Looking back to look forward, 10 years after the First Principles Review

Exactly 10 years ago, the then minister for defence, Kevin Andrews, released the First Principles Review: Creating One Defence (FPR). With increasing talk about the rising possibility of major power-conflict, calls for Defence funding to increase to at least 3 percent of GDP, and questions raised about Defence’s ability to spend the money appropriated to it, it is the perfect time to assess whether Defence created the sustainable and enduring business model that the Review championed.

The FPR was commissioned in August 2014 by the predecessor of Andrews, David Johnston, as both an election commitment and a response to the 2014 National Commission of Audit’s recommendation for an efficiency review ‘as a pre-condition for setting any new funding profile for Defence under the White Paper’.

Conducted over eight months and chaired by David Peever, the FPR was an end-to-end review of Defence’s business processes, structure and organisation. It was designed to look forward to the challenges Defence would face in the 21st century and structured around the need for a sustainable and enduring business model. The combined effect of the review was supposed to be a more unified and integrated organisation, more consistently linked to strategy and led by its centre.

Key among the FPR’s recommendations were:

—Establishment of a strong, strategic centre to strengthen accountability and top-level decision-making. This would involve a new ‘One Defence’ business model, a streamlined top level management structure, establishment of a strong and credible internal contestability function, and a reduced number of committees;

—The establishment of a single end-to-end capability development function to maximise the efficient, effective and professional delivery of military capability. This included establishing the new Capability Acquisition and Sustainment Group (CASG) with reduced management layers, and transferring accountability for requirements setting and management to the vice chief and the service chiefs;

—The implementation of an enterprise approach to the delivery of services enabling corporate and military operations to maximise their effectiveness and efficiency. This would involve consolidation and standardisation in estate, information management, geospatial intelligence and customer-centric service delivery;

—The creation of a ‘One Defence’ workforce to ensure committed people with the right skills are in appropriate jobs, through the development of a strategic workforce plan for building a highly professional workforce across the Department and the Australian Defence Force; and

—The management of staff resources to deliver optimal use of funds and maximise efficiencies, through stripping back and simplification of overly complicated processes and structures, as well as the introduction of greater transparency, contestability and professionalism.

The review set out an ambitious agenda to ensure that Defence was fit for purpose and able to deliver with the minimum resources necessary. Most of the recommendations were implemented over two years.

At its simplest, the FPR sought to ensure that respective ministers, secretaries and chiefs of defence force would ask themselves every working day: Does this decision (or these options to government) strip back and simplify complicated processes and structures? Do they introduce greater transparency, contestability and professionalism? Do they enforce accountability and leadership?

Against these three questions, sadly, Defence’s implementation did not climb to the ambitions demanded by the review team. Despite the FPR’s intent to dethatch Defence’s hierarchy, devolve accountabilities to the lowest level possible and de-layer the organisation, Defence now has more senior executive service and star-ranked officers and organisational units than it did in 2015.

Committee structures have similarly reverted, though it should be acknowledged that the Investment Committee has been a positive advance for the organisation, though the burden on its members continues to be back-breakingly cumbersome. The behavioural change that is necessary to transform Defence seems to have broken on the rocks of institutional resistance.

The review highlighted ‘an organisational culture within Defence that is risk-averse and resistant to change’. The FPR authors were deeply focused on the risk culture of the organisation and many of their recommendations centred on practical ways to overcome this risk aversion. The simplicity and elegance of their recommendations were certainly lost on the upper floors of the Russell offices during the implementation process.

Defence’s failure to change—with concomitant failure to deliver—represents the organisation’s unwillingness to explore a different concept of risk management. This was also the case with Peever’s subsequent review of Defence innovation in 2021, which called for Defence to embrace a desire to improve (we think—the review was heavily redacted, including all of its recommendations).

Similarly, the concept of a single end-to-end capability development function has not taken root, with the contestability function failing to meet the aim of a ‘robust and disciplined contestability function to provide arm’s-length assurance to the secretary that the capability needs and requirements are aligned with strategy and resources and can be delivered’. Correspondingly, the transfer of accountability to the service chiefs appears to have frustrated the FPR’s aims for an integrated capability management process, in which all the fundamental inputs to capability (including industry support, facilities, ICT and workforce) are managed as a whole.

This has been particularly challenging for the capability managers within CASG, who no longer have all the levers necessary to effectively and efficiently manage the ‘smart buyer’ function. It appears that the common-sense approach to acquiring and sustaining capability—where the full process does not need to be followed when common sense says that the judicious use of a fast-track path is appropriate and risks are acceptable—has struggled. Few are the examples of innovative use of procurement practices, development of fast-track projects, or the creation of novel contractual relationships.

Skill development in CASG, and in Defence more broadly, continues to be a fundamental challenge. The Defence Workforce Plan didn’t emerge until 2024, and we are yet to see whether this plan will effectively deliver the required workforce, identify the critical skills gaps or build those skills and workforce strategies that place ‘the right people with the right skills in the right roles at the right time to deliver Defence’s mission’.

