Key issues
- During
the term of this parliament, members and senators can expect a volatile
regional and international environment as Australia’s international
relationships and national interests come under continued pressure.
- Australia’s
increasingly volatile strategic environment is characterised by:
- falling
international cooperation and rising competition
- expanding
use of military and economic power to coerce middle powers to act in the
interests of superpowers
- uncertainty
about US strategy and reliability
- rising
incidents of confrontational ‘grey zone’ warfare.
- US–China
competition is driving strategic dynamics in the Indo-Pacific. Increased competition
generates tension, which could escalate to major conflict with little
warning.
- Strategic
threat has increased as regional powers increase military ‘capability’ (the
power to achieve a desired effect) and change the military balance in the
Indo-Pacific. The US no longer has a decisive regional military advantage.
- Australia
has already reformed its defence strategy and begun programs to increase
deterrence by, for example:
- acquiring
new long-range strike capability
- acquiring
conventionally armed, nuclear-powered submarines through AUKUS
- upgrading
and expanding northern military bases
- equipping
the Army to operate around the region
- boosting
the defence industrial base.
- Progress
is being made, but it will take 5–10 years to embed the integrated and
focused defence capability that is planned. In the interim, Australia is
enhancing deterrence through closer engagement with regional security
partners.
- The
defence budget is under increasing pressure as a result of capability upgrades,
increased global demand for military equipment and US pressure for increased
spending. Any further regional volatility will lead to more pressure on the
budget.
An increasingly volatile strategic environment
The rules-based international order is under
pressure
In the wake of the Second World War, the international
community, dominated by the victorious Western powers, built a series of
institutions and structures. These were designed to provide security and
stability through an international order based on reciprocity, norms of
responsible behaviour and respect for the fundamental principles of the UN
charter and international law.
This network of relationships between states with shared
rules and agreements on behaviour, led by the US and underpinned by US power, is
often referred to as the rules-based
international order (or the post-Cold War global order). Australia
remains a strong supporter of that order as a safeguard for regional
security and stability.
Over the past decade, the loose ‘axis
of upheaval’ or ‘axis
of adversaries’ (Russia, China, North Korea and Iran) has often resorted to
hard power (military and economic coercion) to influence other states, which
has increased pressure
on the global order.
The 2022 US National
security strategy forecast that the international situation,
characterised by geopolitical competition, nationalism and populism, would make
it much more difficult to achieve the cooperation necessary to deal with shared
challenges such as climate change, food insecurity, terrorism and inflation (p.
6).
It has now become
clear that under the Trump administration the US
will also use its hard power to ensure that ‘international relations always
serves US
interests first’.
The National
defence strategy: 2024 (NDS24) warned that strategic competition causes
tension and uncertainty and brings an increasing risk of military escalation or miscalculation that could lead to major conflict in the region (p. 11).
Hugh Jeffrey (Deputy Secretary for Strategy, Policy and
Industry in the Department of Defence) argues that the post-Cold War global
order is already over and that Australia finds itself in a
long-term struggle among states. He says states will compete to shape a new
world order using hard and soft power, trade and economics, innovation and
technology. This strategic competition ‘will drive elevated levels of
uncertainty and risk for at least the next decade’.
Commenting on Australia’s strategic direction in the Attorney-General’s
2025–26 portfolio budget statement, the Australian Security Intelligence Organisation
(ASIO) advised:
Australia has entered a period of
strategic surprise and security fragility. The prevailing security environment
is complex, challenging and changing. Over the medium term we anticipate the
security environment will be more dynamic, more diverse and more degraded. We
are facing multifaceted, merging, intersecting, concurrent and cascading
threats. (p. 187)
Australia has a variety of instruments
of national power to deal with geopolitical challenges (p. 3; 8–9). This article
focuses on the defence response to the volatile security environment.
Australia’s use of other instruments of national power to manage threats is
examined in the Issues & insights article, ‘Navigating a world more
prone to conflict’.
Assessing strategic threat
Intelligence analysts assess the level of threat by
considering the intersection
of the capability, intent and opportunity of a potential adversary (Figure 1). Threat
is perhaps best understood as relational. It depends on who or what is
being threatened as much as who or what is doing the threatening. Risk
is a separate concept focused on the likelihood of a threat materialising
at a particular time or in particular circumstances.
