SYDNEY (Realist English). Australia has embarked on its biggest military modernization drive since the Second World War, committing more than A$25bn to fleets of autonomous drones and submarines, Japanese-designed frigates, and a sweeping shipyard upgrade. The effort reflects a shift in strategy as the country adapts to what officials call its most challenging security environment in decades.
Defence minister Richard Marles warned in August that Australia faces “the most complex, in some ways the most threatening strategic landscape since the end of the second world war.” Chinese live-fire drills off the nation’s eastern seaboard underscored the urgency, while U.S. President Donald Trump has pressed allies, including Australia, to accelerate defence spending. Prime Minister Anthony Albanese is set to meet Trump on October 20 to discuss regional security.
The new strategy stems from a landmark review that cited the rise of “major power competition” in the Pacific, driven by an increasingly assertive China. It urged Canberra to reduce reliance on allies and bolster its own capabilities. “The urgencies are clear,” former U.S. diplomat Kurt Campbell told reporters in Canberra.
Key projects include a A$10bn deal with Japan’s Mitsubishi Heavy Industries for up to 11 Mogami-class frigates, part of a A$55bn surface fleet renewal also involving Britain’s BAE Systems. Australia has allocated A$12bn to upgrade the Henderson shipyard near Perth to build the frigates and service future nuclear submarines. In the air, Boeing’s MQ-28A “Ghost Bat” drones — the first locally designed combat aircraft in 50 years — are being tested under a A$1bn contract, with a total A$4.3bn earmarked for unmanned aerial systems.
Canberra has also signed a A$1.7bn contract with U.S. group Anduril for “Ghost Shark” autonomous underwater vehicles, while Leidos secured a A$46mn deal for anti-drone systems. Marles described the uncrewed vessels as “the world’s leading capability in long-range autonomous undersea systems.”
Defence outlays are expected to rise from about 2% of GDP today to 2.25% by 2028, and potentially 3% within a decade, according to Commonwealth Bank chief economist Luke Yeaman. Much of the burden stems from the Aukus pact with the U.S. and UK, which will see Australia acquire nuclear-powered submarines at a cost of A$268bn–A$368bn by 2050.
Yet critics argue the spending surge still falls short. “The strategy is right but it’s not been funded,” said defence investor Steve Baxter. Others, such as the Lowy Institute’s Sam Roggeveen, contend that Canberra is investing heavily in submarines and frigates while neglecting the vulnerable north.
The build-up underscores Australia’s delicate balance between security and economics. China remains its largest trading partner, and Albanese has sought to repair ties with Beijing even as his government strengthens deterrence. “The government is torn between different political goals — the relationship with China but also deterring China,” said Andrew Carr of the Australian National University.
Analysts note that unlike Japan or Taiwan, Australia has little history of preparing for conflict near its own shores. Carr warned that Canberra has yet to articulate to the public the full implications — and trade-offs — of its new “national defence” posture.