Defence is pursuing yet another strategic reform agenda, set out in Chapter 11 of the National Defence Strategy. It aims to deliver both strategic reform—the transformation of the core elements of Defence that deliver effects to achieve the strategy of denial—and enterprise reform—the transformation of Defence’s enabling elements that drive performance. In doing so, it could do worse than returning to the fundamental first principles that drove the FPR:

—Clear authorities and accountabilities that align with resources (empowering decision-makers to deliver on strategies and plans within agreed resourcing, while also holding them responsible);

—Outcome orientation (delivering what is required with processes, systems and tools being the means, not the end);

—Simplicity (eliminating complicated and unnecessary structures, processes, systems and tools);

—Focus on core business (Defence doing only for itself what no one else can do more effectively and efficiently);

—Professionalism (encouraging committed people with the right skills in appropriate jobs);

—Timely, contestable advice (using internal and external expertise to provide the best advice so that the outcome is delivered in the most cost-effective and efficient manner); and

—Transparency (behaving in a way that enables others to know exactly what Defence is doing and why).

If Australia is to effectively meet the challenges it faces, the government and the public need to have confidence in the combat capabilities of its armed forces, the effectiveness and timeliness of Defence’s decision making and the efficient use of the nation’s treasure.

Peever and his team set up a strong and sensible plan to ensure Defence was able to meet these three demands. Sadly, because of culture, behaviour and bureaucratic malaise, the FPR proved less enduring than the review team—and the Australian public—needed it to be.

The world can still keep Trump in check

US President Donald Trump has shown a callous disregard for the checks and balances that have long protected American democracy. As the self-described ‘king’ makes a momentous power grab, much of the world watches anxiously, aware that his administration’s growing illegality and corruption is eroding not only the US Constitution but what remains of the post-1945 international order. A return to great-power spheres of interest looks increasingly likely.

But foreign governments, businesses and civil-society groups have more power than they think in the face of a revisionist United States. They can take five steps to create external checks and balances on the Trump administration and on anti-democratic forces more broadly. Anti-democratic forces around the world cast a long shadow, but with a boost of courage and the strength of solidarity, pro-democracy coalitions can come together to fight for the light.

The first step is to unite and make as much noise as possible. Would-be autocrats depend on divide-and-rule tactics, maximising fear by convincing individuals and governments that they alone are on the chopping block. Imagine if all governments in the Americas (with a few exceptions, such as Argentina) denounced Trump’s designs on the Panama Canal and Canada, loudly and repeatedly, and refused to refer to the Gulf of Mexico as the Gulf of America. Indeed, they could collectively rename it the Gulf of the Americas.

Another option is for all the Association of Southeast Asian Nations and European Union governments to issue a joint statement repudiating Trump’s claim that Ukraine started the war with Russia, instead insisting on the truth: Russia violated Ukraine’s territorial sovereignty. The Organization of Islamic Cooperation’s 57 members could collectively introduce a censure resolution in the United Nations General Assembly condemning any suggestion of expelling all Palestinians from Gaza, as Trump casually suggested last month, while reaffirming a collective commitment to a Palestinian state.

It may prove even more consequential if European countries (EU members plus Switzerland, Britain and Norway) joined strategic partners such as Canada, Japan, South Korea and Australia in outlining the global chaos that Trump will unleash if he tries to take Greenland by force, thereby legitimising war as a foreign-policy tool. These denunciations should be issued repeatedly in all appropriate international forums.

The second step is to push back hard on Trump’s provocations, escalating to absurdity. If the US raises tariffs from 100 percent to 200 percent, governments should announce that they are raising them to 400 percent. This is a game of chicken, not a negotiation. The US may be the world’s largest economy, with a GDP of nearly US$28 trillion, but the combined economies of the EU member states, Britain, Norway, Switzerland, Canada, Mexico, Japan, South Korea and Australia are 25 percent larger, totalling nearly US$35 trillion. Instead of coming to the White House with hat in hand and flattery at the ready, hoping to get an exemption from the coming trade wars, world leaders would be better off presenting a united front.

Third, use law to counter Trump’s lawlessness. The rule of law is not simply a code of conduct approved by duly constituted authorities. It is an entire system designed to channel dispute away from the battlefield and into the courts, to replace armed combat with legal jousting before an impartial referee. To the extent that the Trump administration ignores or rejects national and international law, foreign governments, businesses and civil-society groups should use their own courts to make their case and enforce their rights.

Lawfare could be especially useful for fighting corruption and economic malfeasance. When the actions of US officials violate cross-border contracts or give illegal advantage in international business deals, local prosecutors should apply their national law. This could help create a ‘zone of law’ for global commerce. But under no circumstances should they engage in vendettas or politically motivated prosecutions.

The fourth step other countries must take is to create a thriving domestic tech sector. This requires time, but few things are more important over the longer term. Governments and citizens should have options other than US or Chinese tech, particularly in the AI phase of the digital revolution. Moreover, as the EU well knows, competing with the existing tech giants requires the removal of trade barriers and the integration of capital markets, both important steps toward enhancing regional power on the global stage.

Lastly, the Trump administration has made clear its disdain for multilateral institutions, having rejected the UN’s sustainable development goals and questioning whether UN agencies’ projects ‘reinforce US sovereignty by limiting reliance on international organizations or global governance structures.’ Other countries—especially rising middle powers—should seize this moment to take over these institutions and make them their own.

It is time, for example, to give up on the UN Security Council. The permanent members will never agree to reform it and will continue to veto resolutions affecting their own interests, as the UN’s founders expected. Russia’s veto in the Security Council means that the General Assembly has already become the primary forum for addressing issues regarding the Russian invasion of Ukraine.

Rising middle powers such as India, Brazil, Mexico, South Africa, Nigeria, Egypt, Indonesia and Saudi Arabia should seize the opportunity of great-power deadlock or collusion to align global institutions with the actual configuration of power in the world. They should insist on equal representation and promote decision-making based on weighted majority rule, which would give every country a genuine voice. The EU would have much to gain by supporting such reforms, but even if it does not, an international system designed by the victors of World War II must either change or sink into irrelevance.

