NATO lifts defence spending

Australia looks to be increasingly isolated in being one of the few key US allies to ignore pressure from Washington to substantially increase defence spending. Further pressure came from the North Atlantic Treaty Organisation summit in The Netherlands which endorsed a move by its 32 member States (Spain appeared to be the only holdout) to lift spending on defence and national security to 5 per cent of GDP over the next decade, to meet the threat of a resurgent Russia and support Ukraine in its fight against Moscow. US Defense Secretary Pete Hegseth in May urged Australia to lift its defence spending to at least 3.5 per cent of GDP (or an extra $40 billion a year) to carry its weight in the alliance and respond to the threat posed by China. Washington reiterated that US allies must lift spending to carry more of the load ahead of the NATO summit. But Deputy Prime Minister (DPM) and Defence Minister Richard Marles said in the wake of the NATO summit that Australian defence spending would have to be assessed, while defending the current plan to lift spending to 2.33 per cent of GDP by 2033-34. No doubt if Australia adopted the NATO definition of defence spending it is spending more than currently estimated. AIDN has also called for greater defence spending though not without ongoing procurement reform to support more opportunities for local SME’s. Prime Minister Anthony Albanese has said Australia will determine its defence spending based on capability need. DPM Marles also said last week that Australia’s level of defence spending which currently sits at just over 2 per cent of GDP would be reviewed ahead of the release of the new National Defence Strategy due in 2026.

PM Trump meeting still a work in progress

Prime Minister Anthony Albanese abandoned the bid to meet face-to-face with US President Donald Trump on the sidelines of this week’s NATO summit. The decision came after Mr Albanese was among a number of leaders who missed a meeting with Mr Trump after he quit the Group of Seven (G7) nations summit in Canada, early to deal with the Middle East crisis. DPM Marles attended the NATO summit instead. Though there is no substitute for a face-to-face meeting with the US leader, given his modus operandi, Mr Albanese did however secure a meeting with senior Trump administration officials at the summit to underscore Australia’s ongoing commitment to the AUKUS submarine plan and plead Australia’s case for a carve-out on tariffs. The US is conducting a 30-day review of the AUKUS plan to see if it meets “America First’’ principles. The major concern centres around the US commitment to sell Australia three to five nuclear powered conventionally armed Virginia class submarines from 2032. The US is concerned workforce and production challenges make it difficult to build enough submarines for its own Navy let alone spare vessels to sell to the RAN. This is despite Australia supporting US submarine production to the tune of $US3 billion as part of the AUKUS agreement. The two leaders are now likely to hold a formal meeting in Washington later in the year, rather than rely on the vagaries of a meeting on the sidelines of a summit.

WA defence export push

WA Labor Premier Roger Cook and Defence Industries Minister Paul Papalia visited the UK this week on a defence export mission. Premier Cook said UK Prime Minister Sir Keir Starmer recently announced an ambitious plan to build up to 12 additional nuclear-powered submarines over the next decade, and WA businesses could play a pivotal role in speeding up the construction of these military assets. He said WA companies already manufactured parts of Australia’s Collins class submarine and were working to enter the US Virginia class supply chain. He said one of the aims of the trip was to strengthen ties with the UK in an effort to break into the UK Astute class submarine supply chain. During the five-day mission, the State Government was to be involved in a roundtable meeting in London with UK defence industry representatives and meet with UK Government officials including Maria Eagle, Minister of State for Defence Procurement and Industry, and Lord Spellar, the UK’s Trade Envoy to Australia. Both Minister Eagle and Lord Spellar have recently visited WA, conducting discussions around the progress of the landmark AUKUS partnership and the investment and trade relationship between WA and the UK. The WA delegation was also due to visit a UK naval base in Devonport, which is the sole nuclear repair and refuelling facility for the Royal Navy. Minister Papalia embarked on a similar mission to the US in April.

Defence industry grants audit

The Australian National Audit Office is conducting an audit of defence industry funding grants due to report in October. The audit report release date has been extended. This means the ANAO is accepting submissions from organisations and the public until September 28. The ANAO is examining whether Defence industry grant schemes meet their obligations under the Commonwealth grant rules and guidelines. This includes elements such as whether funding rounds are well‐designed and supported by appropriate administrative arrangements. Whether applications are assessed in accordance with the grant opportunity guidelines and funding decisions informed by appropriate advice. It will also consider whether monitoring, reporting and evaluation activities are implemented effectively and used to inform future grants program design and implementation.

NATO procurement deal

DPM Richard Marles emerged from the NATO summit with a procurement agreement which could further open up European market opportunities for Australian defence industry. In a statement issued after the NATO summit in The Netherlands, DPM Marles confirmed Australia had signed an agreement with the NATO Support and Procurement Organisation (NSPO). The Minister suggested the NSPO agreement would strengthen Australia’s cooperation with NATO partners on capability acquisition, systems support and logistics. Under the agreement, the Australian Defence Force will be able to gain access to collaborative procurement efforts with NATO partners. The new partnership would also unlock wider opportunities for Australian defence industry to access new markets across NATO supply chains. Though the NATO agreement represents progress, the Albanese government is also placing its faith in negotiations over the broader European Union-Australia defence and security pact announced last week. Prime Minister Albanese said he hoped the pact would open the way for procurement opportunities which were of benefit to Australian and European industry.