## The Case for Both Sides of the Defense Funding Debate
Originally published on 14 July 2025.
The current debate on Defence funding, sparked by our 29 May report *The cost of Defence: ASPI Defence budget brief 2025-2026* and a subsequent US request for Australia to spend more, has swung between a call for increasing funding as a percentage of GDP and a call for making individual funding decisions on specific capabilities that the nation needs.
As demonstrated by *The Cost of Defence*, both sides of that debate are, actually, right. The report set out specific and necessary capability recommendations that would immediatly require spending of at least 3 percent of GDP. That ratio is not merely arbitrary; it has concrete justification.
The defence share of GDP is a widely adopted metric, a standardised way of comparing the effort a country puts into its defence. Indeed, the deputy prime minister highlighted in his launch of the 2024 national Defence Strategy and associated spending plan, the Integrated Investment Programme, that ‘Defence spending as a proportion of Gross Domestic Product [is] projected to increase to around 2.4 per cent by 2033-34’.
Expressing defence spending as a percentage of GDP shows how much of a nation’s overall productive capacity is allocated to defence. This provides context that absolute spending figures cannot. It also allows for meaningful comparisons between countries of different economic sizes. Without this normalisation,comparing the defence budgets of,say,the United States and Australia would be misleading. Targets for defence shares of GDP, such as NATO’s 5 percent, also help guide discussions about burden-sharing among allies.
Further,the GDP-share metric helps assess the affordability of defence spending for a given economy,and highlights the opportunity costs and trade-offs a nation makes between defence and othre public purposes. And tracking this percentage over time reveals shifts in a country’s strategic priorities or responses to changing security environments, in ways that absolute financial figures cannot.An increasing percentage indicates heightened perceived threats or a more assertive foreign policy, while a decrease suggests lessened threat perceptions or a shift in domestic priorities.But increasing defence spending to a percentage of GDP without a clear understanding of the strategic and capability needs of the military is strategically and economically unsound. Throwing money at defence without understanding what that money buys results in waste and inefficiency and undermines military strategy. It was because of this very reason that the Integrated Investment Program was created in 2016, providing a sensible strategic and financial approach to the key elements of spending needed to deliver and sustain Australia’s defence capabilities. maintaining a 10-year Integrated investment Program (the period for the initial version ending in 2026) facilitates whole-of-capability and whole-of-life decision making.
But we should also be careful to ensure that governments do not fixate on major capital acquisitions alone. Kit isn’t everything. The Australian Defence Force’s force structure and capability comprises *equipment* (such as ships,submarines,aircraft and armoured vehicles),*details and communications technology* systems (such as fixed and deployable networks and communications systems),*infrastructure* (such as airfields,port facilities and training areas),*trained people* (including ADF,Australian public service and contracted personnel) and the *defence industry and national support base* that delivers all of these elements.
The chief of the defence force, Admiral david Johnston, said in June that the department of Defence is fully expending its budget and that Defence i
Accelerating Defence Capabilities: Key Investment Areas
High lethality drones proven on today’s battlefield include the Switchblade 600 loitering munition (tens of thousands of dollars per unit) and first-person view drones (a few hundred to a few thousand dollars). More complex systems like the MQ-28A Ghost Bat, Ghost Shark UUV, Bluebottle USV, and Speartooth UUV could be fast-tracked for battlefield innovation and persistent surveillance in australia’s approaches. Counter-drone capabilities for air, surface, and sub-surface environments should also be accelerated, such as the Electro optic Systems Slinger system ($155-$1,550 per shot) and DroneShield’s RfPatrol, dronegun, DroneSentry-X and DroneSentry-C2.
Space-based surveillance and communications are crucial for integrated air and missile defence (IAMD), long-range strike, and autonomous systems. While Defence has issued a request for information for project SPA 9102 (narrowband satellite communications), a sovereign space-based intelligence and surveillance capability and sovereign launch capabilities remain necessary to assure access and strengthen space resilience.
Cyber and electromagnetic warfare (EW) receive $9.9 billion through the redspice program, but personnel and capability levels are still inadequate. Expanding offensive cyber forces and advanced EW systems is recommended.Potential investments include an additional $500 million to $1 billion over five years for offensive cyber tools and platforms,$1 billion to $5 billion per platform type for advanced airborne,naval,or ground-based EW platforms (potentially under AUKUS Pillar Two,beyond the MC-55A Peregrine),and hundreds of millions for next-generation cyber warfare training and simulation.
Multi-domain integration (MDI) demands integrating cyber, C4ISR, IAMD, space assets, and emerging domains like financial and political warfare. Investment could total tens of billions over the next decade, including low billions for cyber personnel, $5 billion to $15 billion for C4ISR backbone, $10 billion to $30 billion for IAMD systems, and $100 million for a financial and legal warfare unit.
Defence Infrastructure requires upgrades, particularly in northern Australia, for force projection and resilience. Recommended investments include $5-10 billion for northern base upgrades, $3 billion to $5 billion for estate resilience (hardening, climate adaptation, renewable energy), and $2 billion to $4 billion for logistics infrastructure.
Naval Shipbuilding and Sustainment are foundational, but require additional focus on workforce development, northern Australian sustainment, and uncrewed system integration, requiring hundreds of millions to low billions of dollars.
Workforce Development and Retention: The ADF aims for 69,000 personnel by the early 2030s and a 100,000 total defence workforce by 2040. Despite meaningful commitments ($5.7 billion over four years, $50.3 billion over a decade), recruitment and retention remain a challenge.
Summary of Defence Funding & Preparedness Recommendations
This text outlines recommendations for substantially increasing Australia’s defence funding and preparedness, stemming from the “Cost of Defence” report. Here’s a breakdown of the key points:
1. Increased Sustainment Funding for ADF:
* Moving the ADF to a 24/7 “always-ready” state would require a 50% increase in sustainment funding,equating to approximately $9 billion per annum.This focuses on maintaining and operating existing equipment and personnel at a higher level of readiness.
2.Beyond Conventional Defence Spending – National Preparedness:
* The report advocates for broader government investment in national preparedness and resilience across all sectors (economy,society,government operations).
* This is aligned with NATO’s recent decision to allocate 1.5% of GDP to critical infrastructure protection, civil preparedness, innovation, and the defence industrial base.
* Specific investment areas include:
* Critical Infrastructure Resilience: $100-300 million/year for upgrades (hardening, redundancy, cybersecurity).
* Cybersecurity for Smaller Utilities: tens of millions/year in grants for training,services,and secure solutions.
* Physical Resilience of Critical Infrastructure: $500 million/year for hardening against attack, sabotage, and extreme weather.
* Combating Misinformation: Tens of millions/year for detection, analysis, and countering foreign interference.
* Community Civil Preparedness: Tens of millions/year for education, training, volunteer programs, and equipping community hubs.
3. Overall Defence Spending – Reaching 3% of GDP:
* The report argues that current defence funding trajectories are insufficient to deter adversaries and protect Australian interests.
* It recommends increasing defence spending to at least 3% of GDP by 2026-27.
* This increase is based on a comprehensive assessment of capability needs, considering both current and future threats.
* The text emphasizes that spending needs to be driven by both strategic assessment and capability requirements, not just arbitrary GDP percentages.
In essence, the report calls for a holistic and substantial increase in investment – not just in traditional military capabilities, but also in national resilience and preparedness – to address the deteriorating international security environment.
Worth a look