The Coalition’s announcement that it will increase defence spending is a long overdue acknowledgement that business as usual in national security is not a valid option. It’s intent to hit 2.5% of GDP over the next five years and 3.0% over the next ten is a much needed recognition of our geopolitical realities.

Australia has been coasting on defence spending at 2% of GDP or less for decades. That may have been appropriate in a post-Cold War world characterised by international rules and a United States willing and able to enforce them. But we are now in a world in which authoritarian states are seeking to expand through force, relatively minor actors such as the Houthis can inflict global costs, and perhaps most concerningly, the US no longer seems committed to upholding the international order it created. Shadow Defence minister Andrew Hastie correctly stated, ‘we can’t take anything for granted.’

And even if we want the US to remain engaged, it’s calling for its allies to spend more and the figure coming out of DC is 3.0%. Either way, Australia has to step up.

The previous Coalition government acknowledged Australia’s declining security environment in its 2020 Defence Strategy, but then didn’t lift Defence’s funding envelope. Fortunately, it’s moved forward.

The Albanese government also acknowledged our security challenges and set out increased funding in its 2024 National Defence Strategy with an additional $50.3 billion over ten years. But there’s little sense of urgency; it’s a very languid ramp up to 2.33% of GDP over ten years with next to no new money in the early years.

Moreover the increase goes on just two programs: nuclear-powered submarines and the new general purpose frigate program. These may be important priorities, but there was no new money for anything else or to address the existing pressures on the Defence acquisition budget caused by an over-stuffed wish list and high inflation.

That means we can now see the jarring opportunity cost presented by nuclear-powered submarines. Seven years before Australia has the first of its SSNs, their annual acquisition cost has exceeded the Air Force’s entire capital budget, with the result that the Air Force is not getting any new aircraft beyond what is already on order. Defence can’t simply absorb the cost of a ‘fourth service’ on two-and-a-bit percent of GDP.

So the Coalition’s funding can help to rebalance Defence’s investments. They state that the first five years would add $21.8 billion to the current Defence funding line. By the end of the ten years, the new funding line would be an annual increase of around $29 billion on the Albanese government’s plan (from $100 billion to $129 billion). That’s real money.

However, the policy is very thin on details. The one explicit purchase is an additional squadron of F-35A Joint Strike Fighters to get the total to 100. It’s not a bad idea; the aircraft exists and is coming off a hot production line. But at around $4 billion, it won’t consume all the extra money.

Before producing new shopping lists to spend it on, it’s important to ask what that additional defence spending is trying to achieve. There are two big strategic risks that it can address.

The first is our excessive reliance of the US. The ADF has become increasingly ‘American,’ with more of its key equipment and systems imported from the US. That might have made sense when the primary role of the ADF was to plug into US-led coalitions and interoperability and interchangeability with the US were essential priorities.

But now we need greater self-reliance. Certainly, we can’t walk away from our US equipment, but if we want to hedge, much of the new money will need to be invested in building up Australia’s own defence industry. The Coalition has hinted at that, suggesting some of the money will be spent on Australian companies designing drones and guided weapons.

The second risk is related, namely the achievability of the AUKUS nuclear-powered submarine enterprise. The Coalition is committed to AUKUS, but even supporters of AUKUS acknowledge its risks including whether we will get the submarines on time, our ability to crew them, and their future relevance. All successful businesses need to hedge their risks to ensure they remain in business. Defence is no exception; it needs other systems that can deliver long-range strike and effective deterrence whether AUKUS delivers or not.

Hedging could take a range of paths, from big options like the (admittedly US) B-21 long-range stealth bomber, to new kinds of air and maritime drones and strike missiles that Australian industry can design and built at scale, to our own satellite surveillance systems, to greater national resilience.

The additional funding would make some of those options a reality. But most importantly the new funding has to start flowing immediately—more money in ten years’ time doesn’t deter any threats today.

This article was first published in The Australian.