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Australia’s ongoing debate about its level of defence spending is once again gaining headlines, with renewed and urgent calls to focus on material capability rather than arbitrary figures.
Since the release of the 2020 Defence Strategic Update (DSU) and the supporting 2020 Force Structure Plan (FSP), Australia has undergone a marked transformation in its defence policy and spending priorities.
This shift reflects a growing recognition of the strategic uncertainty shaping both the Indo-Pacific and the broader global order. It also signals a recalibration of national priorities away from long-standing assumptions about warning time and towards an emphasis on deterrence, resilience and preparedness for high-end conflict.
This transformation, spanning both funding priorities and the force structure of the Australian Defence Force (ADF), underscores Canberra’s enduring strategic commitment to preserving peace, stability and security in the Indo-Pacific while continuing to uphold the key pillars of the post–Second World War economic, political and strategic order.
For decades, however, one of the core difficulties in Australian defence planning has been the inversion of the logic that should underpin strategy. As many observers have noted, successive governments have allowed “budget to drive strategy” rather than “strategy to drive budget”.
This approach, shaped by the legacy of the Cold War-era Defence of Australia doctrine, placed heavy emphasis on self-reliance, a decade-long “warning time” for potential threats and a continental focus in posture and capability planning. While it provided a degree of predictability, it often left the ADF underprepared for rapid shifts in the strategic environment.
The 2020 DSU and FSP attempted to break from that mould. They outlined an ambitious AU$270 billion investment across the decade, reprioritising capability development towards long-range strike, cyber and information warfare, enhanced maritime security and, most prominently, the transition towards conventionally armed, nuclear-powered submarines under AUKUS.
These moves were heralded by some as long-overdue recognition of the deteriorating security environment, yet others warned they risked compounding delays and gaps in force structure by shuffling acquisition priorities midstream.
Unsurprisingly, the “winners and losers” dynamic was immediately evident. Within Australia’s defence industry, some sectors prospered under the new investment streams, while others faced painful adjustments and contract uncertainty.
For the taxpayer, meanwhile, the reprioritisation often translated into higher unit costs and, in some cases, fewer platforms being delivered to the warfighter – an issue that has long plagued Australian defence procurement.
Amid growing debate, Deputy Prime Minister and Defence Minister Richard Marles sought to reassure both the public and the industry. Launching the 2024 National Defence Strategy and Integrated Investment Program), he said, “The inaugural National Defence Strategy sets out a clear and priority-driven approach to protecting against threats to Australia and our interests. The National Defence Strategy outlines how we are transforming the ADF and equipping it to survive in a much less-certain world.”
He added, “The 2024 Integrated Investment Program is a complete rebuild of the integrated investment programs of the past. While it contains more money, it also required the reprioritisation of AU$22.5 billion over the next four years and AU$72.8 billion over the decade.”
The government’s message has consistently highlighted the importance of aligning posture with strategy: ensuring infrastructure upgrades, building supply chain resilience, accelerating technology acquisition and smoothing the pathway from “concept to capability” to deliver a more effective ADF.
Yet the deeper political and strategic debate continues to revolve around money. Historically, Australia’s defence spending has hovered close to the 2 per cent of gross domestic product (GDP) benchmark first championed within NATO.
The Albanese government has signalled a gradual rise towards 2.3–2.5 per cent of GDP by 2030, though critics argue this remains inadequate in the face of rapid Chinese modernisation, ongoing grey zone coercion and the reality of a shrinking warning time. Many strategists and former defence leaders have called for spending to move decisively towards 3 per cent or more of GDP to ensure genuine deterrence and independent capability.
The debate is not simply about numbers. At stake is whether Australia’s defence planning continues to be shaped by fiscal ceilings – what the budget can bear in any given election cycle – or by a sober assessment of strategic needs and the cost of meeting them.
If the former persists, the consequences are profound: capability gaps within the ADF, a fragile and under-utilised defence industrial base and missed opportunities to integrate defence investment into the broader economy as a driver of innovation and national resilience.
Ultimately, the challenge remains the same: to break the cycle of “budget driving strategy” and accept the uncomfortable truth that real strategy, especially in an era of great-power competition, must come first, even if it carries a higher price tag than the political system has historically been willing to bear.
The latest to enter this ongoing debate is Royal Australian Navy Captain (Ret’d) Nick Tate in a piece for the Australian Strategic Policy Institute’s (ASPI) Strategist, titled Forget the GDP ratio. Our objective is a force that can sustain a fight, in which he articulated the case for shifting the rhetoric and focus towards the material outcomes, not merely the proportion of the nation’s GDP being spent on defence.
Strategy driving budget, not budget driving strategy
I have often put forward the case that one of, if not the most critical challenges facing Australia’s defence uplift and modernisation is the seemingly unkillable problem of “budget driving our strategy” and corresponding acquisition decisions that bleed into failed industrialisation efforts.
Nick Tate argued that measuring defence simply as a share of GDP is misleading. While “the good thing about the share of GDP as a measure of defence spending is that it’s simple and comparable”, in practice, “it is a poor guide to whether the country can sustain and win a fight”.
Instead, he contended that Australia should design its military posture around capability – namely, a force that can truly stay in the fight – rather than chasing a tidy percentage target. The defence share of GDP “will then fall out of that” and that figure would likely be higher than Australia’s current 2.0 per cent anyway.
He emphasised that real military power depends on the unglamorous but essential elements: fuel, repair yards, deployable command systems, hardened bases, logistics and sustainment. As ASPI’s John Coyne put it, “logistics and economic enablers are what turn defence spending into real military power”.
Raelene Lockhorst is also quoted pointing out constraints such as “defence’s land holdings, workforce and fuel”. Tate warned that the ambition of “minimum viable capability” is often misinterpreted. In practice, he said, it becomes doing the bare minimum while letting enablers slip down the priority list – “That’s not agility. It’s risk.”
For example, the Ghost Shark submarine program, despite its AU$1.7 billion commitment, still lacks clarity on critical support infrastructure: “secure basing, weapons handling, shore power and maintenance”.
Purchasing hardware is meaningless if you can’t sustain it in operation. Tate argued that basing defence policy around a GDP percentage may win political points but “the percentage itself won’t refuel a Hornet at Tindal or open a wharf in Darwin”.
Logistics and infrastructure – not just shiny new kit – determine whether capability holds up under stress. He challenged the government to ask hard, operational questions: How many days of fuel are available in northern bases? How fast can missiles be reloaded? How quickly can a battlegroup be deployed and kept supplied? If those metrics improve, the GDP ratio “will take care of itself”.
Tate’s bottom line comes down to, “We should spend what’s needed, not what looks neat. A single ratio gives false comfort. Real strategy is about usable power – ready ships, aircraft and bases that work when they’re called on.”
Final thoughts
For Australia, the coming years will be about navigating between expectations and limits.
Can Canberra meet the US demand without undermining domestic priorities? Will strategic reviews translate into capability on the ground and on time?
And perhaps most importantly, will Australia develop its own criteria for what defence spending is sufficient, grounded in its unique strategic circumstances, rather than simply responding to external pressure or benchmarks?
If Australia can maintain clarity in what it needs to defend and when and with what capabilities, it will be in a stronger position to argue for its chosen level of spending.
But if the debate remains framed only in terms of GDP percentages, with “3.5 per cent” as a mantra, the risk is that big numbers dominate political discourse without matching capability or clarity of strategy.
Or simply put, Australia will continue to go around in circles at a time when we can ill afford to.
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at
Stephen Kuper
Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.