Figure 1 Threat assessment

Source: Parliamentary Library
Strategic threats in the Indo-Pacific
Regional increases in capability and changes in the
military balance
The 2020
Defence strategic update assessed that strategic
competition between the US and China was driving strategic dynamics in the
Indo-Pacific (p. 14) and stated:
Growing regional military
capabilities, and the speed at which they can be deployed, mean Australia can
no longer rely on a timely warning ahead of conflict occurring.
Multiple countries in the Indo-Pacific are investing in new
and sophisticated weapons with greater range and speed. Longer range
weapons have overturned Australia’s long-standing advantage of geography
because denying access to the sea-air gap to the north no
longer provides protection against a military strike (p. 15).
For example, in 2024 China test fired a land-based
intercontinental ballistic missile (ICBM) with the range to reach any part of
Australia (Figure 2). North Korea has a similar
capability (p. 15). China’s new H20 stealth bomber is also assessed to have the range to reach
any part of Australia from land bases in China (p. 33).
Figure 2 Chinese intercontinental ballistic
missile (ICBM) test launch

Source: SatTrackCam Leiden (b)log, A
Chinese ICBM test launch at full range, into the central Pacific, on September
25, plotted from the Navigational Warnings and a NOTAM, 25 September 2024.
While the US held a decisive military
advantage in the Indo-Pacific from the end of the Second World War, in 2024 a US
Congressional Commission concluded that China had largely
negated the US advantage in the Western Pacific (p. v). It noted that
China’s military has modernised across the board, but especially in areas that
are critical to a conflict in the Western Pacific. The US Defense Department (US
DOD) confirmed that China’s
army and navy are now the largest in the world and its aviation forces the
largest in the region. China has also built space-based capabilities at or near
the same level as the US.
Grey zone confrontation and escalation risk
Australia has expressed concern
about confrontations such as unsafe
interactions with aircraft (pp. 40–41), unannounced
live–fire exercises (pp. 8–9), cyber
attacks and sabotage of undersea cables.
Strategic competition can be understood as a continuum that escalates
from confrontation to conflict through a ‘grey zone’ (Figure 3). Action in
the grey zone is deliberately ambiguous, but the potential
for miscalculation makes it risky.
Grey
zone confrontation in the region and foreign
interference and sabotage within Australia (p. 4; 5–6) are likely to
continue.
Figure 3 The continuum of competition

Source: Nicholas Drummond, ‘A
Guide to the 2020 Integrated Review’, 6 July 2020.
Uncertainty about US strategy and reliability
US threats to withdraw military support from Ukraine and NATO, and rumours of the cancellation of a planned integrated
defence command in Japan stoked fear of US isolationism. Churn among higher
level defence personnel has affected confidence in military readiness and rapid
policy change has added to uncertainty.
On the other hand, according to the newly appointed US senior defence strategy adviser, Elbridge Colby, the US has core interests in the Indo-Pacific because it cannot
allow China to exercise hegemony over the
Asia-Pacific trade routes. Colby has argued
that the US should reduce its forces in Europe and focus its military strategy
on the Pacific.
That transition seems to be
occurring. The US has reinstated the plan for an integrated defence command in Japan and the US DOD is reportedly prioritising
effort on ‘denial of a Chinese fait accompli seizure of Taiwan – while simultaneously defending the US homeland’.
The US needs Australia as an ally
The US has some key security concerns where Australia can, and
already does, make effective contributions. In advance written responses to his Senate confirmation hearing in March 2025,
Colby stated:
Australia is a core U.S. ally. It has
the right strategic approach as reflected in its strategic documents.
… maintaining deterrence in the
Indo-Pacific region is not a mission the United States can achieve on our own.
Interoperable allies and partners are critical to our forward posture, military
capabilities, and combined efforts. AUKUS is a model of the type of cooperation
we need to meet the challenges of the 21st century.
Indeed, the US has already invested large sums in US
Force Posture Initiatives in Australia, including to:
Australia and the US continue cooperative work on:
US core interests and need
for cooperation may assure ongoing engagement in the region, but US–China
strategic competition increases the risk that Australia, Japan and other US
allies might be drawn into conflict around Taiwan or the islands
and shoals of the South China Sea.
Changes to defence strategy
Strategy of denial emphasising deterrence
Australia has responded to volatility with an updated
defence strategy. NDS24
affirmed a ‘strategy of denial’ as the cornerstone of defence planning (Figure
4) and promoted ‘deterrence’ to become Australia’s primary strategic defence
objective (p. 22). The Australian Defence Force (ADF) is moving from a ‘balanced
force’ to one focused on ‘the most consequential risks’. NDS24 does not explain
those risks.
