Australia’s defense expenditure US$35.2 billion by 2018

Wednesday 5 June 2013, Amsterdam

With its defense imports and exports being bolstered by its Australian Industry Capability (AIC) plan and Defense Export Unit (DEU), a significant modernization and procurement initiative on the part of the Australian DOD, and a rising counterterrorism spend, new research released by Strategic Defence Intelligence claims that Australia’s defense expenditure is set to grow at an CAGR of 5.1% for the next four years, reaching a peak of US$35.2 billion by 2018.

 


Defense Imports & Exports Set To Improve
In 2009, Australia introduced the Australian Industry Capability (AIC) plan, which imposes offsets designed to give domestic companies access to external global supply chains and foreign firms’ technology. Coupled with the government’s Defense Export Unit (DEU), which assists domestic companies in gaining access to export markets and increase their customer base, this has precipitated significant steady growth in the country’s defense imports and exports.
Moreover, this trend is set to continue: 65% of all procurements are forecast to be made from foreign companies between 2014 and 2018, whilst the AIC and DEU – which have successfully pulled out US$550 million by imposing offsets on foreign firms, such as global supply chain deeds and the transfer of training programs and technology aimed at improving domestic defense capabilities – are likely to attract more foreign investment during the same period.

DOD Modernization
The Australian DOD is expected to increase its capital expenditure from US$5.9 billion in 2013 to US$9.5 billion in 2018, as part of a concerted modernization initiative. Revenue expenditure is also expected to increase, from US$20.4 billion in 2013 to US$25.7 billion in 2018, which can be attributed to the additional recruitment, training, and development programs for military personnel that are to be undertaken over the next four years.

This significant procurement of training, equipment and weaponry is expected to compel the Australian defense expenditure, supporting the market’s expansion.

Counterterrorism
Whilst Australia has historically been sheltered from terrorism, its increasingly close relationship with the US, coupled with the occurrence of several terrorist attacks on domestic soil – such as the Sydney Hilton bombing in 1978, the Turkish Consulate bombing in 1986, and the Bali bombings in 2002 – has seen the Australian government increase its precautionary counterterrorism measures.

In 2011, the Australian government announced that it will invest AUD1.2 billion to bolster Australia’s border security, with a range of measures including eight new border patrol vessels and strengthened aviation security. In addition to national security issues, the country plays a crucial role in the ongoing operations in Afghanistan, which continues driving the country’s defense expenditure towards counterterrorism.