Big year for Defence in 2026

With the year drawing to a close and this being the last report for 2025 it is worth examining what’s ahead for Defence in 2026. Next year sees a review of Defence spending and the release of a number of revised strategic documents. This includes the release of the National Defence Strategy, updated Integrated Investment Program, a Defence Industry Development Strategy and a Defence Policy for Industry Participation. All will be of interest to the SME sector but none more so than the consideration of increasing Defence spending, which accompanies the NDS process. The Albanese government will continue to be under pressure (including from AIDN) to lift defence spending to at least 3 per cent of GDP in line with an increased threat environment. The US National Security Strategy made it clear that the Trump administration’s pressure on Australia to boost defence spending to counter the rise of China is not going to abate any time soon. AIDN CEO Mike Johnson will be looking to the industry documents to provide a boost to the role of SME’s in fostering a more self-sufficient, sovereign Defence sector. In 2026, AIDN will also continue its campaign for a mandated minimum percentage of Defence procurement contracts for SME’s; greater release of open tenders to expand direct access opportunities for SME’s across the supply chain; binding commitments for Australian SME content in every Defence program; the new Defence Industry Development strategy to prioritise SME led contributions to sovereign capability; the establishment of an independent body to audit Australian Industry Capability plans to ensure SME involvement with publicly reported findings. AIDN will also continue campaigning for the Australian business definition for general government procurement unveiled by the Albanese government in 2025 to be extended more broadly to Defence.

Chinks begin to show in US tariff regime

Months after US President Donald Trump’s tariff regime was introduced chinks are beginning to show, through exemptions and carve-outs. Australia is subject to a 10 per cent baseline tariff along with 50 per cent tariffs on aluminium and steel. But in September, the White House exempted hundreds of goods, including critical minerals and industrial materials, totalling nearly $280 billion worth of annual imports according to an analysis by US digital news site Politico. The measure shielded dozens of products from sweeping tariffs the president imposed on nearly every country, covering aircraft parts, generic pharmaceuticals, agricultural products and natural resources the White House says are not available at scale in the United States. These mostly apply to countries who have done new trade deals with the US like Japan and South Korea. Then in November, the administration exempted $252 billion worth of mostly agricultural imports like, beef, coffee and bananas. AIDN has campaigned for both the Australian and US governments to negotiate a carve-out on tariffs for Defence commerce including AUKUS trade. Australia’s high-quality steel and aluminium imports are used in the construction of high-tech US Defence weaponry including submarines and aircraft. An imminent decision on a legal challenge before the US Supreme Court could also strike down the Trump tariff regime.

China 20 years behind on sub tech

Two of Australia’s most respected Defence analysts, former Defence Force Chief Chris Barrie and former Defence Department deputy secretary Paul Dibb have backed Australia buying US Virginia class nuclear submarines. In a blog for the Australian Strategic Policy Institute the two authors argue it could be at least 20 years before Chinese submarines are up to US Navy standards given a wide gap in technologies, acoustics, stealth and tactics, if at all. Australia plans to buy 3 to 5 Virginia class nuclear powered conventionally armed submarines from the US from 2032 to boost its defences as part of the AUKUS agreement. It will then go on in partnership with the UK and US to build a fleet of AUKUS SSN submarines from the late 2030’s in Adelaide. The authors argue that while China’s latest SSBN may be its first credible nuclear deterrent it still lags well behind the US Navy SSBN fleet, particularly in terms of speed and stealth. The authors argue that even if the entire land-based US nuclear armoury were destroyed in a pre-emptive strike, the US SSBN fleet would still host half of the United States strategic nuclear warheads and be capable of a massive counter strike. The paper concludes that the ongoing capability gap, supports the strategic benefit to Australia of acquiring US submarines with their advantages in acoustics and stealth.

ADF wraps up in Iraq

The ADF has wrapped up its involvement in Iraq after more than two decades. Australia deployed special forces, RAAF surveillance and transport aircraft and warships to Iraq as part of a US led invasion to overthrow despot Saddam Hussein in 2003. The mission moved to training the IDF, then supporting the battle against Islamic State in 2014. The last mission known as Operation Steadfast was a contribution to training Iraqi security forces and strengthening institutions in the wake of the Islamic State incursion. Deputy Chief of Joint Operations Major General Hugh McAslan, who visited Baghdad for the closing ceremony, said it was the culmination of a significant Australian commitment in Iraq over the past two decades. This included the original Australian deployment in 2003, through to the counter-ISIS mission from 2014, and then into building partner capacity through the NATO Mission in Iraq.

Hanwha green light for Austal stake lift

Treasurer Jim Chalmers has given Korean defence giant Hanwha the green light to lift its stake in WA based Australian sovereign shipbuilder Austal. Dr Chalmers said this week that the Foreign Investment Review Board had approved an application lodged in June by Hanwha Australia to buy a 19.9 per cent share in Austal. Hanwha’s bid means it remains a minority shareholder and cannot increase its shareholding above the 19.9 per cent. In August, the Albanese Government signed a Strategic Shipbuilding Agreement with Austal after naming it a sovereign shipbuilder for Tier 2 surface combatant vessels for the RAN. Dr Chalmers said the minority stake had been approved only under strict conditions. He said there would be limits on Hanwha’s access to sensitive information, limits on the storage of information and stringent criteria on any Hanwha nominee on Austal’s board. Austal CEO Paddy Gregg said the company respected the government’s decision. He added that the Austal board and management remained firmly focused on delivering value of all Austal shareholders as Australia’s sovereign shipbuilder under the Strategic Shipbuilding Agreement, as a major contributor to the US industrial base and with significant growth opportunities ahead.