These are radical moves. But the leader of the world’s most powerful country is implementing a radical agenda. The US system of checks and balances is the primary means of protecting democracy. The world can help.

Red tape that tears us apart: regulation fragments Indo-Pacific cyber resilience

The fragmentation of cyber regulation in the Indo-Pacific is not just inconvenient; it is a strategic vulnerability.

In recent years, governments across the Indo-Pacific, including Australia, have moved to reform their regulatory frameworks for cyber resilience. Though well-intentioned, inadequate coordination with regional partners and stakeholder consultations have created a situation of regulatory fragmentation—the existence of multiple regulatory frameworks covering the same subject matter—within and among Indo-Pacific jurisdictions.

This inconsistency hinders our ability to collaboratively tackle and deter cyber threats, essentially fragmenting the cyber resilience of the Indo-Pacific.

Regulatory fragmentation threatens regional security for three key reasons.

Firstly, it impedes technical efficiency. While we tend to think of cyberspace as borderless, its composite parts are designed, deployed and maintained on the territory of states that enact their own laws and regulations. Factors such as threat perception, the organisation of the given state and its agencies, and regulatory culture shape these frameworks. The degree to which the state provides essential services and owns physical and digital infrastructure also influences framework development.

As governments introduce complex regulatory obligations for cyber resilience, most digital services providers and ICT manufacturers will have to divert resources from efforts that would otherwise enable them to prepare for and respond to threats more effectively and across jurisdictions. Ironically, this undermines the effectiveness of regulatory regimes for cyber resilience in the first place.

In addition, complex and confusing nation-specific requirements push regulatees to follow a checkbox approach to cyber resilience, rather than a holistic, risk-informed and agile one. Boards may prioritise meeting the bare minimum of regulatory requirements instead of maintaining a risk management posture commensurate with the rapidly evolving threat environment.

Secondly, regulatory fragmentation undermines innovation. Complex regulatory regimes—especially for government procurement and for critical infrastructure operators—can seriously undermine competition and innovation. Startups and smaller vendors (looking to sell to such entities) have to divert scarce resources away from research, development and innovation to fund compliance with a maze of obligations. This is especially problematic for small and medium enterprises in sectors reliant on innovation—such as cyber resilience and advanced manufacturing—as regulatory risk mitigation can deny these firms the ability to scale and expand into new markets.

Thirdly, regulatory fragmentation impedes trust in partnerships. A jurisdiction’s regulatory robustness in relation to cyber resilience is a key factor in determining the suitability of partners in sensitive policy domains.

For example, while Japan has taken steps to invest in its national cyber resilience, particularly after Chinese hackers compromised government networks, the United States has remained cautious about Japan’s ability to protect sensitive information. Through sections 1333 and 1334 of the National Defense Authorization Act for Fiscal Year 2025, the US Congress tasked the Departments of State and Defense with reporting on issues such as: the effectiveness of Japanese cyber policy reforms since 2014; Japanese procedures for protecting classified and sensitive information; and how Japan ‘might need to strengthen’ its own cyber resilience ‘in order to be a successful potential [AUKUS Pillar 2] partner’.

Collaboration requires trust. That trust hinges not just on the quality and harmonisation of regulatory frameworks; it also depends on whether they’re enforced and underpinned by a shared appreciation of the cyber threat environment, including in relation to state-sponsored actors looking to preposition themselves in critical infrastructure assets and steal intellectual property.

That trust also relies on a shared appreciation of the importance of removing unnecessary impediments to innovation, including the growth of allied and partner capability, and threat mitigation by stakeholders, which is itself contingent on shared political will.

After all, regulatory fragmentation is politically driven. Leaders, ministers, officials and regulators each seek to satisfy constituents at home and exert influence abroad over cyber policy. They may prefer to clean the cobwebs through visible operational reactions rather than kill the spider through holistic, long-term preparation.

Such political considerations may disregard commercial and technical realities when regulatory parameters are determined in the interests of digital sovereignty, including when it comes to (not) banning technology vendors.

Fixing this is a tall order but not impossible. Australia and its partners could consider establishing a baseline degree of regulatory harmonisation and reciprocity. This could include factors such as:

—Definitions of the subjects and objects of cyber regulation;

—Thresholds and deadlines for reporting breaches of cyber resilience to the state;

—Standards and controls that regulatees must implement, and outcomes they must achieve;

—Technology supply chain risk management requirements, including methods to assess whether procuring technology from certain vendors is too risky;

—Types of penalties for non-compliance; and

—Powers of the state to gather information or intervene in the operations of regulatees.

Allies and partners must better align their regulatory frameworks. Be it via multi-stakeholder collaboration or multilateral regulatory diplomacy, tackling regulatory fragmentation will make the Indo-Pacific more cyber-resilient.

Let us tear away the red tape that tears us apart.

TSMC’s $100 billion bet: strengthening ties or weakening Taiwan’s leverage?

Taiwanese chipmaking giant TSMC’s plan to build a plant in the United States looks like a move made at the behest of local officials to solidify US support for Taiwan.

However, it may eventually lessen commitment from Washington since it is a step toward US domestic production of semiconductors, reducing reliance on Taiwanese supply. The US’s friends, particularly Japan and South Korea, may make similar moves as they have much the same incentive as Taiwan to strengthen relations with Washington.

