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The Australian Industry Group (Ai Group) has urged the federal government to take decisive steps to ensure AUKUS Pillar 2 delivers tangible defence capabilities, warning the initiative risks stalling if it remains overly focused on policy reform.
In a report released today (11 August), Ai Group said that while early work on the trilateral pact’s advanced capabilities stream, involving Australia, the United Kingdom and the United States had made solid progress through export control reforms, innovation pathways and policy alignment, the program must now move quickly to commercialisation, acquisition and delivery.
Ai Group chief executive Innes Willox said: “AUKUS Pillar 2 offers Australian companies an opportunity to work with leading UK and US defence sectors, creating high-tech jobs, boosting Australia’s defence innovation and most importantly delivering advanced capabilities to the Australian Defence Force.”
Willox said there was “a lack of clarity across industry” about the program’s objectives, with some viewing it as a research effort, others as procurement-focused, and still others as primarily about policy change, a situation he warned was hampering engagement and investment.
The report makes five key recommendations for the next phase of Pillar 2:
- Publish a clear strategy outlining objectives, activities, funding, milestones and success measures, with regular classified and unclassified industry briefings.
- Shift focus from policy to capability execution, establishing defined acquisition pathways.
- Create dedicated, fast-tracked funding streams for near-term AUKUS capability goals and supply chain uplift programs.
- Broaden policy reforms beyond export controls to include cyber security harmonisation, procurement, intellectual property and workforce development.
- Strengthen intergovernmental coordination and establish structured industry engagement mechanisms across all three partner nations.
Willox added: “Our research shows that while there is strong political backing, the initiative must have clear capability and acquisition pathways and dedicated funding.”
Pillar 2 of AUKUS, distinct from the nuclear-powered submarine program under Pillar 1, aims to accelerate joint development of advanced defence technologies, including undersea capabilities, quantum technologies, artificial intelligence, autonomy, hypersonics and counter-hypersonics, and cyber.
Ai Group argues that with the geopolitical environment becoming increasingly contested, Australia must ensure that Pillar 2 translates into real-world capability gains for the ADF and creates long-term industrial benefits for local defence companies.
The full report by Ai Group is available here.
