Tag Archive for: Defence Industry

Agenda for change 2025: Preparedness and resilience in an uncertain world

For more than a decade, which has included the 2013, 2016, 2019 and 2022 federal elections, ASPI has helped to generate ideas and foster debate about Australian strategic policymaking through Agenda for change, a wide-ranging collection of analyses and recommendations to assist the next Australian Government in its deliberations and planning.  

Agenda for change 2025: Preparedness and resilience in an uncertain world continues in its tradition by providing focused and anticipatory policy advice for the 48th Parliament of Australia. The agenda strives to highlight, and present solutions to, the most pressing questions that our next government must consider in order to advance and protect Australia’s national interests in a more disordered and challenging world. 

This edition reflects five interrelated aspects of Australia’s position in 2025, focused on the need to:

  • defend Australia
  • navigate our place in a new world (dis)order
  • reform our security architecture and policies
  • secure our critical infrastructure
  • protect and use our natural resources. 

In 2025, that means equipping the next government for the reality of the contest in which our country is engaged. Since the previous edition of Agenda for change in 2022 we’ve seen:

  • Russia’s ongoing war on Ukraine and public confirmation of the China–Russia ‘no limits’ partnership
  • change in Australia’s policy towards China, with a focus on ‘stabilisation’, accompanied by reduced economic coercion against Australia but a ratcheting up of military intimidation, including an unprecedented PLA Navy circumnavigation of Australia
  • heightened aggression by China against the Philippines in the South China Sea and against Taiwan
  • a lowering of the national terrorism threat level to ‘possible’ in 2022, before it was raised back to ‘probable’ not quite two years later 
  • the 7 October 2023 Hamas terrorist attacks on Israel, the resulting war in Gaza and an increase in politically motivated violence in Australia
  • the rise of artificial intelligence, including the landmark release of ChatGPT in late 2022 and then DeepSeek in 2025
  • the return of Donald Trump to the White House, bringing tension among allies and question marks over the future of the US-led international order.

Each chapter in Agenda for change includes a limited number of prioritised policy recommendations, which are intended to be discrete, do-able and impactful. Although, when dealing with some of the more existential challenges facing Australia, the recommendations are necessarily and similarly expansive.

In addressing that extraordinary range of developments, ASPI has drawn on a wide range of expertise for the 2025 edition of Agenda for change. The views expressed are the personal views of the authors and don’t represent a formal position of ASPI on any issue, other than a shared focus on Australia’s national interests. 

North of 26 degrees south and the security of Australia: Views from The Strategist, Volume 10

The Northern Australia Strategic Policy Centre’s latest report, North of 26 degrees south and the security of Australia: views from The Strategist, Volume 10, contains articles published in ASPI’s The Strategist over the last six months.

Expanding on previous volumes, this edition introduces thematic chapters focused on a range of subjects relevant to northern Australia. These include:

  1. Northern Australia and Defence,
  2. Developing Northern Australia,
  3. Northern Australia new policy opportunities,
  4. Critical Minerals, Energy, and Commodities,

Articles are authored by a range of experts across these varied topics.

Volume 10 also features a foreword by The Hon Lia Finocchiaro MLA, Chief Minister of the Northern Territory. Chief Minister Finocchiaro calls readers attention to the Northern Territory’s unique place in Australia’s defence history, its enduring strategic importance, and the Territory’s defence capabilities.

The 34 articles in this Compendium provide practical policy options which government could implement in the short term. Facilitating both the security and economic prosperity of northern Australia.

Lessons in leadership: Interviews with 11 of Australia’s former Defence Ministers

In a time of growing strategic uncertainty, 11 of Australia’s former defence ministers have shared valuable lessons they learned over decades running one of the toughest portfolios in government.

In this compendium, the former ministers from both sides of politics give their views on topics ranging from the complexity of dealing with a massive department, to the grief they shared with families at the funerals of slain soldiers.

The pieces are drawn from interviews with former ASPI executive director Peter Jennings and links to the original video interviews are available in the posts on The Strategist site.

North of 26 degrees south and the security of Australia: Views from The Strategist, Volume 9

The Northern Australia Strategic Policy Centre’s latest report, North of 26 degrees south and the security of Australia: views from The Strategist, Volume 9, contains articles published in ASPI’s The Strategist over the last six months.

Expanding on previous volumes, this edition introduces thematic chapters focused on a range of subjects relevant to northern Australia. These include;

1. Defence in the North,

2. Developing Northern Australia,

3. Northern Australia and the Indo-Pacific

4. Critical Minerals, Energy, and Commodities,

5. Space, Food Security and Climate Trends

As in previous editions, Volume 9 contains a range of expert opinions across these varied topics.

Volume 9 also features a foreword by the Hon. Eva Lawler, Chief Minister of the Northern Territory. Chief Minister Lawler calls readers attention to the relevance of northern Australia in light of the National Defence Strategy and updated Integrated Investment Program as well as Australia’s economic ambitions, stating “the strategies in this volume can inform our efforts to unlock northern Australia’s full potential and build a stronger, more resilient nation.”

The 36 articles discuss practical policy solutions for decision makers facilitating development, prosperity and security of northern Australia. These policy solutions tackle both the challenges and opportunities present in the north, and reflect the potential of the north to increasingly contribute to Australia’s national security and economic prosperity.

The cost of Defence: ASPI Defence budget brief 2024-2025

Australia needs to spend more on defence—and it needs to do so immediately. The strategic imperative has been firmly established in the government’s own major defence documents.

The Albanese government and the Coalition opposition agree that we are in the gravest geopolitical period in generations and this is only going to intensify.

But as the Australian Strategic Policy Institute’s latest Cost of Defence report finds, the rhetorical urgency is not being matched by action in the form of defence investment. The May budget is the latest demonstration of this mismatch, lacking spending for swift increases in capabilities that the Australian Defence Force would need if our region were to deteriorate quickly.

In particular, this year’s budget priorities are not directed towards strengthening the Australian Defence Force’s ability to fight in the next decade.

This is not doom-mongering; the government has acknowledged that the warning time before any conflict, which had long been set at 10 years, has shrunk to effectively zero time.

We have war in Ukraine and the Middle East, aggression and increasingly dangerous and unprofessional behaviour from China causing instability and confrontation in the South China Sea and across the Taiwan Strait, erosions of the rule of law and revisionist agendas from authoritarians. Instability is heightened by foreign interference, economic coercion and artificial intelligence-enabled dangers such as cyber attacks and disinformation.

If war were to break out at any time in the next 10 years, our military would essentially fight with the force it has today. Based on current resourcing, nothing significant will change over the decade.

Most of the major new capabilities in the government’s defence investment blueprint are two decades away from being fully fielded. That blueprint does contain some shorter-term enhancements, but these will not be fielded until the 2030s.

The welcome $5.7 billion in new defence spending over the four-year forward estimates period is devoted to just three priorities: the AUKUS submarines, the next fleet of surface warships and investment in long-range strike, targeting and autonomous systems. But two thirds of this funding doesn’t arrive until 2027-28. The relatively impressive longer term plan leaves us vulnerable in the immediate period ahead. More money immediately is not a silver bullet, and ambition must be balanced with how much Defence can actually spend each year. But the nation’s security requires a two-pronged strategy of enhancing our existing force to meet threats within the decade while investing in long term capabilities.

Other countries are furiously pursuing new capabilities that can be put into action quickly—such as creating masses of small drones and prototyping and developing new technologies.

We talk about technology and asymmetric advantage—playing to your strengths and finding effective means to exploit an opponent’s weaknesses–yet we lack a credible pathway to bring them into operation to bolster the force we have today.

Over the longer term, the picture starts gradually to improve. The $50 billion in additional spending over the next decade is an important commitment, even if far away. The plan for a complete recapitalisation of the surface combatant fleet will eventually give us the biggest and most capable navy Australia has had since World War Two.

But, so far, we are failing to grasp the opportunity to link our traditional large platforms such as submarines and warships to more modern developments in warfare—drones and various small uncrewed and smart capabilities. AI, robotics, electronic warfare and space capabilities remain aspirational, without any pathway for inclusion and integration into a truly focused force capable of meaningful deterrence and warfighting. That is why it is so important to realise AUKUS Pillar II, which is dealing with these capabilities.

It’s easy to criticise; harder to do. All governments are grappling with tight budgets amid competing demands and the unremitting expectations of voters and taxpayers. As a nation, we need to accept the need for higher defence spending. Hoping that conflict won’t come is not a viable strategy. If we are prepared for war, we have a better chance of deterring and hence averting it.

Europe is living that lesson now, having put all hope in the judgment that global trade and economic entanglement would bring security. Now it is clear that military investment is imperative to deter war or best prepare nations for it.

The government has a vital responsibility to speak plainly to the nation about the geopolitical risks and the possibility of conflict.

