Special Report: Australia increases 2025–26 defence budget by 5%

Australia's total defence spending is forecast by Janes to reach the equivalent of about USD57 billion by 2033. (Janes)

Australia has announced a defence budget of AUD62.7 billion (USD40 billion) for 2025–26, marking a nominal increase of 5% compared with the revised 2024 allocation of AUD59.5 billion.

The Portfolio Budget Statements (PBS) 2025–26, released on 25 March, outline forward estimates projecting continued growth, with allocations projected to rise to AUD65.5 billion in 2026, AUD72 billion in 2027, and AUD79 billion in 2028.

The projections indicate a nominal increase of 5% in 2026, 10% in 2027, and 9.5% in 2028, reflecting Australia's strategic focus on strengthening its defence capabilities amid evolving geopolitical dynamics.

Within the Department of Defence (DoD) budget for 2025–26, the Australian Army, despite having the largest staffing levels among the three services, has been allocated only about 20% of the total budget at AUD13 billion. In contrast, the Royal Australian Navy (RAN) received 25% (AUD15.7 billion), followed by the Royal Australian Air Force (RAAF) at 16% (AUD10 billion).

The disparity in funding distribution is largely attributed to Australia's commitment to the AUKUS alliance with the UK and US, which involves the acquisition, operation, and sustainment of a sovereign fleet of conventionally armed nuclear-powered submarines.

The 2025–26 defence budget includes nearly AUD2.7 billion for the AUKUS submarine programme, which aims to bolster Australia's deterrence capabilities and contribute to regional security in the Indo-Pacific.

In addition, AUD1.9 billion has been allocated for the Hunter-class frigate programme, which, led by BAE Systems, aims to deliver to the RAN six advanced anti-submarine warfare frigates by the early 2030s.