Australia has begun a sweeping defence upgrade, pledging over A$25 billion toward modernising its military over the coming years. Officials say this is the most expansive build-up since World War II, driven by growing regional pressures and expectations from allies to play a stronger role in Indo-Pacific security. The plan covers new autonomous drones, undersea vessels, frigates, and shipyard upgrades.
This move is set against a shifting world order in which power struggles in the Pacific basin are more visible than ever. China’s growing naval presence near Australia’s coastline and heightened expectations from the United States have pushed Canberra to act. After a strategic review warned of intensifying “major power competition,” the government chose to invest in military capabilities rather than rely exclusively on alliances.
Prime Minister Anthony Albanese is scheduled to meet U.S. President Donald Trump on October 20, where defence and Indo-Pacific cooperation will top the agenda. Some analysts view this as part of Canberra’s push to balance economic ties with Beijing while deepening security bonds with the U.S. and regional partners. Indeed, political commentary notes the difficult position Australia faces: improving deterrence without triggering unacceptable economic fallout.
One high-profile contract is a roughly A$10 billion deal with Japan’s Mitsubishi Heavy Industries to deliver up to 11 Mogami-class frigates. This is part of a broader A$55 billion surface fleet upgrade that also includes the Hunter-class frigates to be built in Adelaide with assistance from the UK’s BAE Systems. To support these shipbuilding ambitions, the government has pledged A$12 billion toward the Henderson shipyard near Perth, converting it from yacht production to a facility capable of warship and future submarine construction.
In aerial development, Australia is testing MQ-28A “Ghost Bat” drones under a A$1 billion agreement with Boeing. These are “loyal wingman” drones meant to fly alongside crewed aircraft. This system is part of a A$4.3 billion push to strengthen domestic drone capabilities, a rare step in domestic military aviation.
At sea, Australia has committed A$1.7 billion to autonomous underwater vessels built by Anduril, nicknamed “Ghost Sharks.” These vessels will be manufactured in Sydney and are described by the Defence Minister as lethal strategic assets. According to project data, they are expected to support intelligence, surveillance, reconnaissance, and strike missions. (They will be built domestically as part of Australia’s push for sovereign capability.)
Complementary plans include a decade-long, A$1.3 billion counter-drone program, supported by Leidos through a A$46 million contract for operational systems. Some funding is also being brought forward: in March 2025, defense officials revealed that an additional A$1 billion would be accelerated to support submarine base planning and guided weapons manufacturing.
Economists estimate that defence spending, now around 2 percent of GDP, will rise to 2.25 percent by 2028. Some forecasts suggest it could reach 3 percent over the longer term if projects under the AUKUS security pact expand fully. Under that pact, Australia plans to acquire nuclear-powered submarines in partnership with the U.S. and U.K. The total cost for this submarine acquisition is projected to reach A$268–368 billion by 2050.
Still, critics argue the pace and allocation of investment raise doubts. Some say too much is focused on conventional naval assets like frigates and submarines, which could become vulnerable in future warfare environments. Others argue that northern Australia, closer to potential flashpoints, needs better defences first. Steve Baxter of Beaten Zone Ventures warned that though the strategy looks sound, its financial backing so far is inadequate.
Domestic tensions also surface around transparency. Observers note that the shift to a heavier defence posture has been introduced without much public discussion on tradeoffs, between defence and social spending, for example, and without clear communication about what full-scale hostilities might mean for civilians.
Australia’s relationship with China complicates matters further. Beijing is still Australia’s largest trading partner. The government has sought to restore economic ties following earlier tensions, and any aggressive military posture risks backlash. Scholars argue the government is performing a balancing act, promising strong deterrence while trying not to alienate China too sharply.
The defence overhaul clearly marks Australia’s intention to stand more firmly on its own. Investments in unmanned systems, modern shipbuilding, and shipyard regeneration show the country is preparing for new strategic challenges. But success is far from guaranteed. The outcomes will depend on efficient project delivery, sustained funding, and political leadership that is willing to manage economic and diplomatic risks.