We need to grasp the challenge that is in front of us today, not in three or five years’ time. Otherwise, we risk delivering on Macarthur’s famous two word warning: “The history of failure in war can almost always be summed up in two words: “Too late.” Too late in comprehending the deadly enemy. Too late in realizing the mortal danger. Too late in preparedness. Too late in uniting all possible forces for resistance.”

Why take the risk of only acting after a crisis and saying better late than never? The world in turmoil demands we act in real time to both deter crises and be best prepared for them.

Nobody wins unless everybody wins: The Coles review into the sustainment of Australia’s Collins-class submarines

In 2003, Australia became the proud owner of the last of six new-build Collins-class submarines. Less than a decade later, the fleet was in a poor state of repair, and at times only one or two of the boats were available to the Royal Australian Navy. This account by Andrew Davies explains how the situation was remediated by bringing in a team of highly experienced naval professionals to take an uncompromising look at the arrangements in place to manage a vital national defence asset.

Despite a public perception that the submarines were inherently defective, the problems were in fact almost entirely due to dysfunctional and often rancorous organisational dynamics between the key players. In the space of just a few years, and with remarkably little required in the way of additional funding, the situation took a dramatic turn for the better.

As with earlier ASPI case studies on defence projects, Nobody wins unless everybody wins is designed to help those in Defence, industry and parliament and other interested observers to better understand the complexities of the business, all with the aim of improving how Australia equips and sustains its defence force.

Other monographs in this series:

AUKUS Pillar 2 critical pathways: A road map to enabling international collaboration

The AUKUS trilateral partnership presents Australia with an unprecedented opportunity to achieve national-security goals that have eluded it for decades. It could offer access to cutting-edge technologies. It can further integrate Australian, US and UK military forces, allowing more unified action to maintain deterrence against national and transnational actors who threaten the global rules-based order. Perhaps most importantly, AUKUS—in particular its Pillar.2 objectives—is an opportunity for Australia to pursue the long-sought industrial capacity necessary to defend its borders and its interests across a range of probable conflict scenarios.

A vision for Pillar 2 success

AUKUS partner nations implement operational and regulatory frameworks to co-produce, co-field and continuously enhance world-leading national defence capabilities in critical technology areas. Governments will provide leadership and resources to drive effective multinational collaboration among government, industry and academic contributors, leveraging competitive advantages from across the alliance to deliver collective capability.

Whatever the rhetoric, however, the benefits are far from assured. While the effort has had successes, including cooperative artificial intelligence (AI) / autonomy trials and landmark legislation, most of the hard work remains. Strategies and principles are only the beginning. Success or failure will hinge on the translation of those strategies and principles into the regulations, standards and organisational realignments necessary to operationalise the vision. The challenges are significant—from skills and supply to budgets, leadership and bipartisanship. But the benefits from this three-nation enterprise are worth the hard work to sustain political will and financial investment and to combine aspirational ambition with suitable risk tolerance to overcome obstacles.

Past debate has contributed valuable insight into problems that can threaten the full realisation of the AUKUS arrangement including for example, problems like outdated and dysfunctional export-control regulations, struggles with integrating complicated classified information systems and differing regulations and frameworks among the AUKUS partners. Yet, when it comes to fixing those problems, regulators and industry participants often talk past one another. Governments claim that mechanisms are in place to facilitate cooperation. Businesses counter that waiting six months or more for necessary approvals is an unreasonable impediment to innovation. Both sides have a point. So far, reform efforts have been unable to break the logjam.

In this study, ASPI takes a different approach. Rather than wade once more into the morass of trade regulations to identify obstacles and recommend fixes, we interviewed the regulators and businesses that implement and operate under those regulations. Our data collection involved engaging more than 170 organisations as well as key individuals. Our intent here is to provide an operational perspective on practical barriers to cooperation as envisaged under AUKUS—particularly under Pillar 2—and offer the Australian Government detailed and actionable recommendations that we believe would help AUKUS Pillar 2 succeed.

A constant challenge has been policymakers’ lack of understanding of the daily challenges faced by businesses striving to keep Australia, the US and the UK at the forefront of defence innovation. Similarly, myths abound among industry participants about the degree of restrictions imposed by regulations such as the US’s International Traffic in Arms Regulations (ITAR). Officials make the claim that all necessary exemptions exist for AUKUS partners to cooperate, and that only minor adjustments are required to turbocharge transnational innovation. Businesses reply that narrowly tailored exemptions buried in mountains of rules are useful only for the lawyers required to make sense of them. This report aims to bridge that gap.

AUKUS is a generational opportunity for Australia. Its focus on critical Pillar 2 technologies has the potential to bring Australian champions to the world stage and lift the nation’s defence industry up to the state of the art in a range of modern capabilities. Done right, that can help to realise the robust industrial capacity that Australia needs.

The big squeeze

Video Explainer

Executive Director’s foreword

This is a very different year for the defence budget. We are in a time of significant change and upheaval.

Uncertainty is rife, but some fundamentals can help in working through uncertainty, especially in the world of defence policy, planning, capability programming and budget. The order of those words is important.

Defence budgets are not arbitrary. Capability requirements must drive budgets. It doesn’t mean that the budget is unlimited but it demands that governments consider proposals for what is required and assess what can be afforded. If budgets drive capability, it risks the true capability needs not being put to government which results in failure to ask of government what they are elected to do – make decisions based on all available information.

The oft-cited metric of defence spend as a percentage of GDP is helpful as a point of comparison on the rate of effort of specific economies towards defence outcomes. It establishes a baseline from which we can measure – and therefore tell a story about – defence spending over time, and in the context of broader geopolitics. The low percentages across major European economies helps to illustrate why deterrence failed against the Putin regime and should be a lesson for all in relation to why defence spending is so important for managing tension and long-term peace.

But a percentage in isolation is not helpful in assessing whether the budget allocated to Defence will allow it to deliver the capabilities for which the government has asked.

The Albanese government released the 2023 Defence Strategic Review (DSR) and its Portfolio Budget Statements (Budget) within weeks of one another. The DSR establishes the future strategic direction for the Department of Defence and the ADF, including by identifying priorities that must be acted upon in the immediate term. The Budget represents a continuity approach with the strategic and budgetary guidance from the 2020 Defence Strategic Update and 2016 Defence White Paper.

There is, therefore, a disconnect between the two. This can be addressed and will be through a series of further reviews and specific activities to be progressed by Defence in the coming year. There are significant additional bodies of work yet to be finalised that will affect the future defence budget; all indications point to a steady and possibly substantial rise.

Australia must of course invest in defence capability commensurate with the challenges of the strategic environment. Crucially, however, the role of defence to help deter wars, while being ready for times of conflict, requires spending even in times of relative peace. A detailed discussion of how defence is budgeted to both deter and win wars, and the external and internal dynamics that drive budget (and other) programming and management, is more important today than at any time in the post-Cold War era. This document is a must read for those interested in current and future defence spending and for increased understanding of its importance to the government’s overall budget theme of providing increased certainty to Australians in an increasingly uncertain world.

Executive summary

Defence has long been seen as a necessary burden on the federal budget. However, it is assuming the status of an urgent priority in the wake of the AUKUS agreement and the far-reaching reform urged by this year’s Defence Strategic Review (DSR). Both are responding to a much more challenging geopolitical environment and the realisation that Australia doesn’t have the luxury of time to achieve readiness.

This year’s Defence budget reflects the urgency of the demands upon Defence to the extent that it includes the initial spending on the nuclear-powered submarines and the first response to the DSR, despite there being only very approximate estimates for how that spending is to be scheduled and for the savings that will pay for them.

However, the urgency of the demands upon Defence isn’t reflected in its short-term funding. The only increase in the Defence budget over the next three years is compensation for the increased cost of imported military equipment flowing from a fall in the value of the Australian dollar.

Excluding this, the core funding of Defence (not including the Australian Signals Directorate) has actually been reduced at a time when unprecedented demands are being placed upon it. Between 2023-4 and 2025-6, Defence funding, excluding compensation for adverse foreign exchange movements, drops from $154.0 billion to $152.5 billion.

Both the AUKUS submarines and the DSR conclusions highlight an approach in which capability will drive budget conversations – not vice versa. That is welcome. But there is clearly much more work to be done to clarify the capability implications of the DSR, and then reflect those accurately – and at the appropriate time – in the budget.

The difficulty in bringing the DSR reforms and the spending on submarines into the budget is understandable. The timing of the DSR meant it reached the staff compiling the Defence budget very late in the annual process, while the nuclear-powered submarine program is of historically unprecedented complexity for any government project. The broad outline of the submarine program was only announced in March 2023.

New programs responding to the DSR such as a long-range strike capability or the hardening of the northern Australian bases, are not the subject of budget measures, with Defence expected to provide the additional funds needed with savings obtained from other programs.

Funding in each year continues to move faster than the predicted annual rate of inflation, consistent with the recommendations of the 2016 Defence White Paper (DWP) and the 2020 Defence StrategicUpdate (DSU).

However, the Defence Department’s financial controllers have fewer real resources to work with over the next three years than they were expecting in March 2022, when the Budget still contained the French submarine program and the DSR hadn’t even been commissioned.

