Despite persistent warnings from both Coalition and Labor governments that Australia’s strategic environment is deteriorating, the Labor government has lost another opportunity to adequately fund defence for the challenges ahead.
The latest Australian Strategic Policy Institute (ASPI) defence budget brief has said the level of funding for Defence and other elements of Australia’s national‑security community failed to match the seriousness of the challenge.
“The international order isn’t so much fraying as falling apart. The stability of the Indo‑Pacific region is increasingly fragile, and China’s strategic challenge is the biggest destabilising factor,” it said.
“Armed conflict occurring on a regional or even global scale, without significant warning, is a real possibility within the remainder of the decade.
“Moreover, with the advent of the Trump administration, some of the old certitudes about Australia’s alliance relations with the US no longer apply and are unlikely to return.”
The government handed down the federal budget on March 25. That took consolidated defence funding for 2025-26 to $59 billion, nominal growth of 4.2 per cent but just 0.8 per cent in real terms. Defence spending rose to just over two per cent of Gross Domestic Product (GDP).
There was little opportunity for any detailed examination as three days later Prime Minister Anthony Albanese called the election for May 3. Against most expectations, Labor returned with a significantly increased majority.
Defence barely rated a mention during the campaign. The Opposition did promise a substantial increase in defence funding, if elected. It did not help.
In its study, ASPI said Defence funding should be increased to reflect the deteriorating strategic environment. It should reach three per cent of GDP in 2026–27 and be sustained at least at that level over the next decade.
The government should plan to reprioritise the 2026 editions of the National Defence Strategy (NDS) and the Integrated Investment Plan (IIP) to ensure the readiness and sustainability of the current force.
It should also commit to funding national preparedness and national resilience measures across government, the economy and society that will ensure Australia is ready to manage potential national‑security crises.
ASPI said significant organisational reform was needed within the Defence organisation to reduce bureaucracy, enhance agility and improve capability delivery.
Australia rated relatively poorly on its ability to deliver combat power from the dollars invested, it said.
“Through cost overruns and schedule delays, Defence has demonstrated a lamentable history of spending far too much money for too little capability,” ASPI said.
“The ANAO (Australian National Audit Office) has reported a cumulative 442 months in delays on the department’s top 21 procurements, with an average slippage of more than two years, while the approved cost of Defence’s biggest projects has soared by $18 billion to nearly $41 billion.”
“Defence industry requires capacity building, workforce development and better integration with government strategies. Workforce shortages and shortcomings in cultural reform remain critical impediments to preparedness.”
ASPI said without urgent, coordinated and well‑resourced responses to the challenges, Australia risked a brittle and hollowed Defence force, diminished industrial sovereignty, and compromised national security in a volatile Indo‑Pacific region.
“This year’s Budget is therefore an opportunity lost. In failing to adequately fund defence, the government has lost the opportunity for another year to prepare the ADF for the missions that are becoming more likely in the immediate term,” it said.
“The Budget is also a lost opportunity for Australian industry, which is becoming increasingly frustrated at cancelled, reprioritised and delayed defence procurements.”