Last week the Liberal Party released its defence policy (slightly) ahead of Saturday’s federal election. The initial announcement focused on the goal of growing the defence budget to 2.5% over the next five years and to 3.0% over the decade. Since then, the announcement has been supplemented by a document that outlines broader defence policies addressing leadership, acquisition reform and defence industry. It’s by no means a white paper or national defence strategy, but it’s reasonably detailed as election policy statements go.

Strategic Analysis Australia has published analyses of the Coalition’s defence policy (here, here and here). A key point is that we now have a real point of difference between the government and the opposition, in contrast to the bipartisanship that characterises so much of Australian political discourse around defence and security.  That difference lies in their funding commitments. So in this piece we’ll simply unpack that difference.

The first thing to note is that the Coalition policy paper doesn’t provide a ten-year line of annual funding numbers like the 2016 Defence White Paper, the 2020 Defence Strategic Update and the 2024 National Defence Strategy did. Rather, it talks in terms of GDP. As many commentators have noted, that can be a somewhat fluffy description of defence spending as GDP predictions can fluctuate significantly. The Albanese Government’s goal in last year’s NDS of hitting 2.4% of GDP by the end of the decade (i.e., 2033-34) has already shrunk to 2.33%. That’s not because the funding commitment has changed, but rather because GDP forecasts have increased. While increased GDP sounds good, it’s actually driven by higher inflation. In short, there will be more dollars in the economy but they will be devalued dollars.

In our view, it would be preferable to see the Coalition’s actual planned budget numbers in black and white as dollars. Nevertheless, if we make some assumptions, we can reverse engineer those numbers.

First, if we take the Government’s GDP predictions set out in its recent 2025-26 budget papers for the forward estimates and project them out to the end of the decade we can have a set of GDP numbers from which to derive defence spending.

Second, the Coalition have provided one actual dollar number, namely that by the time the defence budget reaches 2.5% of GDP in five years’ time, the cumulative difference between their funding line and the Albanese government’s NDS funding line is $21.6 billion. That provides one fixed marker to model the ramp up.

Next, we’ll assume by ‘the next five years’, the Coalition means 2029-30 and by ‘the decade’ it means the decade set out in the NDS which is to 2033-34.

Finally, we assume a relatively smooth ramp up in funding. That is, unlike the NDS funding line, the spending starts to ramp up immediately.

Those assumptions generate the numbers presented in Table 1.

Table 1: Comparison of different defence funding models (A$bn)

	2025-26	2026-27	2027-28	2028-29	2029-30	2030-31	2031-32	2032-33	2033-34
DSU 2020	58.2	61.2	64.6	70.0	73.7
Labor’s NDS 2024	58.4	61.2	67.9	74.8	79.1	84.2	88.3	95.6	100.4
PBS 2025-26	59.0	61.8	67.6	74.1
Coalition election policy	60.3	64.3	71.5	79.4	87.5	96.7	106.7	117.5	129.1
Difference between NDS and Coalition policy	1.9	3.1	3.6	4.6	8.4	12.5	18.4	21.9	28.7

The difference between the different policies is more striking when presented in a chart.

Figure 1: Comparison of different defence funding models (A$bn)

As SAA has noted many times, in the early years the NDS funding line doesn’t grow much beyond the 2020 Defence Strategic Update funding line that the Albanese government inherited from the previous Coalition government. Out to 2029-30 it’s $13.7 billion, but with very little at the front end. The Coalition’s funding line adds a further $21.6 billion over five years for a total difference of $35.3 billion. We don’t know what ramp up profile the Coalition’s funding line has, but hopefully it doesn’t repeat the slow ramp up in the NDS and a significant part of the $21.6/35.3 billion over the next five years flows immediately.

When we look at the difference over the decade, the difference is even more stark. By the end of the decade in 2033-34, the Coalition’s defence budget reaches $129.1 billion compared to the NDS’s $100.4 billion, an annual difference of nearly $29 billion. The cumulative difference over the decade is $103.2 billion.

We are starting to talk real money. Importantly, it opens up options. All of the increased funding in the NDS model is consumed by only two capabilities, the nuclear-powered submarine enterprise and the general purpose frigate. There is no additional money for anything else. In the Coalition’s policy, the additional funding would allow Australia to address key strategic risks such as its excessive dependence on US military power and technology and the viability of AUKUS’s submarine enterprise.

The Coalition’s policy statement doesn’t go into much detail on how that $103.2 billion would be spent other than committing to a fourth combat squadron of F-35A fighter aircraft, which at around $4-5 billion wouldn’t even represent the tip of the funding iceberg, leaving nearly $100 billion for other priorities. Nevertheless, many of the policies are positive, such as reforming Defence’s leadership and acquisition processes, bringing external advice and expertise, and rapidly getting funding to Australian small and medium enterprises that can produce the consumables of conflict such as missiles, drones and uncrewed undersea vessels.

One might suggest in light of the current election polling that this is all hypothetical and Coalition’s defence policy and funding line will be consigned to the dustbin of history. But regardless of the outcome of the election, the policy is a significant step forward in an area where bipartisan consensus generally reigns. We now have a real policy difference between the major parties. The Overton window is opening. It is not just policy wonks who are advocating for 3% of GDP; it has become part of the political discourse.

Prime Minister Albanese has already been prompted to respond. While he has not committed to greater defence spending, let alone 3%, his comment that he is ‘open’ to increasing defence spending beyond the NDS’s line is some progress over the government’s previous sentiments that it has already done all that it is going to do in this area.

So 2.5% per cent may not be just around the corner, let alone 3%. But policy development in democracy thrives on real political debate and we are finally starting to see that on the issue of defence funding.