Australia’s defence industry stands at a crossroads, with the urgent need for a decisive plan to empower local small and medium enterprises (SMEs). The current landscape is fraught with barriers that stifle innovation and discourage participation. Complex tendering rules, excessive compliance requirements, and cumbersome export processes create prohibitive hurdles for Australian SMEs. If we continue to rely heavily on global supply chains and foreign decision-makers, we risk undermining the very autonomy we seek in defence spending.
Critics often dismiss defence spending as a drain on taxpayers or a distraction from more productive industries. However, this perspective is short-sighted. A stronger Australian Defence industry would not only bolster national security but also drive economic growth. Defence manufacturing creates thousands of skilled jobs, particularly in regional areas where Defence facilities serve as economic anchors. Every dollar invested locally circulates through the broader economy, supporting apprenticeships, advanced manufacturing, and supply chain innovation.
Moreover, technologies developed for defence—such as cybersecurity, automation, and materials engineering—often find civilian applications that boost productivity across other sectors. Far from being a cost centre, a vibrant defence industry is an engine of national capability and innovation. In a region where instability is on the rise, Australia’s ability to export defence technologies responsibly could enhance both economic resilience and strategic influence.
Earlier this year, I argued at the National Press Club that Australia must build a self-reliant defence industry by 2035. The goal is not isolationism but independence—the ability to produce, maintain, and upgrade critical defence capabilities without relying entirely on foreign suppliers. Achieving this will demand consistent funding, stable procurement policies, and a genuine commitment to Australian-made assets. Practical support measures, grants, local procurement quotas, and access to early-stage capital are essential to help SMEs participate in Defence projects.
What’s needed now is a mandated minimum share of Defence contracts for Australian SMEs, binding commitments to include locally produced resources in every major Defence program, transparent reporting and accountability, and the establishment of an independent auditing body to ensure compliance with Australian Industry Capability (AIC) plans.
Reform is essential. It should not involve weakening security but rather cutting red tape that adds cost and delay without improving outcomes. The government’s Defence Industry Development Strategy, due for update in 2026, recognises the goal of greater self-sufficiency. However, what’s missing is a clear roadmap to get there.
The Covid-19 pandemic exposed the fragility of global supply chains. That should have been the moment to overhaul procurement systems to prioritise local capacity. Instead, progress has been piecemeal. But that’s not all. In early 2025, the government took an important step by revising what constitutes an ‘Australian business’ under federal procurement rules. The new definition includes at least 50 percent Australian ownership, local tax residency, and a principal base of operations in Australia. That same definition should be applied to defence procurement. Without it, foreign-owned subsidiaries can claim the label ‘Australian industry’ while the profits—and often the know-how—flow offshore.
The hard truth is that without a self-reliant defence industry, Australia’s security is contingent on the goodwill and capacity of others. Supply disruptions, political changes, or strategic divergence could leave us dangerously exposed. An increase in defence funding to at least 3 percent must come with the outlined reforms to process and procurement to ensure we acquire the capabilities needed for the decades ahead.
The notion that President Donald Trump somehow gave Australia a free pass on its low level of defence spending should be met with concern, not comfort. Any such reprieve, real or imagined, is unlikely to last long. As the Australian government navigates its relationship with Washington, defence spending will remain squarely on the agenda.
Right now, Australia spends a little more than 2.0 percent of GDP—around $59 billion per year—on defence. By contrast, the United States has urged its NATO allies to lift defence and other security spending to 5 percent of GDP in response to global instability. The message from Washington is unmistakable: the US expects its allies to share more of the load. Australia cannot afford to assume that our alliance guarantees protection if we fail to invest in our own security.
Australia has the talent, resources, and industrial base to chart a different path. What’s needed now is political will, long-term investment, and a belief that our security—and our sovereignty—are worth building here at home. To do otherwise is to cede control of Australia’s future to others.