The surge of inflation over the past year has made the constraints of a reduced funding base even tighter. The Treasury now expects inflation to reach 6% this year, or double the level it predicted a year ago. Inflation is being powered, both in Australia and globally, in large part by an overheated economy that’s the result of record low interest rates and large government deficits and further exacerbated by the impact of the Russian invasion of Ukraine on food and energy markets.

With unemployment at near record lows, Defence has been unable to meet its recruitment targets, which has been further exacerbated by increasing separation rates among uniformed personnel.

Defence had planned for the ADF to raise its numbers this year (2022-23) by 2,201 but instead faced a contraction in size by 1,389 uniformed personnel.

The rigid constraints on Defence funding over the next four years reflect the Treasury’s judgement that total government spending must be curbed if inflation is to be brought under control. Treasury’s economic forecasts assume that the combined efforts of government and the Reserve Bank of Australia will succeed in taming inflation over the next 18 months, bringing inflation back into the Reserve Bank’s target band by 2024-25.

The government will start providing increased funding for defence from 2027-28 onwards. An amount of $30.5 billion has been set aside for defence spending out to 2032-33. It’s expected that this will increase the defence share of GDP from around 2.05% to more than 2.3%. The additional funding will lift Defence’s share of government spending from about 8.2% now, including both operational and capital spending, to about 9.7% by 2032-33.

However, the principal task for Defence over the year ahead is to decide how to reconfigure its force structure and capability acquisition programs in line with the DSR and the difficult budget constraint.

That work is to be completed ahead of the planned 2024 National Defence Strategy, which is expected to be released before next year’s budget. The uncertainty surrounding the existing Integrated Investment Program (IIP) will affect defence industry as the scope and schedules of major programs are reviewed. Although Defence has raised the share of its procurement sourced domestically from about 45% to 55% over the past five years, it’s possible that the pressure to acquire new capabilities quickly will result in more ‘off-the-shelf’ imports.

Given the intense re-ordering of the Defence capital program expected over the year ahead, this year’s ASPI defence budget brief isn’t a detailed examination of the major acquisition programs. Rather, it’s a guide for the government, industry, academia and citizens interested in Australian defence strategy, capability and budget.

The strategic context for the 2023-24 defence budget is complex and extremely challenging. There’s currently a gap, and quite a significant one, between the rhetoric of the 2023 DSR and the 2023-24 defence budget (and forward estimates). How Defence and the rest of government will work together to bridge the gap will become clearer over the coming year. This publication focuses on what ASPI can usefully contribute to that process, and where the key issues lie in the defence budget.

The cost of Defence ASPI defence budget brief October 2022-2023

Executive summary

Shortly before the recent election, the previous government released a defence budget that continued its record of delivering the funding it promised in the 2016 Defence White Paper (DWP) and subsequent 2020 Defence Strategic Update (DSU).

The Albanese government’s first budget was not designed to focus on Australia’s security situation or defence spending. Tasked with sharing Australia’s difficult economic situation with the Australian public, the budget has more immediate fish to fry.

For those Australians who want to see increased defence spending, this was not going to be that budget as it would have directly undercut existing defence reviews due within months. Certainly, the Prime Minister has stated that the government will do whatever is necessary to ensure Australia has the defence force it needs in these strategically uncertain times.

But this budget gives no indication of how much the government is willing to spend to do that. With the Defence Strategic Review (DSR) under Stephen Smith and Angus Houston conducting its work and not due to report until March next year, the government has stuck with the existing funding line it inherited from its predecessor. That’s an artefact of the 2016 Defence White Paper—a document developed in a different era and quickly overtaken by events.

So Defence is in a holding pattern while the government keeps its powder dry and waits for Smith and Houston (noting their interim report has recently been handed to the government). No doubt it has had conversations with the DSR leads indicating its comfort zone for additional spending, but that hasn’t been made public.

What we can say from the information set out in this budget is that any increase to defence spending will require difficult reprioritisation. While the government received a revenue windfall this year due to high commodity prices, those are forecast to return to normal. And with the government committing to deliver the tax cuts agreed by its predecessor, its income is under further pressure. At the same time, it’s facing five growing spending pressures: interest on the growing debt, the National Disability Insurance Scheme, health care, aged care, and defence—and that’s before any increase to the existing defence funding line. The result is a forecast for deficit spending for the next 10 years.

That’s not a good situation for the DSR leads. They’re tasked with delivering new military acquisitions faster in the next decade, but the existing acquisition plan is probably already unaffordable (without increased spending), with many entirely new capabilities or expensive replacement projects. And with nuclear-powered submarines and frigates on the untouchable list, the challenge of delivering more sooner gets even harder, as those two programs will consume tens of billions of dollars over the coming decade even before they deliver their first vessels.

Moreover, inflation is rapidly eroding Defence’s buying power by billions of dollars every year. By the end of the forward estimates, Defence may have lost around $18 billion in buying power even if inflation rapidly returns to the Reserve Bank of Australia’s target rate. That’s the budget papers’ predictions, but those predictions haven’t been very accurate in recent years.

This year, despite nominal growth of over 7% in defence spending, real growth is under 1% once inflation is taken into account (although, with inflation difficult to predict, it’s also difficult to reliably quantify real growth). It’s hard to see Defence affording its ambitious acquisition program with a budget that’s essentially static in real terms.

Inflation is also driving nominal GDP growth at a predicted 8% this year. That means that defence spending is falling as a percentage of GDP for the second year in a row despite the government delivering the funding set out in the 2016 Defence White Paper and 2020 Defence Strategic Update. Predicted defence spending has also fallen significantly just since the March budget, from 2.11% to 1.96%, despite the funding line remaining fundamentally unchanged.

In summary, there is no pot of gold available to cover increased defence spending. That doesn’t mean the government can’t or won’t increase defence spending, but any increase will require either higher taxes (which appears unlikely, since the government is proceeding with its predecessor’s planned tax cuts), greater borrowing (accelerating the vicious cycle of debts and deficits), or cuts to other priorities that have constituencies of their own.

When we look at Defence’s big three areas of spending—capital acquisitions, people and sustainment—there have been no significant changes since the March budget. With the Australian dollar at a 20-year low against the US dollar, the Defence budget has received a large automatic top-up to maintain its purchasing, but there’s no adjustment to compensate for inflation.

There are a few changes to spending, but they’re broadly consistent with what we would see in a mid-year budget update. For those who follow capability, the top 30 acquisition projects and sustainment products hold some interesting information, but the lists are quite consistent with previous plans. We’ll have to wait for the outcomes of the DSR to see anything new.

Similarly there’s been no adjustment to Defence’s personnel allocation since March. But that still means the ADF needs to find roughly 13,000 more people this decade to operate the capabilities on its shopping list, even though it’s only managed to grow by an average of 300 per year since the 2016 White Paper. Smith and Houston may need to consider whether it makes sense to acquire capabilities that the ADF can’t crew, or at least how the ADF can maximise its combat power without many additional people. Of course, another HR strategy is one based on ‘if you build it, they will come.’

The situation is also difficult with Defence’s civilian and external workforce. To deliver its ambitious capability program, Defence has relied on growing numbers of contractors. They’ve helped Defence spend record amounts in its acquisition programs in recent years, despite the impact of Covid-19; however, they come at a cost. That growth may be over; in the October budget, the government is seeking $144.6 million in ‘savings from external labour and savings from advertising, travel and legal expenses’. That’s not a large percentage of Defence’s total budget but, if it means the organisation can’t hire the people it needs to manage the acquisition program, it’s hard to see how Defence will deliver more capability sooner.

Overall, while there were no surprises, the October budget hasn’t made the job any easier for Smith and Houston.

Deciding the future: the Australian Army and the infantry fighting vehicle

Introduction

The aim of this report is to inform government decision-makers and the public on the ability of Project LAND 400 Phase 3—the infantry fighting vehicle (IFV) acquisition—to meet the needs of Australia. I examine a number of factors that provide context for the government’s upcoming decision, whenever that may take place. Those include how IFVs fit into the Australian strategic environment, the ease with which the ADF can deploy them, their vulnerability to threats, and the ongoing utility of armour in the light of lessons unfolding from the ongoing Russian–Ukrainian War.

To set the information into a useful context, this report explains the nature of contemporary land warfare and speculates how the Australian Army is likely to fight in a future conflict. To further assist those making the IFV decision, this report offers a number of scenarios that outline potential operations that the government may direct the ADF to undertake. It also identifies current gaps in ADF capability that will need remediation if the IFV is to achieve its potential, as well as the other opportunities that might not be taken up because of the focus on this investment.

