Australia boosts defence spending but more may be needed in age of uncertainty

SYDNEY - Australia’s ruling Labor Party revealed plans in its federal budget on March 25 to fast-track A$1 billion (S$843 million) in defence spending amid a growing consensus in Canberra that the amount will need to be increased to address regional security risks.

Unfortunately for Labor, which faces an election due to be held by May, the additional outlay did not appear to persuade analysts that the government is spending enough to secure the nation.

The budget revealed plans to lift annual defence spending from A$59 billion in the year to June 30, 2026 – or 2 per cent of the country’s gross domestic product (GDP) – to A$74 billion – or 2.2 per cent – by the year to June 30, 2029. The boost includes a move to bring forward A$1 billion in spending, which was due to be spent in 2029 and will now be spent from 2026 to 2028.

But the plans fall short of the proposed spending of 3 per cent that the Trump administration, as well as commentators in Australia, have called for. Former Labor leader Kim Beazley recently proposed lifting spending to 3 or 3.5 per cent.

A former senior Australian defence official, Mr Michael Shoebridge, a director of the think-tank Strategic Analysis Australia, told The Straits Times the government should be lifting defence spending to 3 per cent of the GDP within three years.

He said current spending levels will leave Australia’s military “more fragile and weaker”, especially as much of the spending is on major projects such as the acquisition of nuclear-powered submarines under the Aukus security pact with the United States and the United Kingdom, which will not be fully in place for decades.

“The defence budget is too low to meet our security needs in a world with current wars in Europe and in the Middle East, and a growing military power called China that is quite threatening to other countries and Taiwan, and an America that is either unreliable or more demanding or perhaps a mix of both,” he said.

In the past decade, Australia has steadily increased defence spending after it hit a post-World War II low of 1.6 per cent in the year to June 30, 2013.

But it has also embarked on high-spending acquisitions, including the nuclear-powered submarines, naval frigates, F-35 jets and new combat reconnaissance vehicles. These large-scale projects came as Australia grew concerned about China’s massive military build-up and the risk of regional instability amid the intensifying rivalry between Beijing and Washington.

Australia’s security anxieties deepened in 2025 due to the “America First” turn by the Trump administration, which has shown scant regard for traditional allies and called on US partners to pay more for their own defence. These anxieties multiplied in February after China dispatched warships to conduct its navy’s first circumnavigation of Australia.

As the election looms, opinion polls show that the main concern of Australians is cost of living pressures, but worries about defence are growing.

A survey published in The Australian Financial Review on March 16, which asked voters for their most important issues, found 71 per cent named cost of living, followed by housing (38 per cent), healthcare (28 per cent), crime (27 per cent) and the economy (26 per cent). Only 16 per cent named defence, but this was up from 11 per cent the previous month – a shift attributed to the Chinese warships and uncertainty in Europe about the future of Ukraine.

The government used the budget – its last before the election – to try to address voter concerns about the cost of living. The budget included a A$5 a week income tax cut from July 2026, a A$150 rebate on household electricity bills, A$17.1 billion funding for road projects over the next decade, and additional subsidies for medicines and medical visits.

“This budget is our plan for a new generation of prosperity in a new world of uncertainty,” Treasurer Jim Chalmers told Parliament.

“Trade disruptions are rising, China’s growth is slowing, war is still raging in Europe... Australia’s economy is turning the corner, when we know the global economy is taking a turn for the worse.”

But the effort to deliver tax cuts and handouts left little extra for defence.

Ms Jennifer Parker, a defence policy expert at the Australian National University’s National Security College, told ST the budget’s additional defence spending was welcome but “isn’t enough”.

“It is not a question of spending 2 per cent or 3 per cent (of GDP), but whether we have the capabilities to respond to the changing environment. We absolutely do not,” she said.

Ms Parker said Australia needs to develop capabilities to protect against ballistic missiles and drones, as well as additional naval capabilities such as mine warfare vessels.

Mr Shoebridge said Australia needs armed and unarmed drones for air, sea and underwater and should develop its own missiles and munitions.

“You can’t do more without spending more,” he said.

With the election around the corner, Labor’s budget leaves it vulnerable to attack from its opponents that it is not doing enough to develop the nation’s long-term defences.

The opposition – the Liberal-National Coalition – tends to push for higher military spending.

Though cost of living may be front of mind for most voters, the Coalition will probably try to remind them that they also need to watch their backs.