Figure 4 The strategy of denial

Source: National
Defence Strategy: 2024, p. 22.
Deterrence is achieved by
convincing a potential aggressor that the consequences
of coercion or armed conflict would outweigh the potential gains. Deterrence
is only effective if it is credible, so it requires effective lethal military
capability and clear political will to act. Hugh Jeffrey argues that, as a
3-ocean nation (Indian, Pacific and Southern oceans) with a unique ratio of
population size to territory, Australia’s
critical space for deterrence is the undersea domain.
Upgrades to ADF capability
NDS24
identified a critical set of 6 capability effects that the ADF must achieve
(pp. 28–29) and 6 immediate
priorities for an integrated, focused ADF (p. 38). Some of the initiatives
underway to meet the NDS24 requirements include:
However, it will take 5–10 years to produce sufficient
integrated and focused defence capability to provide a substantial overall
increase in deterrence.
Closer regional engagement
Australia is also building deterrence through closer
engagement with regional security partners. The US
Force Posture Initiatives have been expanded. Submarine
Rotational Force–West is expected to become operational in 2027. Formal
agreements, interaction, exercises and defence cooperation are expanding with Japan, Singapore and Papua
New Guinea. There is an identifiable trend beyond interoperability of
allied forces towards ‘interchangeability’,
which permits greater integration and streamlined logistics (pp. 6–10).
Development of better and cheaper missile and drone defence
is a high priority across Western countries; cooperation on networked air and
missile defence architecture is one focus of AUKUS Pillar II and the Australia–Japan–US
Trilateral Defence Consultations.
Pressure on the defence budget
The NDS24
capability upgrades require big increases in the defence budget over the
next decade (p. 67), which parliament will be asked to approve.
Military tactics and technology are undergoing rapid
advances, which is placing pressure on defence budgets worldwide. Cheap drones (uncrewed
military systems) in particular are imposing high costs on countries that
rely on highly capable but very
expensive missile interception systems. The defence budget will come under
further pressure as rising
international demand for equipment, and particularly ordnance, drives
up costs.
Defence spending is currently 2.05% of GDP and projected to
reach 2.34% by 2032–33 (Figure 5).
Figure 5 Planned defence spending and percentage of GDP
Source: Parliamentary Library calculations based on NDS24, 2024–25
Defence Portfolio Budget Statement and ABS
Australian System of National Accounts, March 2025.
Defence budget expert Marcus
Hellyer reviewed Australian defence spending for financial years 1949–50 to
2019–20 and showed that funding
of around 2% of GDP is historically low. However, this result is largely
due to increases in GDP, not cuts to defence expenditure. Hellyer pointed out
that percentage of GDP does not measure changes in real spending and is a crude
tool for identifying the resources necessary to address strategic challenges.
Parliament’s role
during conflict
There have been many different structures
of wartime government and emergency
legislation in Australian history, including joint meetings of both houses
of parliament to discuss
the war in secret. The 47th Parliament rejected
a Bill to establish a Parliamentary
Joint Committee on Defence designed to receive classified information.
The 2024 paper AUKUS
and war powers: the constitutional dimensions of grand strategy,
published by King’s College London, calls for closer alignment between the
AUKUS partners’ constitutional war powers procedures to avoid causing
significant diplomatic and strategic consequences through misunderstanding.
If confrontation spills over to conflict, the decision to
deploy the ADF into armed conflict is a prerogative of the Executive
Government.
The policy
of the Albanese Government, which may be an emerging convention, suggests
parliament should expect:
- to be informed within 30 days after any government decision to
deploy the ADF in a major military operation and be given an opportunity for
debate
- the government to table an unclassified written statement
outlining the objectives of the deployment, the orders made, and its legal
basis.
Concluding remarks
Over the term of the 48th Parliament, members and senators
can expect a volatile regional and international environment as Australia’s
international relationships and national interests come under pressure. As a
result, the Parliament may be asked to consider increases to the defence budget,
but strategic surprise is also possible. Parliament may need to be prepared for
an escalation to conflict with little warning.
Further reading
- Department
of Defence, National
Defence Strategy: 2024, (Canberra: Department of Defence, 2024).
- Stephen Fallon, The
Defence Strategic Review’s Vision for the Australian Army, FlagPost, (Canberra:
Parliamentary Library,14 August 2023).
- Karen Elphick, The Deterrence Advantage of Nuclear-powered Submarines in a
Contested Indo-Pacific, Research paper series, 2024–25,
(Canberra: Parliamentary Library, 4 March 2025).