For Taiwan, semiconductors have long been more than an economic asset; they have been a strategic shield. The island’s role as the world’s most advanced chip producer has created an unspoken security guarantee, as its survival matters to the global economy. But as TSMC shifts production to the US, that shield may begin to weaken.

Taiwanese officials understand that economic entanglement with the US strengthens political ties. TSMC’s US$100 billion investment is an effort to deepen those ties and ensure that Taiwan remains indispensable to Washington. The goal is clear: by embedding Taiwan into the US economy, its security will become a priority.

Yet shifting production overseas brings unintended consequences. The more the US secures its own chip supply, the less dependent it becomes on Taiwan. Over time, Washington may feel less compelled to maintain a strong military commitment to the island. The very move intended to guarantee US support could ultimately make Taiwan more expendable.

The transactional nature of US foreign policy under President Donald Trump highlights the risks of Taiwan’s strategy. The US has shown that its commitments are not always permanent. When allies are no longer seen as essential, support can fade. Ukraine has witnessed the limits of US backing.

For the US, TSMC’s investment aligns perfectly with economic nationalism and the push for supply chain security. Bringing semiconductor production home reduces the risks that geopolitical instability presents. It also fits neatly into the broader US-China rivalry, as Washington seeks to curb Beijing’s access to advanced chip technology. But in securing its own position, the US may inadvertently erode Taiwan’s leverage.

Taiwan is not alone in using economic diplomacy to bolster security ties. Japan and South Korea are watching closely, knowing that integrating their industries with the US strengthens their alliances. Both nations are making their own semiconductor investments in the US, mirroring Taiwan’s strategy.

For these allies, the calculation is the same: a deeper economic footprint in the US may translate into stronger security commitments, but the longer-term consequences remain uncertain. If Washington’s dependence on Asian chipmakers diminishes, will its military presence in the region follow suit?

Beijing sees TSMC’s move as both a challenge and an opportunity. On one hand, it accelerates China’s race to achieve semiconductor self-sufficiency. China has already invested billions in its domestic chip industry, knowing that reliance on foreign technology is a vulnerability. If the US and its allies shift production away from Taiwan, China may step up its technological ambitions, or act before Taiwan’s strategic value declines further.

On the other hand, any reduction in reliance on Taiwanese chips makes a US military intervention in a Taiwan conflict less certain. The more the US secures its semiconductor supply, the less important Taiwan becomes to its strategic interests. This shift could embolden China to take a more aggressive stance in the region.

TSMC’s expansion into the US reflects Taiwan’s effort to safeguard its future by deepening ties with its most powerful ally. But this strategy carries risks. Taiwan’s greatest asset, its dominance in semiconductor manufacturing, has made it a linchpin of global stability. As that capability is distributed across multiple locations, Taiwan’s strategic leverage may erode.

Taiwan is making itself indispensable to the US economy in the hope that this translates into an ironclad security commitment. But history has shown that alliances built on economic necessity are not always stronger. As the US moves toward greater self-sufficiency, Taiwan must navigate an increasingly complex geopolitical landscape where economic influence alone may not be enough to ensure its security.

The world is shifting, and Taiwan’s bet on economic diplomacy is a high-stakes gamble. The outcome will shape not just Taiwan’s future, but the broader balance of power in the Indo-Pacific.

3 percent of GDP for defence is no stretch. We did 2.9 percent in the Cold War

Australia has plenty of room to spend more on defence. History shows that 2.9 percent of GDP is no great burden in ordinary times, so pushing spending to 3.0 percent in dangerous times is very achievable.

Budget watchers are quick to cite difficulties amid current pressures on revenue and expenditure. But historical data is more revealing than a nearsighted view down in the weeds of fiscal policy.

Australia just isn’t trying. For all the talk of deteriorating strategic circumstances, the defence share of GDP has been flat for half a decade, wandering between 1.9 and 2.0 percent.

The issues holding Australia back from spending more on its defence are largely political rather than economic.

The 2020 Strategic Defence Update identified an increase in geopolitical risks in our region and noted the possibility of Australia becoming involved in a major conflict without the formerly assumed 10-year warning time. As a result, successive Australian governments have made announcements about lifting defence spending through initiatives such as equipping the army with long-range missiles, expansion of the navy’s surface fleet and, most dramatically, AUKUS.

However, in terms of GDP, the proportion of total economic output that goes into current defence spending per year has not increased in recent years. It continues to hover around 1.9–2.0 percent of GDP. As shown in the chart below, Australia’s average defence spending as proportion of GDP since the Cold War ended has been 1.9 percent.

On 5 March, Elbridge Colby, head of policy at the US Department of Defense, called for Australia to spend 3.0 percent of GDP on defence. Various Australian defence and security figures, including former chief of the Australian Defence Force Angus Houston and former secretary of home affairs Mike Pezzullo have similarly called for defence spending to be lifted to 3.0 percent of GDP.

Economics writer David Uren recently explained that to lift defence spending to 3.0 percent, Australia would have to either take on additional debt, increase taxes or reallocate money from elsewhere in the government budget. All three of these options would be politically difficult.

While this is a point well made, the details of fiscal policy that usually absorb us become less useful for assessing the defence budget as we move into more unstable and dangerous times. History shows us that sustaining 3.0 percent of GDP spending over a period of time is quite achievable for Australia. The most recent example of this is the Cold War, particularly up until the 1970s.

