-up bureaucrats."

Marles argued that Australia needs to defend the "global rules-based order," which he said is "under extreme pressure" but not extinct. He stated the government is seeking to "compare apples with apples" by using the same measurement standards as NATO allies.

Opposition and Criticism

  • Opposition defence spokesman James Paterson accused the government of using "accounting tricks" and "an entirely new measure" of Australia's defence spending as a proportion of GDP, stating that "accounting tricks do not make our country safer."
  • Greens defence spokesman David Shoebridge said the strategy "is doubling down on the US alliance" while ignoring evidence of the US "actively trashing international law." He stated that budget increases are "primarily delivered by an accounting trick where defense pensions get rebadged as defence spending."
  • Retired senior army officer Ian Langford accused the government of using "accounting tricks" to inflate defence spending figures.
  • Australian Strategic Policy Institute executive director Justin Bassi praised Marles for rejecting claims that "rules are dead."

Defence Property Divestment

Overview

In conjunction with the defence spending announcement, the federal government is proceeding with plans to sell 67 Department of Defence properties nationwide. An independent audit of the defence estate, conducted by Jan Mason and Jim Miller, identified that significant portions of the department's 3-million-hectare estate were no longer necessary, and many facilities had "already deteriorated beyond the point of economical repair."

Financial Projections

The government expects to generate approximately $3 billion from the sales. The majority of funds are expected from the sale of 26 large metropolitan sites, with an estimated adjusted market value between $2.2 billion and $2.4 billion. The three Victoria Barracks properties (Sydney, Melbourne, Brisbane) could generate $1.3 billion. Proceeds will be reinvested into the military.

Cost Savings and Expenses

The divestment program is anticipated to save the Department of Defence up to $100 million annually in maintenance costs for vacated sites. The process is projected to incur up to $1.2 billion in costs related to site sales, staff relocation, and contamination remediation. If metropolitan properties were retained, an estimated $3 billion investment may be required over the decade for remediation and deferred capital works.

Key Sites Identified for Sale

New South Wales:

  • Victoria Barracks Sydney (Paddington): Built between 1841 and 1849, operating at approximately one-third capacity. Maintaining the site is projected to cost nearly $195 million over the next decade.
  • HMAS Penguin (Mosman, Sydney Harbour): Royal Australian Navy base housing diving and navy medical schools.
  • Spectacle Island (Sydney Harbour): Heritage-listed island, vacant, with over $4 million in maintenance costs since 2023.

Victoria:

  • Victoria Barracks Melbourne (Southbank): Completed in 1872, 56% utilization rate.
  • RAAF Williams base (Point Cook): Birthplace of the RAAF, 112 years old.
  • Fort Queenscliff: Used for cadet training and museum.
  • Other Victorian sites: 16 sites including training facilities in Carlton, Sandringham, St Kilda, Geelong, and Latchford Barracks at Bonegilla, as well as golf courses at HMAS Cerberus and Swan Island.

Queensland:

  • Victoria Barracks Brisbane (Petrie Terrace): Nearly half empty.

Tasmania:

  • Derwent Barracks (Dowsing Point, Hobart): 31-hectare site.

Derwent Barracks Redevelopment

The Tasmanian and federal governments announced a redevelopment agreement to build up to 1,000 homes on the Derwent Barracks site. The proposal includes social, affordable, and private housing, as well as open spaces, amenities, and community infrastructure. The 20 full-time defence personnel, reservists, and cadets currently at the site will relocate, mostly to Anglesea Barracks, a process expected to take at least 12 months.

Sales Process

Most sites will be handed to the Department of Finance for tender. The government has not disclosed individual valuations to avoid diminishing commercial advantage. Complex sites like Victoria Barracks may take up to two years to be ready for sale; others could go to market later this year. The divestment is expected to be an ongoing process for several years.

Heritage Protections

The government has committed to managing heritage obligations as a condition of sale for sites with heritage listings, including Victoria Barracks, RAAF Williams-Point Cook, and Fort Queenscliff. Assistant Defence Minister Peter Khalil stated, "We are not going to bulldoze those heritage locations." Arrangements to retain existing museums will also be explored.

Community and Stakeholder Concerns

A Senate inquiry is examining the proposed sale of Defence assets, with more than 100 submissions received and public hearings ongoing. Concerns raised include:

  • Heritage preservation: Groups including the National Trust of Australia have campaigned for Commonwealth ownership of heritage sites.
  • Affordable housing: Community Housing Industry Association Victoria has advocated for dedicating 20% of suitable sites to social housing.
  • Public access: Minister Khalil stated the sale aims to enhance public access to currently gated properties.
  • Heritage site viability: RSL president Peter Tinley raised concerns about the commercial viability of some heritage sites and the potential displacement of approximately 2,600 cadets.
  • Planning: The Planning Institute of Australia urged strategic planning before divestment to ensure public interest.

Melbourne Council Master Plan

The City of Melbourne has proposed a draft master plan for the Victoria Barracks site on St Kilda Road. The 5.7-hectare heritage-listed site's plan prioritizes preserving heritage, public open space, a prep-to-year-12 school, housing, and community arts and cultural centres. A spokesman for the Department of Education stated the area's education needs are met by existing schools, with no plans for an additional school in Southbank.

Strategic Rationale

The divestment aligns with the 2023 Defence Strategic Review, which emphasized the need to invest in northern and western bases, including HMAS Stirling in Rockingham and a network of bases from Cocos Island to Tindal in Katherine. An $8 billion redevelopment of HMAS Stirling is underway to support the submarine rotation force. The audit described the northern network of bases as "critical to enhancing the preparedness and capacity of the ADF and co-operation with international partners," particularly the United States and Singapore.