The report’s analysis results in some key questions for decision-makers to consider as they decide on the infantry fighting vehicle acquisition:

  1. Does the government believe that its IFV investment will deliver an appropriate balance of protection, lethality and mobility (both tactical and operational)?
  2. Does the government agree with the requirement for an infantry vehicle with STANAG 4569 Level 6 force protection and equipped with an active protection system?
  3. Is the government confident that the number of the IFVs obtained will generate a deployable and sustainable force that represents a sufficient return on the investment?
  4. Does the government accept that the IFV options under consideration will enable the ADF to offset existing gaps in capability and allow it to conduct operations in a contested maritime environment, including sea and airlift, long-range fires and logistics?
  5. Is the government confident that the Army’s combined arms system is deployable in contested environments, particularly in a maritime scenario?
  6. Does the government believe that the IFV will provide utility in the range of contingencies that the government envisages the ADF will need to meet?
  7. Does the government agree that the IFV will contribute to the requirement that the ADF be able to shape, deter and respond to threats as mandated in the 2020 Defence Strategic Update (DSU)?

Tag Archive for: Defence Industry

The battle for Pentagon acquisition policy: tradition versus new-and-cheaper

An upcoming battle over defence acquisition will have repercussions for US military posture, particularly in the Pacific.

The weapons that get bought in larger or smaller quantities, or are launched or cancelled, will indicate whether US President Donald Trump’s administration will strengthen long-range deterrent forces, order a retreat under his Golden Dome missile-defence system, or spend four years trying to blend incompatible visions of industrial and technological strategy.

It’s a battle between, on one hand, tech-industry advocates of radical, cheaper approaches to defence acquisition and, on the other, traditional political and industry forces that want more of the same—but with an important new emphasis on long range for facing China.

Executive orders (EOs) have become so frequent that they barely register in the news cycle before the next wave hits. An April 9 order on ‘modernizing defense acquisition’ deserves more attention than it has got.

It was warmly welcomed by Palantir chief technology officer Shyam Sankar, leading prophet of the tech sector push. ‘This is a Defense Reformation two-fer, right off the bat,’ Sankar wrote in an email. The order directs the Pentagon to buy commercial solutions, if available, and defines them as products developed with private investment.

It also orders a review of all major programs, and states that programs that are 15 percent behind schedule, 15 percent over budget or merely unaligned with the secretary of defense’s priorities—that is to say, any of them—will be considered for cancellation.

The order might have been written by the tech bros pushing for reform, and given how many senior Pentagon leaders had not been confirmed by April 9, it most likely was.

But a couple of weeks later, Republicans on the House and Senate armed services committees unveiled a $150 billion boost to the defence budget, most going to existing and near-future programs: $3.15 billion for more Boeing F-15EX fighters, $4.5 billion to accelerate the Northrop Grumman B-21 bomber, and even $1.5 billion for the ailing ICBM replacement, Sentinel. There was also money to slow retirements of F-15s and F-22s. The new Boeing F-47 and the Navy’s F/A-XX got $400m and $500m respectively. The Lockheed Martin F-35 was not mentioned at all, nor were aircraft carriers.

The navy gets an extra Virginia-class submarine and money for shipbuilding infrastructure—everything from wire and steel to drydocks and workforce development. The consistent ‘more ships’ message has been heard, after a decade of repetition. But there was no cash for the messed-up Constellation-class frigate, which could yet be thrown to the DOGEs.

Congress’s budget boost was a reminder that while politicians don’t object to Pentagon efficiency as such, the religious zeal for reformation resonates weakly on Capitol Hill.

Like industry, Congress strongly favors protecting established programs. In its plus-up proposal, among new and radical things, the Collaborative Combat Aircraft program (for fighter-like drones) and missile defense did best.

In air and sea power, Congress seems to be sending a message to support deterrence, power projection and industry. Hill Republicans are in an expansive mood with a shift towards longer-range systems—the B-21 and the new fighters.

Not mentioning the carriers is not significant. The idea of not having carriers is off the table; the last major design change in the carrier program was traumatic; and its unique facilities and skills make it almost impossible to adjust its building rate.

The omission of the F-35 may mean rather more. The new fighter designs and the F-15EX have greater range; even the F-47 will arrive before the USAF’s planned production of the F-35 will be completed, not before 2051.

The F-35’s supporters seem anxious, and Lockheed Martin wasted no time in promoting a Super F-35 after the F-47 announcement.

The navy converted most of its future F-35Bs, capable of short take-off and vertical landing, into F-35Cs early this year, under a new Marine aviation plan. Navy Secretary John Phelan was asked in his confirmation process whether the service planned to upgrade the B models to the new Block 4 standard; he answered noncommittally. That’s significant because it has long been held that US forces would keep all their F-35s in a common configuration.

Missile defence is a big enough field to accommodate many perspectives and players. More money can be used either to accelerate the established primes’ current programs or to open doors for newcomers. And technology that defends the US homeland can equally be used to protect forward bases. Choices between new and established players don’t have to be taken yet, which is probably a good thing given the ferment of policy ideas.

New cruise missiles and anti-ship missiles present an opening for new ideas and new competitors. There is little daylight between the views of the people running Anduril’s Barracuda cruise-missile project and those who did Lockheed Martin’s Common Multi-Mission Truck (CMMT, or Comet). Both teams believe new technology—one-shot injected structures, additive manufacturing in engines, and cheap and powerful data processing—can drop the cost of a cruise missile by an order of magnitude.

They also think new electronic payloads can allow the same vehicle to perform multiple kinetic and non-kinetic missions. The difference is that Anduril is pushing the idea hard but Lockheed Martin—maker of the million-dollar AGM-158 cruise missile—is not.

Overall, a battle may be brewing between the rebels and the establishment for control of the acquisition machine, a situation that will demand cool heads and competence in the Pentagon.

Good luck with that. Defense secretary and former TV host Pete Hegseth has so far escaped consequences for security lapses that would have terminated the career of anyone else, in government or industry. Navy Secretary Phelan had a John Belushi moment when he said the anniversary of Pearl Harbor was June 7.

As the closing roll of the movie told us, Belushi’s Bluto Blutarsky ended up in the Senate—and on the armed services committee for all we know. But that was fiction, and comedy.

Choose Australian companies to strengthen Australia’s defence

Australia has a unique opportunity to reinforce its national security by fostering a stronger domestic defence industry. For decades, foreign defence contractors have played a significant role in our military supply chains, but it’s essential that Australian businesses are given a greater role in shaping our future security landscape.

The recent procurement shake-up from the government is a much-welcome and much-needed course correction. For the first time, more concrete rules clearly define what it means to be an ‘Australian business’ in the context of government contracts; simply having an ABN doesn’t cut it anymore.

In other words, it’s no longer enough for a company to have a post box in Canberra while funnelling profits and skills offshore. To be recognised as an Australian business, firms must have at least 50 percent Australian ownership or be primarily traded on the ASX, and their principal place of business must be right here in Australia.

This is a positive step forward in ensuring that Australian companies have a fair shot at securing national defence projects, helping to build sovereign capability and strengthen our local industry. For years, the lack of a clear definition edged out Australian-owned businesses. The new rules shift the balance, finally giving Australian companies a fair shot at securing our national defence.

But rules only work if they have teeth. The focus now should be on effective implementation, ensuring they translate into meaningful action, especially when it comes to defence, technology, critical infrastructure and other key national pillars.

The reality is, we have world-class Australian companies developing and deploying cutting-edge defence technology overseas in regions such as Ukraine and for allies including the United States. If our technology is good enough for the world’s leading military power and most pressing conflicts, it’s more than capable of safeguarding Australia.

When Australian companies are involved in major projects, they’re often relegated to subcontractor status, with foreign multinationals leading key initiatives. The government’s ‘broader economic benefits in procurement’ metric is intended to change this, by making job creation, supply chain resilience and retained economic value key factors in contract decisions. But again, that only works if it’s enforced.

By prioritising Australian-led defence capability, Australia can create thousands of high-skilled jobs, onshore technological innovation and build a more self-reliant defence industry.

The importance of this shift is underscored in a report published by Insight Economics in October, which found that Australia’s ICT sector significantly contributes to Australia’s economy: in 2021 it generated $167 billion—roughly 8.5 percent of Australia’s GDP—and in 2024 supported more than 830,000 highly skilled jobs. We need a government that actively prioritises Australian companies, not just when it’s convenient, but as a core pillar of our national security. That means making retained economic value a decisive procurement factor, ensuring that every contract strengthens our defence industry, not just foreign balance sheets.

It also means making sure Australian companies lead, not just support, major defence projects. The US has figured this out: its In-Q-Tel model ensures homegrown defence startups are backed by government investment, keeping critical technology in American hands. Australia must take a similar approach. Australian firms shouldn’t just be considered for defence contracts; they should be the default choice.

By investing in Australian defence companies, we can ensure that our future defence capabilities are resilient, our economy benefits from retained investment, and our national security remains firmly in Australian hands. If we get this right, Australia will be stronger, safer and better prepared for the future.

Australia needs to manufacture change to ensure national security

After decades of gradual decline, Australia’s manufacturing capability is no longer mission-fit to meet national security needs. Any whole-of-nation effort to arrest this trend needs to start by making the industrial operating environment more conducive to manufacturing.

