Spending as a percentage of GDP?

05 June 2025 | By: Rachel Falzon

As the conversation around Australia’s defence spending increases, we are seeing calls for arbitrary increases to defence expenditure, typically framed as a percentage of GDP. 

While the sentiment is well-intentioned, elevating spending targets without first aligning them to clearly defined capability needs risks diverting resources from the actual investments required to secure Australia's future in an increasingly unstable geopolitical environment. Pay rises for everyone? 

We must move past the outdated notion that spending x percent of GDP on defence is, by itself, a measure of security or strategic maturity. Defence investment should be directly correlated to the capabilities we require to deter threats, respond to crises and project national strength where necessary. Spending for its own sake achieves nothing. Spending that builds resilient, fit-for-purpose capability, particularly in line with real-world lessons and emerging conflict trends, is where the conversation must focus.

What is most concerning is not the dollar figure itself, but the absence of a clear and transparent articulation of what capabilities that figure is intended to deliver. Australia’s defence strategy must not be reduced to a budget number. Instead, we need a coherent capability roadmap, underpinned by evidence-based threat assessments and the agility to adapt rapidly to evolving challenges.

Consider the case of Ukraine, a sobering reminder that conventional doctrine and high-end platforms alone are not enough. Ukraine’s embrace of commercial off-the-shelf (COTS) technology, rapidly deployable and mass-producible systems and asymmetric tactics has demonstrated that strategic effect can be achieved through agility, ingenuity and scalability, not just size of spend. Their use of inexpensive and adaptive technology has upended traditional assumptions about military procurement and battlefield dominance in modern times. 

It is not enough to allocate more funding, we must ensure our defence industrial base, procurement strategy and innovation pathways are capable of delivering timely, scalable and mission-relevant outcomes. This includes low-cost technology, embracing dual-use technologies, leveraging partnerships with the commercial sector and investing in sovereign manufacturing that is not only technologically advanced but also practical to scale when it counts.

Ultimately, the first question should not be “how much should we spend?” but rather “what do we need to be able to do, and how do we achieve that with urgency and efficiency?”

Until we start answering that question with clarity and strategic focus, lifting defence spending in isolation may prove counterproductive.