USS Minnesota to come alongside Fleet Base West in Western Australia (Connor Morrison/Defence Imagery)

The Americans are keen to see some marquee projects announced to demonstrate progress on Pillar II of AUKUS, beyond the nuclear-powered subs deal (Connor Morrison/Defence Imagery)

Allied burden-sharing must reshape Australia’s defence priorities

US pressure for higher military spending offers a chance to demonstrate America’s security is bound up with its alliances.

Arthur Sinodinos

8 July 20254 min read

Get used to it. The world has changed and is not going back to some golden age.

The rules-based order is fragmenting. The chief guarantor has clearly signalled that greater burden sharing among allies and partners is necessary with no expectation that the United States will come to the aid of an ally or partner. America First means that America is now a great power pursuing a narrower set of national interests according to its own rules. The importance of allies and partners to American security is variably acknowledged, particularly in the European theatre. At the recent NATO summit, the failure of the United States to reaffirm Article 5 in return for European commitments to spend more on defence was telling.

In the Indo-Pacific, American leaders have been more positive about the role of allies and partners in the coalition to deter China. But the end-state of American policy is not clear. Is it to pivot more permanently to the region and reassert hegemony? Is it to stabilise the relationship with China in a more sustainable way? To what extent is America’s grand strategy hostage to the endgame on China-US trade?

During recent trade negotiations, China flexed its muscles, using its dominance of rare earths supply to wring concessions out of the United States. China is adept at putting more pieces on the table. It may proffer a grand bargain on trade in return for security assurances, think Taiwan and the South China Sea.

In such an environment, a dual-track strategy is emerging in Australia. The alliance with the United States remains in place and AUKUS is a priority. Simultaneously, Australia is creating optionality by deepening ties with other countries and groupings. We have resuscitated the Australia-European Union FTA talks and are open to discussing security cooperation with the European Union. We are also doubling down on our relations with Southeast Asia, Japan and other regional partners. Prime Minister Anthony Albanese’s trumpeting of independence within the relationship with the United States in a weekend speech about Australia’s wartime leader John Curtin will fuel the theme of optionality.

We don’t have the luxury of time: AUKUS is eating into the rest of the defence budget and that is not sustainable.

In these circumstances, spending more on defence is not only about contributing more to the Australia-US alliance but also reinforcing sovereign capability.

There is no magic number when it comes to defence spending. The United States is spending around 3.4 per cent of GDP which has become the default number for other countries. But context is important. Japan has already committed to doubling defence spending to 2 per cent as a proportion of GDP by 2027 and is ducking meetings with US President Donald Trump on defence matters. Australia is raising spending to 2.4 per cent of GDP by 2033–34 and is committed to AUKUS, the most ambitious military industrial project in our history. Debt and deficits are rising, so more guns mean less butter.

US Defence Secretary Pete Hegseth is asking Australia to increase spending to 3.5 per cent of GDP (an extra $40 billion a year), as soon as possible. In other words, it’s not enough to promise an uptick in spending down the track. More is needed immediately, with Hegseth calling out a “real and potentially imminent threat from China”.

Not surprisingly for a Defence Minister, the Deputy Prime Minister Richard Marles welcomed Hegseth’s remarks while Prime Minister Anthony Albanese reminded everybody that Australia will decide for itself what is the appropriate level of defence spending. The government’s formula is that we should know what we want to buy before we commit to extra spending. The other way to look at this is to determine the capabilities that best fit our evolving circumstances and raise spending accordingly. But we don’t have the luxury of time: AUKUS is eating into the rest of the defence budget and that is not sustainable.

Australian Defence Minister Richard Marles and US Secretary of Defence Pete Hegseth at the Pentagon in February (Rodney Braithwaite/Defence Imagery)

Squaring the circle will not be easy and makes forthcoming discussions with US leaders at AUSMIN, the annual 2+2 talks between foreign and defence ministers, potentially uncomfortable. But risk is also opportunity. AUSMIN does not need to get into the weeds but a principal’s level discussion of complementary capabilities that can be delivered in the near and medium term would be apposite.

Complementarity can be framed by the needs of the Indo-Pacific Command and its assessment of tensions in our region. We can also explore new presidential initiatives such as the Golden Dome missile defence system for any potential Australian role given the American assets we host on Australian soil. AUKUS Pillar Two, which covers advanced capabilities, can be woven into this discussion. The Americans are keen to see some marquee projects announced to demonstrate progress on this pillar. Now is the time for political heft to get Pillar Two moving in a way that the public and defence industry can see.

With an America First president in the White House, allies like Australia need to reinforce that America’s essential security interests are bound up with its alliances and partnerships in the region, something that at least Hegseth has acknowledged. Identifying ways to contribute to new US security priorities is part of that process.

This can go hand in hand with an assessment of ways to strengthen relationships with like-minded democracies in other groupings that may/may not include the United States. A new rules-based order may not be in the offing, but we have agency and should exercise it.

About the author

Arthur Sinodinos

Arthur Sinodinos is Partner and Chair of The Asia Group’s Australia Practice and a leading expert on Australian public policy and politics, with a wealth of public and private sector experience spanning national security, industry innovation, economic policy, and banking.

Topics

Australia Defence & security