The sector needs both knowledge-based capital, for innovation, and financial capital. Given the scale of investment required, the government must cooperate with the private sector and incentivise the sector’s independent efforts.

A recent report I wrote for the United States Study Centre discusses how the Australian government can better engage with the manufacturing sector and align the private capital needed to finance its revival.

It first recommends commissioning an independent federal review with a focus on the manufacturing priorities of defence and national security initiatives. The report also recommends establishing an ‘Uplift Project Office’. Such an office, inside government, would coordinate engagement between departments and the investment community.

Successive Australian government strategic documents, including the 2023 Defence Strategic Review and 2024 National Defence Strategy, have underscored the national security importance of expanded advanced capabilities. Such capabilities include hypersonic weapons, artificial intelligence, quantum technologies, autonomous systems, critical minerals extraction and processing, and related value-adding activities.

To establish a sustainable sovereign capability in these fields, or, at the very least, greater supply chain security, Australia needs to revive its domestic manufacturing base. This is a challenging prospect. Over the past two decades, when measured by exports by sector, Australian manufacturing has declined by more than 50 percent, while reliance on resource income has doubled. Manufacturing now accounts for just over 5 percent of Australia’s economic output.

The proposed manufacturing review would map the Australian stakeholder landscape and inform a whole-of-government approach to engaging the private sector to arrest the decline of Australian manufacturing. Among its priorities would be preparing the manufacturing sector to sustain any new investments.

Successful conduct and implementation of such a review would depend on effective communication between government and industry. This is where the proposed Uplift Project Office would add value.

The government would benefit from greater emphasis on private sector engagement to mobilise capital for national security objectives. The proposed office would ensure that engagement extends beyond prime manufacturers and major superannuation funds to include small and medium enterprises and dual-use start-ups, which often drive progress in advanced capability areas.

The office should also coordinate separate efforts such as AUKUS and the National Reconstruction Fund Corporation (NRFC).

The proposed office should work with the investment industry and manufacturing sector to co-develop a standard investment proposal process and identify contracting mechanisms for government projects to upskill responsible agencies in their ability to engage with sources of private capital. Collaborative and consultative engagement would optimise decision-making by better equipping officials to work with investors and industry.

The office should sit under the defence minister to ensure that national security priorities are embedded in its bottom-up activities and are aligned with top-down efforts under the 2024 Integrated Investment Program and NRFC. Ideally, the office would also be guided by an advisory council of stakeholders from Australia’s AUKUS partners to maximise its effect on Australia’s defence innovation priorities.

The office should also support the private sector in investing across different portfolios. It should work with existing government-adjacent investment vehicles, such as the Future Fund investment process and assist in developing plans to mitigate talent pipeline and skilled workforce challenges.

As the geopolitical landscape continues to shift, Australia must be able to self-sustain and contribute advanced capabilities. Industrial capability is a precondition of this. The government, together with industry partners, needs to back domestic innovators and create the conditions for participation in the development, production and global economic success of indigenous capabilities.

The revival of Australian manufacturing is a long-term project that the federal government needs to embed into its policy and practices for the betterment of Australia’s national security. The federal government needs to fine tune engagement with the private sector to ensure that necessary stakeholders can act in a concerted and coordinated manner.

The underexploited potential of Ukrainian defence tech

Western companies and entrepreneurs are largely missing a chance to invest in the thriving and innovative Ukrainian defence tech industry and take its experience back to their home markets.

Failure of foreign investors to put even modest sums into the Ukrainian defence industry also means that Western armed forces are missing out on rapid developments, for example in drone technology. Foreign drone programs developed in peacetime conditions don’t have the benefit of insights and innovation from the pressure-cooker of the war in Ukraine.

Ukraine’s own companies dominate its industry, with 1.5 million first-person-view drones built by Ukrainian firms in 2024. Yet Ukrainian producers would welcome further mutually beneficial cooperation with Western companies.

According to Brave1, a state-run innovation cluster, the number of defence tech startups it encompasses more than doubled in 2024 and now totals 1500. Some of these firms develop multiple products. Products include unjammable drones directed through fibre optic cords instead of radio signals; remotely-controlled machine gun turrets on uncrewed ground vehicles; and anti-drone drones, which intercept uncrewed Russian reconnaissance aircraft.

Although manufacturers must put Ukrainian defence needs first, they’re also looking at export markets and even civil applications for their products.

Take, for instance, the startup Farsight Vision. It combines a software platform with a tiny hardware device that together can quickly create a 3D model of an area from drone-captured footage. Such models allow unit commanders to keep up with the constantly changing terrain in their area of operations—something that satellite imagery fails to provide due to longer production cycles. At the same time, such 3D models have non-defence applications, including monitoring environmental changes in areas that are hard to access, or scouting locations for offshore construction projects.

2025 is likely to become a turning point for Ukrainian defence tech: startups will appear more slowly, and established firms will cooperate more. Smaller teams may be absorbed by bigger companies, leading to concentration and, thus, faster sharing of frontline experience.

Yet foreign investors’ commitment to the industry remains half-hearted.

Kyiv School Economics calculated that in 2024 US$25 million was invested in the Ukrainian defence tech industry by both Ukrainians and foreigners. In other words, all Ukrainian companies were able to attract four times less capital than Helsing, a German defence AI startup, got in its first investment round.

The chair of NATO’s Military Committee, Admiral Rob Bauer, asked whether European investors were ‘stupid’, because they looked away from defence industry altogether.

To be fair, rethinking is underway, as more private money is directed into defence innovation globally. More investors now recognise that security, not other forms of wellbeing, will be the most important commodity in the coming quarter of the century.

Yet very little defence capital makes it to Ukraine, with most investors deterred by various misconceptions and some legitimate concerns. To them the Ukrainian startup ecosystem remains terra incognita. But local actors, including  Brave1 and funds already active in Ukraine, can help foreign private capital make the most of opportunities in Ukraine.

Finally, foreign-built drones have sometimes underperformed in Ukraine. A US producer said it had failed to anticipate the intensity of electronic warfare in the war. That failure prompted the company to scout for Ukrainian talent.

Without battlefield pressure, Western companies cannot innovate and respond to changing technology and techniques as quickly as Ukrainian firms do simply because they must.

On the other hand, those fast-moving, sleep-deprived Ukrainian innovators, constantly incorporating feedback from the frontlines into their tech, have no time for the cumbersome procurement procedures of Western defence ministries.

Thus, win-win partnerships can spring up. Ukrainian startups can bring fresh ideas while well-established foreign defence contractors use their experience with officialdom to export the technology into Western armed forces. Exposed to wartime industry, the foreign firms would themselves build expertise faster.

So far, they are missing the opportunity.

‘Battle-tested in Ukraine’ has become a marketing label in the arms industry. It can be applied more widely with greater cooperation between Ukrainian and Western companies.

Europe needs shared defence capabilities

Following Donald Trump’s victory in the US presidential election, Europe has recognised the need to strengthen its security and bolster its economic resilience. European defence industry leaders have called for more investment in the sector, and defence ministries are spending more on science and technology to ensure their countries’ readiness for the wars of today and tomorrow.

But it is not enough for each country to act alone. The European Union and Britain must approach technological innovation with the goal of building shared defence capabilities. Recent moves in this direction are promising: the German defence company Rheinmetall said it would open a new factory in Britain in 2027, as part of a landmark defence agreement between the two countries. Britain’s BAE Systems, Italy’s Leonardo and Japan’s Mitsubishi Heavy Industries are collaborating to develop a next-generation fighter aircraft. Germany’s Helsing, which specialises in AI-based defence software, is working closely with Swedish defence giant Saab and plans to expanded its presence in Britain.

Focusing on collective, rather than national, interests would enable large economies of scale. Each country could build on its comparative advantages, both in technological innovation and military capabilities, and thus strengthen European resilience for decades to come. This would also ensure that Europe serves as a strong partner to the US, contributing its unique defence expertise and industrial base.

Advanced European technological capabilities also form the foundation of economic prosperity, as reflected in Mario Draghi’s recent report on the future of European competitiveness and the European Commission’s policy agenda. But national policies continue to focus on technological sovereignty, with the goal of strengthening and protecting domestic industry, at the expense of sharing resources and information with allies.

This is the wrong approach. The proliferation of critical technologies means that even the strongest European economies cannot build an advantage on their own. Moreover, each country going it alone would stifle growth opportunities by inadvertently limiting exports and reducing market size below what is economically efficient or desirable.

Gaining a technological edge requires building European alliances that promote and protect shared capabilities. This collective statecraft would allow smaller economies such as Denmark, Norway and Estonia, which are home to innovative entrepreneurs working in quantum, space, and cyber technologies, to contribute to Europe’s sovereignty. These countries are too small to support a broad-based tech sector; working more closely with European allies would help them build their industrial base and boost domestic economic growth.