Sources: SIPRI Military Expenditure Index and Australian government projections

As the chart shows, Australia could sustain average defence spending of 2.9 percent of GDP through the Cold War over 40 years from 1950 to 1991. (The Stockholm International Peace Research Institute dataset which the chart is based on only goes back as far as 1950, not quite the beginning of the Cold War.) This is very close to the 3.0 percent currently being advocated for. During the Cold War, Australia responded to the threat of communism expanding into South-East Asia by maintaining significant forces and often deploying these into various conflicts across our region.

This contrasts with the post-Cold War period from 1992 until now, where defence spending has averaged 1.9 percent of GDP. After the collapse of the Soviet Union, the United States and its Western allies quickly reduced military spending, enjoying a peace dividend due to reduced global geopolitical tensions. From 1986 to 1996, Australian defence spending dropped 0.6 of a percentage point from 2.5 percent to 1.9 percent of GDP. Over the next few years, defence spending remained consistently below 2.0 percent, even during the years of Australia’s involvement in the global war on terror and peacekeeping operations in our region. In 2013, defence spending reached its lowest share of GDP since 1938, just 1.6 percent of GDP.

The years since have seen great increase in geopolitical tensions, both in our region and globally. Yet defence spending as a proportion of GDP has increased only moderately and slowly since 2013, sitting at 2.0 percent in 2025. Under the government’s projections, spending will continue to slowly increase to 2.3 percent by 2033–34.

This is too little, too late. Under current budget restrictions, new defence announcements largely rely on cannibalising existing funding from sources declared to be of lesser priority, rather than on new funding. A recent example of this is the Redback Infantry Fighting Vehicle, which was cut from 450 vehicles to 129 vehicles, at a much higher per-unit cost.

The proportion of GDP should only be used as a rough guide towards spending on defence. What the money is spent on is important. However, the risk to Australian national security was no greater in the Cold War than it is now, and was arguably much lower. The fact that Australia for several decades maintained defence spending at higher levels than now shows that the country is capable of doing the same again.

The untold story of the 2009 defence white paper

Prime minister Kevin Rudd released the 2009 defence white paper in May of that year. It is today remembered mostly for what it said about the strategic implications of China’s rise; its plan to double the size of the Royal Australian Navy’s submarine force from six to 12 boats; and its goal more generally to build a larger Australian Defence Force, known as ‘Force 2030’.

Most commentaries assumed that Force 2030 was overly ambitious. This missed the point of the deep logic of the 2009 white paper that was hidden in plain, unclassified sight. Force 2030 provided only for an initial baseline force. It was designed to be expanded progressively through a series of five-yearly defence planning cycles, which would have involved regular appraisals of strategic risk, net assessments of military developments and ADF capability gaps, and re-evaluations of defence resourcing (see paragraphs 3.24–25).

The Rudd Government hedged against strategic risk by creating a pathway for a 25-year programme of force expansion. The prescience of this plan becomes clearer with every passing year. Had later Australian governments adhered to the plan, a significantly larger ADF would have been built over a series of five-yearly cycles, in 2009–14, 2014–19, 2019–24, 2024–29 and 2029–34. That version of the ADF would have been more powerful than Force 2030, in terms of its weight, reach and striking power. It also would have been much larger and more powerful than today’s force, and there would have been more options available to rapidly augment the ADF before, say, 2027.

The plan was premised on the critical importance of getting started. Force expansion could occur progressively, once a start had been made. The plan was predicated on a decade (2010–20) of aggressive force development, tendering and capability acquisition. By 2020, production lines, supply chains and procurement agreements would have been in place, especially in the crucial area of naval shipbuilding. Continuous construction, avoiding the start-stop syndrome that often afflicts naval shipbuilding, would have supported rapid construction. It would also have reduced ships’ unit prices over time, as a result of continuity and scale.

This approach was especially crucial in relation to the Future Submarine. The plan was to acquire 12 such boats (paragraphs 8.40, 9.3–10). The best option for timely delivery would have been to order conventional submarines of a Super Collins class, derived from the Collins class that we already had, from 2010 to 2020. They would have been built in Australia, and the first would have been commissioned in 2020. By the late 2020s, a mixed fleet of six refurbished Collins class and six Super Collins class submarines would have been available, at which point a decision could have been taken about whether to decommission the oldest Collins boats, thereby keeping the size of the fleet at 12 units, or, if viable, to retain them, increasing the fleet beyond 12.

Defence White Paper 2009 explicitly contemplated Australia having to acquire a larger force ‘in relation to the heightened risk of inter-state war’. Force expansion would have entailed acquisition of ‘more advanced submarines’ and other capabilities that were not included in the initial baseline force (paragraph 3.21). This meant that, during the 2014–19 planning cycle, consideration would have been given to acquiring nuclear-powered submarines of the Virginia class, the design that Australia would (and indeed does now) need in the 2030s and beyond. We could have negotiated an agreement with the United States under which Australia could have committed to helping with Virginia-class maintenance for itself and the US Navy, thereby increasing the availability of Virginia-class boats for both the USN and the RAN. Perhaps that deal could still be struck today, but that is a story for another day.

The white paper’s approach to capability hedging and force expansion should also be read as providing for acquisition of heavy bombers, missile-defence interceptors and other capabilities that were not included in Force 2030. To this end, the Department of Defence was directed to develop ‘additional force structure options’ for future consideration (paragraphs 9.108–109). It was also directed to undertake mobilisation planning, in contemplation of Australia having to mobilise significant resources if circumstances of ‘national peril’ arose (paragraphs 10.22–24).

