Special Report: Australia set for modest decline in defence spending

Australia's defence budget of AUD66.9 billion marks a nominal decrease of about 1% compared with the revised 2025 allocation of AUD67.1 billion. (Janes Defence Budgets)

Australia has announced a defence budget of AUD66.9 billion (USD48.4 billion) for 2026–27, marking a nominal decrease of about 1% compared with the revised 2025 allocation of AUD67.1 billion.

The Portfolio Budget Statements (PBS) 2026–27, released on 12 May, outline forward estimates projecting growth, with allocations forecast to rise to around AUD70 billion in 2027, AUD77.9 billion in 2028, and AUD82.6 billion in 2029.

Under the new defence budget, Australia has committed an additional AUD14 billion over the next four years and AUD53 billion over the next 10 years, the Australian Department of Defence (DoD) said.

The investments aim to increase the Australian Defence Force's (ADF's) ability to deter and respond to threats, build self-reliance, strengthen Australia's sovereign defence industrial base, and enhance co-ordination with regional partners.

The funding delivers on the 2026 National Defence Strategy (NDS) and Integrated Investment Program (IIP), bringing the total defence portfolio allocations to AUD887 billion through to 2035, the DoD said. This includes support for the Australian Signals Directorate, Australian Submarine Agency, and Australian Naval Nuclear Power Regulator.

Australia released the 2026 NDS and IIP in March, with the policies building directly on the policy and funding framework established under the 2024 NDS and IIP.

Capability priorities

According to the DoD, AUD425 billion from the total funding is allocated to accelerate modernisation of the ADF to an “integrated, focused force” aimed at strengthening the service's defence capability, preparedness, and resilience.

Combined with the earlier allocations in 2024, Australia has invested additional AUD30 billion over the forward estimates and AUD117 billion over the decade, the DoD said.