The idea is far from new. During World War II, the British shared extraordinary advances in radar with the United States under the auspices of the Tizard Mission. Today, NATO allies are developing drones with Ukraine. But to adopt a more consistent approach to pursuing collective sovereignty over tech outside of wartime, European governments must consider two factors: dependency and vulnerability.

Becoming a leader in critical technologies requires mutual dependence in terms of expertise, geographic advantage, and cumulative production. For example, quantum-computing systems rely on expertise in a wide range of areas, from superconducting materials to cryogenic engineering, which is usually spread across countries, highlighting the importance of alliances. Other innovations, such as space-launch technology, depend largely on geography: Norway’s Andoya spaceport, inside the Arctic Circle, will be essential for European space sovereignty. Lastly, some countries, after years of investment, have a cumulative advantage in production, such as Taiwan with semiconductors. Here, well-established manufacturing operations in Germany and Britain could be complementary.

Equally important is the question of vulnerability, which can stem from dependence. The war in Ukraine, for example, has highlighted Europe’s vulnerability to Russia’s control over natural gas (as well as supply-chain vulnerabilities in drone components). As the energy transition accelerates, the region will need to ensure that it can access critical material inputs and technology—which requires a shared effort.

Multilateral institutions can facilitate such collaboration. For example, the AUKUS security alliance, established in 2021 by Australia, Britain and the US, is committed to delivering advanced capabilities and ensuring license-free defence trade. Likewise, NATO should enable the sharing of non-military technologies.

Fortunately, some progress is already being made on this front. Last year, NATO established an innovation fund to invest in technologies that advance security goals. More recently, the European Commission launched a Trusted Investors Network to remove barriers to co-investing in breakthrough technologies with the European Innovation Council Fund.

At its core, collective economic statecraft means recognising that one country might be better served by supporting industry in another. Only by developing a collaborative framework that enables capital from across Europe (and the US) to be channeled to the most promising ventures can Europe gain the technological advantages that will help it meet important military challenges.

Such bold action would resolve a fundamental tension that has beset discussions of national security and economic competitiveness in Europe. Shifting the conversation from defending the homeland or strengthening its competitiveness to a discussion of how to advance collective interests would lead to measures that both promote and protect Europe’s sovereignty and economy. But first, each European country must be clear about its technological, geographic and production advantages and about how it can best contribute to collective peace and prosperity.

Great progress and greater potential: Australia needs to accelerate programs for uncrewed naval vessels

Australia is doing well in developing uncrewed naval vessels. Now it needs to redouble efforts to get them into service faster. Application of asymmetric technology is a declared outcome of the Defence Strategic Review (DSR) to generate deterrence by denial, so these systems should be moved to the front of the queue.

The Australian Defence Force has designs for three uncrewed vessels in development: the extra large uncrewed submarine Ghost Shark by Anduril Australia in Sydney, the smaller Speartooth submarine by Melbourne’s C2 Robotics, and the Bluebottle boat by Sydney’s Ocius Technology. Each craft is the result of navy-industry collaboration. When the three are operated together as a maritime system, they offer excellent combinations of capabilities and force multiplication, achieving outcomes that no single type could achieve alone.

The selection of the designs appears to be intended to provide effects over an expected future maritime battle space involving the extremely large distances and wide areas of the Indo-Pacific. Australia doesn’t have the workforce, the funding or the time to do that with only crewed platforms. Uncrewed craft are necessary to provide numbers and breadth of coverage in such a large area of operations, and they come with the triple bonus of being highly affordable, imposing low demands on the navy’s workforce, and prompt availability. Working together, the three systems are significantly greater than the sum of each individually.

The Bluebottle’s key advantages are low-cost persistence by use of environmental energy—wind, waves and sunlight for propulsion and electricity—its need for only a small support crew, little equipment and few spare parts ashore.

The Speartooth has long range, is inexpensive and can therefore be made in high volumes. Also, it has very low logistics footprint for storage, launching, recovering and operation.

The Ghost Shark’s key advantages are a large payload volume and very long range and endurance.

While details have not been released, the Speartooth and Ghost Shark presumably use battery-electric propulsion.

Importantly, these vessels are not for next decade in the DSR’s third epoch. The Bluebottle is mature and mission ready. Long-range maritime operations are standard everyday activities for Bluebottles that have already been delivered to the navy. The Speartooth is continuing intensive testing and trials, with more than two years in the water so far and a number of units operating frequently in a test environment. The Ghost Shark is also progressing rapidly, ahead of schedule, with in-water testing well underway.

For all three, testing is showing low workforce demands. Allocated personnel are operating many of these uncrewed systems concurrently. Humans assist and direct them but do not continuously control them.

Uses for the three designs range widely from augmenting contemporary maritime operations to extreme asymmetry—technological outmatching of the opponent. First, uncrewed submarines will probably be the most forward-deployed maritime units. The key advantage of any underwater system is in stealth, and uncrewed subs will use it to penetrate adversary defences and sea lines of communications, projecting capabilities at maximum ranges.

In a conventional operation, the Speartooth subs are likely to be the first line of engagement. Since they are inexpensive, they can be numerous, and losses could be easily afforded. Indeed, large numbers can be sent forward with the expectation that many (or most) won’t come back.

Their deployment in large numbers would raise the enemy’s challenge in looking for and eliminating them, tying up precious antisubmarine warfare resources on these relatively low-value targets. Being small, they can get to places that would be hard for crewed submarines to navigate, such as shallows or constricted waters where turns must be tight.

Speartooths’ payloads would probably also be made cheaply and in large volumes. We may imagine this as a whole host of tricks that could include a wide range of sensors (such as sonars and radio receivers for surveillance) and effectors (such as mines or small torpedoes, or the uncrewed submarine itself acting as a torpedo). A Speartooth could even be noisily present simply to confuse and disrupt an adversary network by acting as decoy by mimicking the sound, magnetic signature or even volume of another underwater object. With a simple mission update, a Speartooth could be tasked to a location to look like an AUKUS or Quad nation submarine, or to generate even greater confusion as a Chinese, Russian or North Korean submarine. The imagination goes wild with the possibilities.

During a period of competition short of war, Ghost Sharks will be forward, maintaining continuous and close surveillance. In war they would probably sit back somewhat, carrying higher-value payloads, but move forward to help outweigh an enemy’s strength in a particular area for a while. Speartooths can be a shield behind which the more-sophisticated Ghost Sharks could operate more effectively to activate or deploy larger and more elaborate payloads.

Ghost Sharks will have more payload space and much greater power reserves than Speartooths, for large, energy-intensive payloads and higher deployment speeds. Their price will put them above the range of expendable equipment, so we will want Ghost Sharks to come back most of the time. They may need protection and usually won’t be exposed to high risk of detection and destruction.

So the Speartooth and Ghost Shark designs appear to very neatly complement one another.

They will also be produced at scale here in Australia. These are two cards that the ADF can play when required to mobilise large numbers of craft. We can export them to allies and friends, too.

Bluebottles will probably sit further back, providing many support functions to forward deployed uncrewed submarines. As surface vessels, they can be detected and targeted much more readily than subsurface systems; However, they provide persistent presence in ways that can’t be provided from below the surface, thanks to their use of the wind and sun to keep them going. Plausible functions include surface surveillance, acting as a persistent communication relay, and potentially even recharging of uncrewed subs, using batteries or generators aboard the Bluebottles. They can also contribute to combat operations with radar, cameras and electronic warfare systems above the water and sonars below it, listening for and attempting to detect and track adversary submarines.

Supported by uncrewed boats and submarines, crewed ships and subs have more options in achieving operational tasks. Maritime autonomous systems are likely to be a critical element in the survival and employment of the small numbers of crewed vessels that the ADF has. The ADF really needs to protect crewed ships and submarines: the loss of any would be a national tragedy, taking lives and depriving the ADF of an extremely rare resource that would take years to replace. Risk reduction for crewed ships and subs is alone a reason for seeing accelerated investment in autonomous vessels providing extraordinarily high value-for-money.

The ADF looks in very good shape to bring serious maritime autonomous systems to fruition in the near term. The navy has chosen its designs carefully, so the three platforms working together will be far more effective than any platform on its own. Development of these world-leading systems in Australia, supported by our own industrial base, promises the great benefits of easy supportability and capability expansion.

The National Defence Strategy should accelerate these developments in any way possible. The ADF could and should be producing significant numbers of these uncrewed systems to contribute to the DSR’s demand to generate asymmetric effects from a focused force that deters by denial.

Australia’s lack of defence primes isn’t a problem; it’s an opportunity

Australia is uniquely suited to help solve the greatest defence acquisition challenge of our time. While the world is innovating at an unmatched pace, the old scions of the defence industry are not.

Western armed forces need equipment that is developed and built not just more cheaply and quickly but with evolution built in. They cannot keep waiting for superb systems that take many years, even decades, to get into service and cost so much that few units can be bought—and are then improved only on achingly slow schedules, if at all.

General Jim Rainey, the commander of the US Army Futures Command, had sharp comments when he visited ASPI this spring: ‘We need to change and adapt how we acquire. We are either going to do it now or we are going to do it when we go to war.’