There were other clues regarding force expansion. In a section on fundamental changes in our strategic outlook, there was a discussion of the possibility of a dramatic deterioration of our strategic circumstances. Of particular concern would be any diminution in the willingness or capacity of the US to act as the stabilising force of world order (paragraphs 3.17–19). Indeed, the 2009 white paper explicitly asked whether the US would continue to undertake the strategic role that it had played since the end of World War II (paragraphs 4.17 and 6.27). This raised eyebrows in Washington. It was not presumed that the US would withdraw. Rather, it was judged that, as the US’s strategic primacy and military dominance came under increasing challenge, its allies and partners, Australia included, would have to do more for themselves. The possibilities were that they might do so through their own decisions, or because of pressure from a future US administration, or due to a combination of these factors.

If the future role of the United States was of concern, the plausible contingency of having to militarily confront a major power adversary was positively alarming. This might include hostile operations by such an adversary in our sea-air approaches, most likely as a result of a wider conflict in the region (paragraphs 5.6–7). Such an adversary might gain access to bases and operating opportunities in our sea-air approaches (paragraphs 3.8, 5.12 and 6.25). The higher the likelihood of such contingencies, the heavier the force that we would need (paragraph 8.44).

It was assumed that, except in the case of nuclear attack, Australia would be expected in such contingencies to provide for its own direct defence without relying on the combat forces of other countries. So, in a wider Pacific war, Australia would need to be able to independently contest hostile military operations by a major power in our area of direct military interest (paragraphs 8.45–46). In such a war, Australia would almost certainly be attacked if it was supporting the US, including by providing it with basing and other support (paragraph 7.18).

The 2009 white paper made clear that we would have to be prepared and able to mount such a defence by denying access to the sea-air approaches to Australia and by disrupting an adversary’s freedom of action in our immediate neighbourhood through the independent application of combat power (paragraphs 6.17–19). This would mean being prepared to achieve and maintain air superiority and sea control in places of our choosing in our area of direct military interest (paragraphs 7.3, and 6.38–42). It would also mean being prepared to strike as far from Australia as possible at an adversary’s bases, staging areas and forces in transit. In doing so, we would exploit the funnelling effect of our strategic geography (paragraphs 6.39 and 7.4–6). This might involve operations as far afield as maritime Southeast Asia and elsewhere (paragraphs 6.46 and 8.47).

Such an approach, which echoed the policy of defence self-reliance that was first articulated by the Hawke government in 1987, would not mean we would cease to look to the US for support in such matters as space-based intelligence systems, advanced technologies, long-range missiles and so on, and for protection against nuclear attack (paragraphs 6.20–21 and 6.32–34).

We would, however, have to be prepared to fight independently and aggressively. Assuming that the ADF was heavy enough and had long enough reach, Australian military strategy would be: (1) to deter an attack, because an adversary would have to devote an unacceptably large proportion of its military capability to ensure success against us; or (2), failing that, to blunt an attack by inflicting heavy losses on an attacker while we rallied support.

By 2008, it was clear that by the early 2030s, China would have the capability to be able to operate in our sea-air approaches and to strike at Australian forces, facilities, and infrastructure from long range. It was also judged that the US would be stretched and challenged by China, and that others, such as US allies and partners, would have to be prepared to do more to defend themselves.

Critics were scathing of Defence White Paper 2009’s hawkish view of the risks posed by China’s military modernisation. Almost universally, supposed experts in Australia and elsewhere judged that China would take its place as a responsible stakeholder in the global system and that its military modernisation was no more than what all emerging great powers pursued as they rose.

The white paper took the view that China was no ordinary emerging great power and that it was likely to take a different path. This proved to be prescient. China disliked the language of the document (especially paragraphs 4.26–27 and 5.14) and protested stridently when briefed ahead of the launch of the document. The Rudd government did not buckle, and the offending text was not amended, as Beijing demanded.

Rudd himself would have preferred to see evolution of Asia-Pacific regionalism, in which the US, China, Japan and other nations could integrate their economies and resolve their differences peacefully. However, he was also deeply realistic about prospects of confrontation in the region and the resulting requirement to hedge against a darker future. He knew this would require significant investment in military power, with a particular emphasis on building a strong navy. No Australian prime minister since Alfred Deakin had so keenly appreciated the critical importance of sea power.

The plan got off to a promising start in 2009 and 2010 but was effectively dismantled after Rudd’s removal from office in June 2010. Funding was cut. This stalled the momentum that should have be built over the decade 2010 to 2020, which was when the platform for force expansion was supposed to have been laid. As a result, the ADF is smaller and less powerful today than it would have been under the plan; Force 2030 is unachievable; and the further force expansion that should have occurred cannot be realised by the mid-2030s.

Had force expansion occurred, a plausible alternative history might now read as follows. Defence funding could have been progressively increased over the series of five-yearly planning cycles, with real growth (assuming annual price rises of 2.5 percent) increasing from 3 percent in the 2009–14 cycle to 5 percent in 2014–19, 7 percent in 2019-24, 9 percent in 2024–29 and 9 percent in 2029–34. Factoring in supplemental funding to cover for inflation of the Covid-19 era and extra funding for the Virginia-class submarine program, and allowing for Defence to reinvest internal efficiencies, this funding strategy would have provided us with a defence budget in 2025–26 of around $85 billion to $90 billion growing by 9 percent in real terms. (The actual defence budget for 2025–26 is $59 billion.)

