With Australia’s defense imports and exports being
bolstered by its Australian Industry Capability (AIC) plan and Defense Export
Unit (DEU), a significant modernization and procurement initiative on the part
of the Australian DOD, coupled with a rising counterterrorism spend, new
research released by Strategic Defense Intelligence claims that Australia’s
defense expenditure is set to grow at a CAGR of 5.1% for the next four years,
reaching a peak of USD 35.2 billion by 2018.
In 2009, Australia introduced the Australian
Industry Capability (AIC) plan that imposes offsets designed to give domestic
companies access to external global supply chains and foreign firms’
technology. Coupled with the government’s Defense Export Unit (DEU), which
assists domestic companies in gaining access to export markets and increase
their customer base, this has precipitated significant steady growth in the
country’s defense imports and exports.
Moreover, this trend is set to continue: 65% of
all procurements are forecasted to be made from foreign companies between 2014
and 2018, while the AIC and DEU – which have successfully pulled out USD 550
million by imposing offsets on foreign firms, such as global supply chain deeds
and the transfer of training programs and technology aimed at improving
domestic defense capabilities – are likely to attract more foreign investment
during the same period.
The Australian DOD is expected to increase its
capital expenditure from USD 5.9 billion in 2013 to USD 9.5 billion in 2018, as
part of a concerted modernization initiative. Revenue expenditure is also
expected to increase, from USD 20.4 billion in 2013 to USD 25.7 billion in
2018, which can be attributed to the additional recruitment, training, and
development programs for military personnel that are to be undertaken over the
next four years. This significant procurement of training, equipment and
weaponry is expected to enhance the Australian defense expenditure, thereby supporting
the market’s expansion.
While Australia has historically been sheltered
from terrorism, its increasingly close relationship with the US, coupled with
the occurrence of several terrorist attacks on domestic soil – such as the
Sydney Hilton bombing in 1978, the Turkish Consulate bombing in 1986, and the
Bali bombings in 2002 – has prompted the Australian government to increase its
precautionary counterterrorism measures.
In 2011, the Australian government announced that
it will invest AUD 1.2 billion to bolster Australia’s border security, with a
range of measures including eight new border patrol vessels and strengthened
aviation security. In addition to national security issues, the country plays a
crucial role in the ongoing operations in Afghanistan, which is something that continues
to drive its defense expenditure directed towards counterterrorism.
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