The BGA Australia Team, led by Managing Director Michael “Mick” McNeill, wrote an update to clients on the request from the U.S. for Australian defense spending boost.

Context

  • U.S. Defense Secretary Pete Hegseth recently called on Australia to boost defense spending to 3.5 percent of GDP ahead of an expected meeting this month between U.S. President Donald Trump and Australian Prime Minister Anthony Albanese. The request comes as Australia lobbies for reduced U.S. steel and aluminum tariffs alongside continued support for the Australia-United Kingdom-United States (AUKUS) submarine partnership. The Australian government has described the tariffs as “not the act of a friend.” During his election campaign, which resulted in his reelection May 3, Albanese distanced himself from Trump and rejected opposition calls to increase defense spending.
  • While the government is already expected to eventually lift — or at least advance — planned defense spending, the U.S. request presents a political dilemma for Albanese, who needs to satisfy Australia’s most important security partner while avoiding perceptions of subservience to Trump. Nevertheless, Canberra and Washington continue to advance U.S. force posture initiatives in Australia and defense industrial base cooperation. In mid-2025, the U.S. Army will conduct its first live-fire test of its mid-range capability system in Australia. A by-product of Hegseth’s intervention may be greater scrutiny on the priorities and value for money of the existing defense spending, including the AUKUS submarine program.

Significance

  • Australian Defense Minister Richard Marles met Hegseth at the Shangri-La Dialogue, a security and defense conference in Singapore held from May 30-June 1. Hegseth “conveyed that Australia should increase its defense spending to 3.5 percent of its GDP as soon as possible.” In an address at the conference, Marles said “there is no effective balance of power in this region absent the United States” but “we cannot leave this to the U.S. alone.” Australia would “continue to make further funding decisions based on the assets and capabilities we need to play our part and to meet the strategic moment.”
  • A significant spending boost would be required to fulfil the U.S. request; the current defense spending trajectory is around 2.4 percent of GDP by 2034. Shortly before the Hegseth-Marles meeting, Albanese was asked if Australia would commit to boosting defense spending to 3 percent of GDP, as some in the Trump administration had called for. Albanese responded that “we’ll determine our defense policy” and pointed to the planned boost in defense spending announced last year. Marles, in contrast, said Australia was “absolutely up for having this conversation.” During the election campaign, the opposition pledged to increase defense spending to 2.5 percent of GDP within five years and set an “aspirational” goal of reaching 3 percent within a decade. Following Hegseth’s request, the opposition affirmed support for increased defense spending while Albanese reiterated his position.

Implications

  • The U.S. request for a boost in defense spending comes as Australia seeks to ameliorate U.S. 10 percent tariffs on exports and 50 percent tariffs on steel and aluminum. Australian officials have pointed to Australia’s abundant supply of critical minerals and rare earths, the intelligence relationship and U.S. trade surpluses with Australia as part of their advocacy. The Australian government believes the tariffs are a breach of the Australia-U.S. free trade agreement but will not impose retaliatory tariffs and is unlikely to pursue the matter at the World Trade Organization. Australian Trade Minister Don Farrell will visit France this week for the Organization for Economic Cooperation and Development Ministerial Council Meeting, where he is expected to meet U.S. officials.
  • The fourth Australia-U.S.-Japan-Philippines Defense Leaders Meeting on the periphery of the Shangri-La meeting expressed “serious concern about China’s destabilizing actions in the East China Sea and the South China Sea and any unilateral attempts to change the status quo by force or coercion.” The leaders committed to synchronizing priority defense investments, enhancing information sharing, strengthening cybersecurity and resilience and increasing operational coordination and interoperability.

We will continue to keep you updated on developments in Australia as they occur. If you have any comments or questions, please contact BGA Australia Managing Director Michael “Mick” McNeill at mmcneill@bowergroupasia.com.

Best regards,

BGA Australia Team

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Managing Director

Mick is a highly-experienced government relations expert and trusted advisor on consensus building, conflict resolution and legislative developments. He has played an integral role in helping parties achieve desired outcomes in areas of national security, health policy, foreign policy and reputational crisis management, as well as media relations, communications campaigns, immigration and human rights. Mick has two decades’ experience working with government as a media analyst, political adviser and NGO advocacy manager. After a stint serving as an adviser to an Australian senator, Mick took on the role of the locally engaged senior political specialist at the U.S. Embassy in ... Read More