A larger ADF would have been available today, with the following force being realised fully during the 2029–34 cycle. The RAN would have had a battle fleet of at least 12 submarines (a mix of Collins and Super Collins boats), with a pathway to acquiring Virginia-class nuclear-powered submarines; six destroyers; 14 frigates; 20 corvettes; six missile arsenal ships, each with 100 vertical launch cells; and two light aircraft carriers (repurposed LHD assault ships) able to carry F-35B fighters, helicopters and autonomous aircraft and other uncrewed vehicles.

The Australian Army would have been a three-division force, with the 1st Division optimised for littoral, amphibious and missile warfare, the 2nd Division for continental defence, and the 3rd Division for training and reinforcement. This would have required 18 battalion groups, as compared with the 10 battalion groups in Force 2030 (paragraph 9.30).

The Royal Australian Air Force would have been building to 100 F-35A Lightning fighters 24 F/A-18F Super Hornet fighters, 12 EA-18G Growler electromagnetic attack aircraft, 10 B-1B Lancer bombers (with B-21 Raiders in prospect), 20 P-8A Poseidon maritime patrollers, 10 MQ-4C Triton uncrewed surveillance aircraft, 10 E-7A Wedgetail air-surveillance aircraft and 10 A330 MRTT tankers (called KC-30As locally).

The ADF would have been equipped with more Tomahawk cruise missiles, launchable from land as well as sea. A land-based, intermediate range ballistic missile force would have also been in prospect. Missile-defence batteries would have been available, including SM-3 and THAAD systems. Autonomous technologies and asymmetric capabilities would have been widely deployed across the force. Crucial enablers, such as command centres, communications systems, hardened bases, and fuel and logistics networks, would have been remediated and expanded. All of this would have required a complete enterprise-level reform of Defence—to make it lean, focused and driven.

With such a force, Australia could have defended itself against a major power adversary by being able to extract a high cost from the attacker while we rallied support from the United States and others. A plan to hold out, as Britain did in 1940, would require Force 2030 and then some. The 2009 White Paper was that plan.

Australia’s international spending reveals uneven ambition

How Australia funds development and defence was front of mind before Tuesday’s federal budget. US President Donald Trump’s demands for a dramatic lift in allied military spending and brutal cuts to US foreign assistance meant that a discussion was unavoidable. The difficult politics of increasing defence spending in Europe continues, and the British government has cut aid to pay for a rise in its defence budget.

This is an important discussion, but we ought to be considering investment in Australia’s strategic posture as a whole.

One way to measure that is the overall level of international spending. Taken together, defence, foreign affairs and trade, aid, the intelligence community and international policing total $72.05 billion for 2025–26, which is about 9 percent of total federal spending.

This share of spending has been steady at a little less than 10 percent since 1999. Attention has understandably focused on a potential lift in the defence budget. But we should think more broadly: there is a strong case that the overall level of spending on tools of ‘statecraft’ needs to rise above its steady level.

Within that $72.05 billion, defence dominates at $58.99 billion. There has been some reprofiling across the forward estimates, but this is consistent with the existing trajectory.

Time will tell whether the Trump administration decides to make an issue of this level of spending, which still hovers around 2 percent of GDP. Time will also tell whether Defence’s ambitious acquisitions program is achievable without further increases.

The official development assistance budget is $5.10 billion. This is about the same as the 2024–25 budget, adjusted for inflation. From a global perspective, with aid spending in retreat in many countries, this is welcome.

We should all recognise the particularities of Australia’s strategic circumstances. One such feature is a neighbourhood of low-income and middle-income countries. Development assistance in this context is not altruism but a strategic necessity. It helps offset risks that are born of underdevelopment, and that directly threaten Australian interests.

Moreover, experts across Southeast Asia have been clear on how Australia should respond to US aid cuts: ensuring stability in existing programs is the top priority.

The foreign affairs and trade budget is $3.91 billion. Within this, the diplomatic or foreign policy operating budget is $1.76 billion. This is a narrower measure, constructed by James Wise and originally published by ASPI. It strips out administered spending and other costs, such as IT and infrastructure, to provide a reasonable measure of Australia’s spending on diplomacy.

As Development Intelligence Lab research has previously noted, of Australia’s relevant budgets over the past 25 years, investment in diplomacy has been the most inconsistent. Although there has been no dramatic cut, projected inflation-adjusted declines in both the overall foreign affairs and narrower diplomatic budgets out to 2028 are concerning.

Australia’s intelligence community will receive a modest real budget rise to $2.05 billion year-to-year (this number excludes the Australian Signals Directorate, which is budgeted under Defence). This tallies with the recently released Smith-Maude Review, which recommends continued investment in Australia’s intelligence agencies, with focus areas including the Office of National Intelligence’s capability as a coordinating agency.

Finally, the Australian Federal Police budget (excluding domestic policing functions) is $2.00 billion, a small real decline compared to the 2024–25 budget. With the federal police now central to high-profile components of Australia’s engagement in Southeast Asia and the Pacific, such as the Pacific Policing Initiative, we can expect the federal police’s international spending to remain significant.

In short, defence spending has been bumped but its trajectory remains essentially the same. Aid, diplomacy, the intelligence community and federal policing are all at about a steady state, with modest inflation adjusted declines across the forward estimates.

The good news is that Australia has not decided to rob Peter to pay Paul. Nonetheless, the big questions remain: in 2025, do we really think that these tools should receive the same share of federal budget they received in 1999?

Things weren’t simple in 1999, and they’ve only become more complex since then. The crisis surrounding East Timor’s independence and then the 9/11 attacks in 2001 marked the beginning of complicated decades for Australian defence and foreign policy.