Australia’s chief of army, Lieutenant General Simon Stuart, was equally sanguine: ‘As one of my predecessors, Sir Henry Wells, adroitly put it in 1957, we must “avoid the situation where soldiers have to be killed to learn”.’

And at ASPI’s Sydney Dialogue in September, Abraham M Denmark, a senior associate from the Center for Strategic and International Studies, had a blunt call to action: ‘Adapt or die.’

By all appearances, US and British primes contractors have chosen ‘die’. Despite increasing calls to change the way they develop defence technologies, they keep podding along with their old processes. At Land Forces 2024, while discussing how the Australian Army relied on space, Northrop Grumman offered to lend its ‘experience and primacy in space’ to help up-and-coming firms—but seemed to have no direct answer to Starlink, a cost-effective commercial service that militaries across Europe and the Indo-Pacific are looking to.

Pillar 2, the part of AUKUS that is not about nuclear submarines, has not enjoyed the detailed attention of Pillar 1, which is. It has been dismissed occasionally as a grab bag of disparate technologies, but a common thread runs through them. Not only will they be critical in a future fight; they are all innovations that primes have failed to deliver over the past decade. China is investing heavily in these technologies and, according to ASPI’s Critical Technology Tracker, is now outpacing the AUKUS partners.

At Land Forces, the US and British prime contractors at least acknowledged the problem, conceding they needed to reduce historical seven- to 10-year production timelines down to 18 to 24 months. It’s unclear how the prime contractors, widely known for cost overruns and delayed delivery, can cut their development times by 80 percent. Regardless, the processes need to be not just faster but fundamentally different.

The US and British defence industries are accustomed to a waterfall process, in which development progresses slowly ‘from requirements definition through to testing, deployment, and field use.’ The process is linear and often irreversible. ‘Information flows in one direction only, regardless of the downstream consequences for the system …’. What is needed, instead, is ‘an iterative fashion where requirements and design solutions can evolve as the technology is developed.’

Take drone technology, for example. In recent research, the Royal United Services Institute’s Justin Bronk and Jack Watling outline findings that Ukraine’s drone industry is constantly tweaking designs, adapting to a fiercely competitive battlefield. Everything from sensors, radios, software and weapons are getting updated every six to 12 weeks, they find.

At Land Forces, Anduril, a disrupting entrant to the US defence industry, demonstrated an understanding of current defence technology challenges: ‘It’s not about getting the tech faster to the warfighter. It’s about getting tech that can evolve,’ stated a spokesman, retired Lieutenant General Neil Thurgood.

Each Pillar 2 technology will require integrating systems of systems. Countering drones can require seamless integration of well over a dozen technologies, which react faster than a human can. The primes, however, continue to try and capture sole source vendor contracts.

While Australia doesn’t have the established defence primes the US and Britain have, it also doesn’t have their bad habits. And Pillar 2 technologies aren’t solely for the benefit of defence, with plenty of opportunity for dual use. Dean Rosenfield, the chief executive of defence-focused engineering company Nova, cites the example of Australia’s mining and farming industries. ‘Australia should be an autonomous systems superpower,’ he says.

Sixty years ago in The Lucky Country, Donald Horne was pessimistic about his compatriots. ‘Australia has not been a country of great innovation or originality,’ he wrote. ‘It has exploited the innovations and originality of others and much of its boasting is that of a parasite’. Half a century later, it is the US and British defence industries that have shown a persistent lack of cleverness. Pillar 2 represents an unmatched opportunity for Australia’s firms, if they wish to take it.

The US Air Force is redesigning itself

The Resolute Force Pacific (Reforpac) exercise will be the largest US Air Force non-combat deployment in many years, with more than 300 aircraft involved. The two-week exercise in mid-2025 will coincide with the multinational, biennial, all-domain Talisman Sabre training event.

But it is also an important step in a radical redesign of the force, USAF Chief of Staff General David W Allvin told the Air Force Association Mitchell Institute’s first forum on future airpower on 13 November—one that includes new definitions that remove familiar terms like ‘contested’ and ‘permissive’ from the service’s vocabulary and may change its acquisition goals.

Since the end of the 1990s geopolitical unipolar moment, when the United States faced no real adversary, Allvin notes, the air force has ‘crowdsourced the fight’ to support prolonged operations in low-threat environments, pulling small units from 93 locations ‘because we didn’t want to break the bases.’

Reforpac will draw large forces from fewer units, to provide more intensive and realistic training. It’s a concept, he said, that was battle-tested in part when the USAF reinforced its Middle East strength after the 7 October 2023 Hamas attacks on Israel.

As air force leadership and the new Integrated Capabilities Command carry forward a process called Force Design, Reforpac is designed generate real-world experience. To keep Force Design focused on results, Allvin says, every question ends with ‘in order to do what?’

One lesson is already emerging: the US Air Force may not be able to afford to structure itself entirely around high-end (read: stealthy) aircraft and systems—and it may not need to. ‘If there are systems there that are less lethal,’ Allvin says, ‘they are there so that we don’t grind the others down facing a cost-imposition strategy.’

An air force can use mass, with uncrewed systems, to impose cost, Allvin adds. ‘Mass may be about having assets that must be addressed, to deplete the adversary’s inventory.’ That’s the theory behind one new effort, a low-cost long-range missile named Project Franklin (because it must be respected) based on an Defense Innovation Unit platform design.

This means big changes in future force structure and equipment plans: for 30 years, since the Desert Storm campaign against Iraq, the end of the Cold War, and the inception of the Joint Strike Fighter program, the USAF’s destination has been an all-stealth force—yet that is still decades away, the last F-35 delivery having slipped into the late 2040s.

No conclusions have been reached—for an Air Force futures conference, the discussion was astonishingly NGAD-free—but Allvin set down some principles for force design. ‘This is a design for the changing character of war. New geostrategic patterns or a new national defense strategy can emerge, and I don’t want people to leave here thinking this is an Indo-Pacific force design.’

Allvin’s principles include:

‘Take back the offensive. You can’t retreat to long range. You have to be able to fight close in, where the partners are.

‘Speed is imperative. The adversary will put effects in immediately. There will not be an iron mountain’—the informal term for massive, centralised supply dumps—‘and we need to disrupt and deny early.

‘Solve for agility. We’ve shown too much hubris about our ability to predict the future, even in our own technology base.’

Terms like ‘denied’, ‘contested’ and ‘permissive’ get lost in arguments over their meaning, and, Allvin says, ‘when you add fractional orbital bombardment systems and cyber, everything is contested.’

In the new force design lexicon, detailed in a document released on 15 November, the air force defines ‘mission area’ capabilities needed to respond to three threat bands, according to density, complexity and distance as mission areas.

—Mission Area 1 (MA1) capabilities can ‘live within and generate combat power from the dense threat area which will be under constant attack’ from missiles or drones.

—MA2 capabilities ‘operate from the defendable area of relative sanctuary beyond the umbrella of most adversary ballistic and cruise missiles … and project fires into highly contested environments.’

—MA3 capabilities ‘create the flexibility and mass to span a range of potential future crises … with positions resilient to limited adversary attack.’

‘It would be great to have all-MA1 forces,’ Allvin said, ‘but it costs too much.’  That point was underscored by Deputy Chief of Staff for Air Force Future MG Joseph Kunkel, whose portfolio includes Collaborative Combat Aircraft (CCA) efforts: ‘If you plan for anything below MA1 as a lesser, included case, you have overkill in MA2 and MA3.’

The new concept is clearly aligned with CCA, but has implications in other areas. High-end platforms can be made more versatile. Doug Young, Northrop Grumman vice president of strike systems, noted that the open systems architecture of the B-21 bomber will support a wide variety of weapon loads, including mixed load-outs, and that the same capability is being retrofitted to the B-2.

The B-2, Young noted, could physically accommodate 240 GBU-39 Small Diameter Bombs, but that was ‘a mission management problem’ when the aircraft was initially developed. We can, he suggested, look at ‘different choices’ now. (Think of eight cruise missiles coming out of one bay and 120 Franklins from the other.)

That capability could be part of a ‘joint long-range kill chain’ concept revealed by Lieutenant General David Harris, deputy chief of staff for Air Force Futures. ‘We talked to the navy and realised we were both investing in the same stuff’ for long-range attack, Harris said, ‘and then we brought the Space Force in.’

Big ambitions. But Allvin’s immediate concern is that Reforpac can be funded, given the post-election turmoil in Washington. ‘I hope that we’re not on a continuing resolution next summer’—which occurs if no budget can be agreed on—‘so we can fund it properly.’

Boeing’s woes and the state of the US defence industry

Boeing is one of the Pentagon’s biggest contractors and therefore a heavyweight supplier for US allies. So its alarming financial condition is much more than investment news.

The company has got itself into loss-making defence programs by overestimating the potential for production profits to cover research-and-development losses. Expect it to be wary in future.

