Trump defence spending pressure paying dividends

US President Donald Trumps’ demands for allies to spend more on defence are having an impact. It was revealed this week that the Coalition could boost defence spending to at least 2.5 per cent of GDP if it wins Government. Though Opposition Leader Peter Dutton says any defence spending increase will depend on the state of the books if he gets to examine them. Speculation too, that the Albanese Government will use the Federal Budget to bring forward some of the spending in its plan to boost defence by an extra $50.3 billion by 2033-34. Neither side has yet laid out a pathway to reach the 3 per cent GDP figure the US has demanded. However, the latest polling seems to indicate the election winning momentum displayed by the Coalition since mid-2024 has stalled. The latest monthly Australian Financial Review/Freshwater Strategy Poll shows Labor closing the gap on the Coalition, with the latter still leading 51-49 but the result is down from 52-48 the previous month. The latest polls were taken after the Trump administration’s refusal to grant Australia’s request for an exemption to US aluminium and steel tariffs. Anthony Albanese has also regained the lead on the important Better Prime Minister rating 46-42. On a uniform swing Labor would have 71 seats and the Coalition 66 putting Labor in the box seat to negotiate with minor parties to form a minority government. A national YouGov poll gave Labor the lead 51-49. All eyes are now on Tuesday’s Federal budget which is predicted to contain more pre-election sweeteners including additional energy bill relief. An election can be held on May 3, 10 or 17.

US missile agreements kick off domestic manufacture

Australia will manufacture missiles at home from 2025, thanks to Australia and the United States signing two memoranda of understanding. The Guided Missile Launch Rocket System (GMLRS) Co-Assembly agreement and the 155mm Ammunition Co-Production MOU enable the production of critical missile and 155 mm munitions in Australia. Under the Global Weapons and Explosive Ordinance Enterprise, the Albanese Government has moved quickly towards establishing a local guided missile manufacturing facility with Lockheed Martin Australia, creating hundreds of jobs. The United States has also granted Congressional approval for the sale more than 300 GMLRS rounds to Australia. The $147 million investment is part of the commitment to manufacturing GMLRS and supporting jobs in Australia. Under the Government’s plans, a new facility will also be constructed, capable of manufacturing up to 4,000 GMLRS a year from 2029.

US negotiating over JORN acquisition

Deputy Prime Minister and Defence Minister Richard Marles has revealed the Albanese government has been negotiating with the United States over the potential purchase of the Australian developed JORN Over The Horizon radar system. DPM Marles referred to the ongoing US negotiations; in responding to Canadian Prime Minister Mark Carney on Wednesday announcing he would be working with the Australian Government to build the Over The Horizon radar system in Canada. Prime Minister Carney said Canada wanted the proven surveillance and threat tracking system to provide early warning radar coverage of threats from the north to the country’s vast Arctic region. DPM Marles said there was still water under the bridge until the JORN deal with Canada was finalised, but it would be Australia’s biggest ever defence export contract. The Jindalee Over The Horizon radar or JORN system provides coverage of Australia’s vast north and wide area surveillance of ships and aircraft out to 3000km. The system is undergoing a $1.2 billion upgrade by BAE Systems Australia and 110 local companies and SME’s. AIDN CEO Mike Johnson said JORN was a prime example of Australian innovation, welcoming Canada’s move and the opportunities it could provide for local SME’s.

Sustainment contract supports SME’s

The Albanese Government has announced a $400 million sustainment contact with Navantia Australia. The seven-year contract secures about 200 local jobs, primarily in Sydney, Melbourne, and Perth. Navantia Australia has been appointed as the first multi-class Design Support Contractor, responsible for providing through-life engineering and design knowledge on the Navy’s Canberra class helicopter landing docks and landing craft, the Supply class ships, and Hobart class guided missile destroyers. This contract will also see Navantia Australia engage with Australian SME’s to deliver critical engineering work. Defence Industry and Capability Delivery Minister Pat Conroy said the contract was another example of the government supporting industry.

Hanwha ups bid for stake in Austal

Austal has been targeted by Korean defence giant Hanwha which increased its stake to 9.9 per cent in a share raid this week. Hanwha has applied to Australia’s Foreign Investment Review Board for permission to lift its stake to 19.9 per cent, the maximum it can own without launching a takeover. Hanwha is also seeking a board seat. Hanwha’s recently appointed global chief executive officer and president at Hanwha Defence, Michael Coulter, said the Korean conglomerate wanted to form a strategic partnership with Austal rather than a takeover. He added that a partnership would see Hanwha add significant value to Austal’s business in global defence and shipbuilding. But the move has been criticised by Austal Chair Robert Spencer who said the firm has vital contracts with the US Navy and Australian government and Hanwha was unlikely to get the approval of either US or Australian regulators. Austal is headquartered in Perth, where it supplies warships to the RAN and Australian Border Force, but has an even larger facility in Mobile, Alabama where it is a supplier of warships and submarine modules to the US Navy.