Australia’s zombie defence industry policy is rewarmed – the 2026 DIDS reinforces failure

Unfortunately, the 2026 strategy is a rehash of the 2024 approach, which Minister Conroy has never acknowledged was a failure.

For those thinking that actual Australian domestic industry – including a large number of highly innovative small and medium enterprises supplying capability to the Australian Defence Force – might be important given lessons from Ukraine and the obvious problems traditional suppliers like the US and UK are having meeting their own needs, you will be disappointed.

Minister Conroy has continued lack of doubt about big foreign primes’ capacity to meet our every need at a time of crisis – when they will, unfortunately but necessarily, meet the needs of their home governments’ militaries first. His confidence remains unshaken as we watch the US delaying and turning off contracted supplies to partners because of its own priority demands.

It’s as if we are still living in 2006 with a reliable America and a capable UK instead of in 2026.

The core problem with the 2024 industry strategy was that it had an empty definition of Australia’s “sovereign defence industrial base” – and the 2026 version bluntly said, “the definitions of defence industry and our sovereign defence industrial base remain unchanged”.

So, any company with an Australian Business Number that is capable of supplying products or services to the Australian Defence organisation is apparently part of Australia’s “sovereign defence industry”. Yes, really. That has the obvious effect of labelling Lockheed Martin, BAE, Northrop and others as Aussie outfits. But it perversely also includes Chinese businesses, including those working closely with the People’s Liberation Army and supplying other Chinese agencies. Welcome Huawei and Hikvision. And now, welcome BYD.

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So, the 2026 industry policy is stillborn on arrival and will not grow Australian sovereign capacity to support our military.

Instead, Pat Conroy is determined to double down on Australia’s growing dependency on US and UK defence companies and call this “sovereign”.

The strategy is also determined to only learn lessons from Ukraine that reinforce existing Defence bureaucratic practices and& instincts that favour the big foreign primes when it comes to procurement.

It said the lesson of Ukraine is its “access to the international industrial base”. No. The main Ukrainian success factor has been its large number of small innovative domestic companies that get contracts to supply the Ukrainian military- which are truly sovereign industry, not branch offices of foreign companies.

They draw on international suppliers for components but they drive battlefield innovation and success. This is a starkly different model to the one in Minister Conroy’s disappointing rewarmed meal.

Unfortunately, there is no policy imagination in Defence that is capable of doing more than just perpetuating existing policy settings that are now at least a decade out of date in the world of 2026. Actual Australian defence companies will see no future for themselves in this strategy, except as part of big offshore primes’ clunky supply chains.

To give an example, as he launched the 2026 document, Minister Conroy announced what he called a “Major milestone in support of Australian Defence industry and jobs”. Sounds exciting.

Contain your excitement, though. this wasn’t anything remotely in the realm of the $5.4 billion spent on AUKUS just in 2025–26. No, it was $22 million going to 60 Australian companies – an average of $367,000 each – i.e. maybe the salaries and related benefits of two employees for a year (maybe). But the gruel is so thin for actual Australian companies in the strategy that this is labelled a major milestone…

Australian defence companies are left hoping to win tiny grants instead of supply contracts, with their future being selling to everyone but Australia’s military or folding in to be a subcontractor of a big foreign prime.

What can still change things in Australian defence policy and behaviour to deliver sustainable military power to our defence force is:

1. Getting the definition of Australian sovereign industry right by taking the meaning of words like sovereignty seriously instead of emptying them of content for political convenience.
2. Applying that new definition to Defence’s purchasing decisions.
3. Then allocating a number ending in “$billion” in each annual Defence budget to procurement of capabilities from these Australian businesses.

The starting point for a practical working definition looks like this:

“Australia’s sovereign industrial base is made up of companies headquartered in Australia, with production lines in Australia able to supply products and services to Defence.”

Such companies will make supporting and equipping the ADF their essential priority in times of crisis – which even the best-intentioned branch office of a foreign outfit simply won’t be able to do because of the demands of their home governments.

No wonder Minister Conroy didn’t want to release his “new” industry strategy in front of a hall of defence industry people at the Defence and Industry Conference on Wednesday but booked the friendlier National Press Club venue instead. Even there he faced a more-than-sceptical audience.

After four years in the portfolio, Minister Conroy is a walking definition of institutional capture. That’s only a problem for those concerned about having an Australian military that has understood and adapted to the way wars are fought, supplied and won in 2026.

Michael Shoebridge is a founder and director of Strategic Analysis Australia. This article has been republished with the author’s permission.