Meanwhile, the other two big US military aircraft builders, Lockheed Martin and Northrop Grumman, look more interested in defending current business, such as the F-35 (Joint Strike Fighter) and B-21 programs, than moving on new and riskier ones.

Boeing’s Defense & Space division on 23 October posted a US$5.5 billion loss for the third quarter of 2024. Most of the drag came from write-offs of future losses on current programs, mainly the T-7A Redhawk trainer and the KC-46 Pegasus tanker. And the company’s civil division, which makes airliners, has its own enormous problems.

Boeing’s profit estimate at completion (EAC) for the KC-47 and T-7 programs is negative. Quite likely, the MQ-25 carrier-based tanker drone and VC-25B presidential transport programs are no longer expected to make money, either.

‘Our EAC process needs to get better,’ CEO Kelly Ortberg said. Advisedly so: after bidding low to get the tanker job, Boeing tried to save money by building the basic airframe at its civil plant at Everett, Washington, rather than setting up a military line in Wichita, which was needed.

Boeing’s rock-bottom bid on the T-7 was influenced by its partnership with Sweden’s Saab, which offered new and cheaper process. But as far back as 2019, Saab people were quietly saying that Boeing didn’t seem to understand those processes.

In 2018, Boeing agreed with then president Donald Trump to cut costs of the two new presidential aircraft by adapting surplus 747-8 airliners it had already built. An independent VIP conversion specialist, GDC Technics, was supposed to convert them, but it went bust and Boeing had to take the work in-house.

As well as being stuck with loss-making aircraft projects, Boeing Defence and Space is under pressure from SpaceX and other newcomers in the space industry.

The result is that the division is losing money, hard to sell, and hard to grow. One analyst asked Ortberg about ‘the potential of just exiting some programs or some contracts where you’ve got absolutely no path to profitability’. Not viable, Ortberg said. ‘These are our core customers that need this capability. We’ve got long-term commitments.’

Well, that, at least, was reassurance the Pentagon wanted to hear.

But are things better in the rest of the US industry? Its structure was established by the Last Supper, the 1993 meeting where deputy defence secretary Bill Perry advised bosses of aerospace prime contractors who still considered their businesses viable to look to their left and their right, ‘because one of you will be out of business in five years.’

It triggered a wave of mergers and acquisitions.

But from the end of 1996, when JSF program kicked off, there was a long drought of major combat aircraft programs (imagine no new projects between the P-80 of 1944 and the F-111 of 1967), because of the Pentagon’s focus on counter-insurgent war in the Middle East.

Next, the Pentagon focused on squeezing the industry on initial acquisition cost, through projects such as Better Buying Power.

Finally, we saw the shift of business emphasis towards maximising shareholder value. What is good for that is cash profit. What is less good is low- or negative-margin research and development, and what is even worse is spending money competing for programs that you don’t win or might win only to see them cancelled or delayed.

For US defence prime contractors today, the path to prosperity is to defend your existing programs and the future support business that goes with them. With few new starts for suppliers to bid on, the primes can demand lower prices from them by threatening to look elsewhere. They can squeeze suppliers until the pips squeak, raiding them for their best-performing people, and then complaining about late deliveries and quality problems.

New programs? Well there is one for fighter-like drones, the Collaborative Combat Aircraft (CCA), but it doesn’t look anything like the sort of big-money effort that the air force’s stalled Next Generation Air Dominance (NGAD) was supposed to be, fielding a so-called sixth-generation fighter.

 

Lockheed Martin CEO Jim Taiclet could have been more enthusiastic about prospects. At Lockheed Martin’s earnings call, he said, ‘We have to be able to meet the J-20 with enough numbers in the Pacific. F-35 and F-22 now are the only really competitive jets against the J-20, one to one. We have to field enough of those aircraft in a short enough timeframe to maintain an effective deterrent in the Pacific. We need to be able to bring autonomy in the Collaborative Combat Aircraft concept into fifth gen—and sixth gen, if there is one.’

If there is one?

Northrop Grumman CEO Kathy Warden had a similar message when an analyst asked, ‘With the Air Force reevaluating at least the manned part of NGAD, could that free up to get your funding for the Air Force to get to that desired B-21 inventory of 150 units?’

Warden responded, ‘I think that’s exactly what the air force is looking at. They are undertaking a force structure design review, and we know that B-21 is in the mix.’

There’s common sense to this approach. The walls are going up around the major programs, and the case is being made that the CCA or other capabilities can augment them but cannot be allowed to replace them.

And if any money is freed up by postponing a new generation of fighters, Taiclet and Warden will happily take it. (And don’t forget that Northrop Grumman has a very large stake in F-35.) They’re betting, not unreasonably, that CCA money going to other, smaller aircraft suppliers will not come out of their pockets.

Making the AUKUS partners interchangeable takes a defence ecosystem

To make the AUKUS partnership successful, the three partner nations will need to shift, as Defence Minister Richard Marles said in a speech in 2022, from interoperability to interchangeability.

Interchangeability goes beyond the ability to operate together; it means components and systems from different manufacturers and countries can be effortlessly swapped and integrated. It means any capability acquired by one of the AUKUS partners can be seamlessly introduced into service and operated by the others.

And to achieve this, we need our defence industrial bases to become a well-functioning ecosystem. Defence firms need to work closely with their defence departments and capability organisations and engage with universities and one another. This applies to primes and to small and medium enterprises.

Moving from interoperability to interchangeability is not a distant aspiration; it is an immediate necessity. By adopting an ecosystem approach, reforming export controls, and empowering our workforce, we can forge a defence industrial base that is both resilient and flexible.

Take for example, nuclear powered submarines (SSNs). Our firm, QinetiQ, leads on the test and evaluation and operational assurance of British submarines, and our ranges and skills are being adapted to also provide UK regional assurance for visiting United States SSNs and, eventually, Australia’s.

This can accelerate Australia’s acquisition of capabilities in test and evaluation and in training and mission rehearsal—not only for Australian SSNs but also to enhance interoperability for each nation’s SSN deterrence capabilities.

We recently announced the formation of Team TECSA, a collaborative initiative bringing together industry and academia to address Australia’s requirement for test and evaluation, certification and systems assurance.

This task is beyond the capacity of any single company, making collaboration across the entire defence ecosystem essential.

Interchangeability also raises the question of where we can augment our supply chains and create efficiencies. The progress made in the guided weapons and explosive ordinance enterprise is an example of establishing Australia as a reliable second source for critical munitions.

There are also opportunities in critical minerals, quantum computing, AI and in vital components as diverse as ball bearings and rocket motors.

In the same way that Australia has been a major beneficiary and a key market for the US defence industry, opportunities are emerging for Australian businesses to play a bigger role in supporting US defence production.

Take for example, the Australian Department of Defence’s Global Supply Chain (GSC) initiative. In the past, Australian companies were able to access niche opportunities in the US. Under AUKUS, the objective is to seamlessly integrate Australian industrial knowhow into a common market.

We are talking about a new wave of opportunity for Australian businesses that is unprecedented.

A critical enabler of this vision is export control reform. Export controls serve as the rules of engagement in our industry, ensuring that technology and information flow securely and responsibly across borders. Reforming these controls is crucial to facilitate true industry interoperability.

By harmonising export regulations, we create an environment in which defence partners can share technology and collaborate without unnecessary barriers. This reform not only strengthens alliances but also accelerates innovation by providing access to a broader range of resources and expertise.

Much progress has been accomplished since Marles’s declaration of intent two years ago. These reforms are the foundations of our enhanced partnership. They form the high external walls needed to protect the most sensitive information and technology that is the lifeblood of our sector and lower the internal walls to foster co-operation and innovation.

There is still work ahead of us to realise the aspiration for an AUKUS defence industry free-trade zone, allowing for seamless collaboration by commercial, industrial and research entities from all three nations.

None of these advances can happen without addressing our most valuable asset—our workforce.

Our people are the driving force behind innovation and transformation. To achieve interchangeability, we must harness their full potential and address the gaps in skills and capabilities.

Fostering the best possible talent pipeline is not solely the job of our governments.

It requires policymakers, defence forces, industry, universities and unions to do their part.

QinetiQ runs a sovereign skills program that transfers our employees from Australia to Britain to participate in live test and evaluation environments. This knowledge transfer ensures our employees learn about QinetiQ’s global test and evaluation and threat mission rehearsal capabilities so that they return to provide the skills needed to meet Australia’s defence priorities.

By investing in training programs and cross-border collaborations, the defence industry can ensure that our workforce is equipped to tackle the challenges of tomorrow. This exchange of expertise enriches our collective knowledge base, making us more adaptable and proficient.

A world where defence equipment can be quickly adapted to meet the evolving demands of modern warfare, regardless of its origin, requires us to transcend traditional boundaries. It demands open standards, common platforms and aligned objectives across nations.

This is no longer about competition between our countries; instead, it is about ensuring that the sum of our parts is greater than if we acted alone. Our strategic circumstances demand this new approach.