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The tide is officially turning against the Australian defence industry’s struggle for financial backing, and even basic services.
It’s a fight that's seeing significant ground swell from Australian financial institutions in recent years to support the future of the defence industry in Australia.
Defence industry and some hot-topic sectors, such as firearms or missile manufacturing, have traditionally been lumped in as unfavourable clients under the standardised ESG policies of the 2000s. Environmental, Social, and Governance Policy framework typically assess and guide a business’s performance in areas outside financial profit by promoting ideals such as sustainability and ethical practices.
It’s no surprise either, until recently most Australians had never been confronted with conflict or learnt the necessity of defence industry support, in some cases, they were ideologically opposed to even the suggestion of financing the domestic companies producing new defence equipment on their own soil.
Resurgance of Support
New conflicts between Ukraine and Russia, in the Middle East and some red-blooded policy from the United States government against pacing rival in the People’s Republic of China, are all timely prompts that the domestic defence industry is an asset worth supporting.
“We’re engaging in the biggest peacetime increase in defence spending in Australia’s history,” according to comments from Australian Deputy Prime Minister and Minister for Defence Richard Marles, speaking to ABC 7.30 on October 21.
“What we need to do is to assess our strategic needs, to understand the defence force we need to build to meet them, and then to resource that. And that’s what we’re doing.
“And in doing that, we are yielding a very significant increase in our defence spend.”
The revolution in geo-political circumstances is also motivating significant change in the world of banking and investing to better support defence technology innovation and demand for growth.
DroneShield chief financial officer Oleg Vornik confirmed the Sydney-based counter drone technology developer had previously been denied financial service by several major banks early in the companies’ development; however he is now seeing real movement in financial services.
“I think there has been a lot of general relaxation in terms of dealing with defence companies by big banks,” he said.
“So, I remember maybe five or 10 years ago, Westpac was really the only bank out of the big four that was more or less comfortable dealing with defence industry. Now we’re seeing essentially all four big banks are comfortable and have been actively pitching for business with us.
“In terms of equity, there’s of course, ESG on the minds of a lot of funds. And traditionally, defence has been very much, to put a bit flippantly, in the same sort of market as tobacco, fossil fuels and pornography by a lot of funds.
“I think now it’s changing, and funds are recognising that defence is sort of the bedrock of democracy. If you don’t have defence (support), nothing else matters.
“Banks traditionally have been quite firm on the ESG… And I think often they would just swipe lethal and non-lethal under the same umbrella.
“(Financial support) It has certainly evolved… all four banks are now very keenly engaging with defence, certainly with the non-kinetic side of it.
“I think when it comes to funds, not so much banks, but equity investors, defence is a pretty hot area, and we have about 35,000 shareholders… So we have had an enormous amount of support from both Australian and overseas shareholders.
“So I think in the face of rapidly changing geopolitics, people are understanding that investment in defence is ultimately what’s supporting democracy, which is ultimately supporting all of their life principles.”
In addition, Mr Vornik speculated that while the struggle for financial support for the defence industry had previously been strongly felt in Australia, it was not as significant an issue for defence support and innovation in other countries such as the People’s Republic of China and United States.
“The biggest thing is that you need transactional banking (as a business) and you can’t really avoid that. So obviously, if you don’t have that, then how are you going to get your money from your customers… Transaction bank account is a lifeline and lifeguard of the business. So that’s kind of the biggest threat,” he said.
“The big thing was just like, you can’t survive if you don’t have a transaction account. So that was our main concern at the time.”
Vornik also identifies that there is still considerable separation of achievable financial support for lethal and non-lethal defence equipment in Australia.
“I think even with the changes, people are still a little cautious when it comes to (the development of) lethal technologies in Australia. In the US, not at all,” he said.
New growth in Defence Industry banking
In promising indications earlier this year in August, the Commonwealth Bank released its updated 2025 Environmental and Social Framework recognising that Australia’s national security and resilience are critical to the nation’s stability and prosperity while also acknowledging risks associated with certain types of weapons.
“In an increasingly complex geopolitical environment, the defence and aerospace industry plays a critical role in ensuring national security, economic strength and supply chain resilience,” according to Commonwealth Bank Major Client Group Executive General Manager Chris Williams, championing defence industry support.
“The sector is a catalyst for innovation, sovereign capability, and the growth of advanced manufacturing. As global supply chains face ongoing disruption, Australia’s ability to design, build and sustain critical infrastructure and technology has never been more important.
“Australia’s advanced manufacturing sector is undergoing a transformation and we’re proud to support the growth opportunities that will help to position Australia as a global leader in high-value, future-focused manufacturing.
“We provide tailored financial solutions to help manufacturers and defence suppliers invest in innovation, scale operations and compete globally. Our data-led insights and deep industry partnerships help unlock growth across the sector.
“We’re equally committed to supporting the people behind the industry. Through our Veterans Banking Program and Veteran Employee Network, we help veterans transition into business ownership and civilian careers.”
The Commonwealth Bank has a role to play in supporting defence capabilities through providing banking products and services, and the responsible use of these capabilities is critical; according to the company.
Defence Connect also reached out to Westpac Banking Institution concerning changes to ESG policy regarding the defence industry. They did not provide comment by the publication date.
Reversing the Decline
Despite this new swing to ‘make up for lost time’ in supporting the defence industry as a national asset, it’s clear that the industry has atrophied after years of government and financial institution neglect.
We cannot, of course, hold either group responsibility; they simply followed and attempted to capture the populist thought of the Australian public at the time and the proliferation of national ‘she’ll be right’ ideology.
Over time the public won a moral victory and relaxed in comfortable solitude, while both financial and political groups celebrated their relevance as guardians of ESG policy.
Unfortunately, incidents have now begun to heat up in the Indo-Pacific power contest and, in consequence, that long-forgotten defence industry, military innovation and domestic manufacturing foundation will have to be rebuilt from the ground up.
The Way Forward
Shooting Industry Foundation of Australia chief executive officer James Walsh, representing firearms manufacturers and dealers, said issues with the firearms manufacturing community, some of which have Defence targeted products, have often stemmed from a place of misunderstanding.
“Often it comes down to a lack of understanding of what our industry does and the processes of our industry (firearms),” he said.
"Banks almost take a role as if to be a third party regulator as such, to say, ‘well we want to make sure that you're not breaking the law’... The reality is that if you’re in a legitimate, highly regulated legal industry, then really you shouldn’t have any concerns about being a business customer and being provided with the sort of finance and the loans and the like that you need to grow.
“Banks, the government, insurance companies should be looking at local industry, looking at local manufacturing and seeing that it’s an investment in Australia. They should be getting behind it because we make good products in Australia and we could export those products to the rest of the world.
“In order to do that, businesses need to grow up, businesses need to get access to finance and financial products. Australia is already an enormously regulated player in the global market… there are appropriate government controls in place to ensure that the industry is legitimate and those legitimate players should be considered low risk (for financial services).”