But Australia is now grappling with how to respond to a fraught position between China and the United States, while also trying to find a durable place among a crowd of ambitious partner nations across Southeast Asia and the Pacific. We need to properly invest in a broad range of tools to navigate this.

Northern Australia’s economic revival can support defence readiness

Two blueprints that could redefine the Northern Territory’s economic future were launched last week. The first was a government-led economic strategy and the other an industry-driven economic roadmap.

Both highlight that supporting the Northern Territory is not just an economic necessity; it is a national security imperative. By aligning defence priorities and economic development, Australia can ensure the Northern Territory is a resilient and self-sufficient pillar of our national defence strategy.

The Northern Territory Government’s Economic Strategy 2025 sets out a determined investment plan to drive economic growth using the Territory’s natural resources, strategic location and emerging industries. It prioritises renewable energy, critical minerals, transport and digital connectivity, tourism, and workforce capacity building. These areas are intended to enhance trade links with Asian markets and achieve annual growth in gross state product that exceeds national GDP growth.

Simultaneously, the Darwin Major Business Group’s What the Territory Needs 2025 roadmap presents an industry-led approach to the Territory’s economic revitalisation focusing on defence, agriculture and critical minerals. By upgrading Darwin Port and expanding renewable energy projects, it seeks to establish the Territory as a trade and energy hub while aligning with national security priorities to attract federal funding and international partnerships.

Both strategies recognise the Territory’s role in Australia’s defence posture and the fact that the Territory’s economic strength underpins national security. Revitalisation of the Territory could reduce reliance on imports, sustain defence operations and reinforce Australia’s ability to project power in the Indo-Pacific.

But progress to transform Northern Australia into a hardened defence hub is slow and limited to enabling infrastructure contained within the defence estate. For example, Defence has earmarked billions over the coming decade to strengthen northern bases. Beyond this, secure energy, stable digital connectivity, reliable water supply and resilient transport networks are required to sustain military operations and accommodate extreme demand surges during joint training exercises.

Defence investment in the Northern Territory cannot operate in isolation. Without a strong economy to sustain it, Defence will struggle to reach its full posting potential. The Territory needs affordable housing, healthcare, education and job opportunities for defence families and industry. Otherwise, recruitment and retention will suffer, places such as Darwin and Katherine will continue to be considered ‘hardship’ postings, and the Territory will be unable to build the workforce needed to support a growing Defence presence.

Both economic strategies recognise that private sector investment must be mobilised alongside government funding. The industry-led strategy can ensure a faster, more agile approach to infrastructure development by using private capital, streamlining regulations and incentivising business. Encouraging the private sector to co-invest in dual-use infrastructure—ports, airstrips and logistics hubs—will create lasting economic benefits while supporting defence capabilities.

Unlocking the Territory’s vast critical mineral reserves and energy resources must also be framed in a national security context. The Beetaloo Basin’s gas potential and the Territory’s deposits of rare earth elements can contribute to energy security and domestic manufacturing growth and self-resilience. The Adelaide River Off-stream Water Storage project ensures reliable potable water supplies for defence bases, training areas and disaster response operations. This shows how infrastructure investment can serve both economic and military needs.

The Northern Territory has a once-in-a-generation opportunity to become Australia’s northern powerhouse for defence and critical minerals. But success will require sustained bipartisan support and collaboration between government, industry and Defence. The window for action is narrowing. As regional tensions rise and global competition for supply chain sovereignty intensifies, Australia must seize the opportunity to strengthen its northern frontier.

Trump could make Asia more united

US President Donald Trump has raised the spectre of economic and geopolitical turmoil in Asia. While individual countries have few options for pushing back against Trump’s transactional diplomacy, protectionist trade policies and erratic decision-making, a unified region has a fighting chance.

The challenges are formidable. Trump’s crude, bullying approach to long-term allies is casting serious doubt on the viability of the United States’ decades-old security commitments, on which many Asian countries depend. Worse, the US’s treaty allies (Japan, South Korea and the Philippines) and its strategic partner (Taiwan) fear that Trump could actively undermine their security, such as by offering concessions to China or North Korea.

Meanwhile, Trump’s aggressive efforts to reshape the global trading system, including by pressuring foreign firms to move their manufacturing to the US, have disrupted world markets and generated considerable policy uncertainty. This threatens to undermine growth and financial stability in Asian economies, particularly those running large trade surpluses with the US—such as China, India, Japan, South Korea and countries in the Association of Southeast Asian Nations.

Currency depreciation may offset some of the tariffs’ impact. But if the Trump administration follows through with its apparent plans to weaken the US dollar, surplus countries will lose even this partial respite, and their trade balances will deteriorate. While some might be tempted to implement retaliatory tariffs, this would only compound the harm to their export-driven industries.

Acting individually, Asian countries have limited leverage not only in trade negotiations with the US, but also in broader economic or diplomatic disputes. But by strengthening strategic and security cooperation—using platforms such as ASEAN, ASEAN+3 (with China, Japan and South Korea), and the East Asia Summit—they can build a buffer against US policy uncertainty and rising geopolitical tensions. And by deepening trade and financial integration, they can reduce their dependence on the US market and improve their economies’ resilience.

One priority should be to diversify trade partnerships through multilateral free-trade agreements. This means, for starters, strengthening the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—which includes Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Britain and Vietnam—such as by expanding its ranks. China and South Korea have expressed interest in joining.

The Regional Comprehensive Economic Partnership—comprising the 10 ASEAN economies, plus Australia, China, Japan, New Zealand and South Korea—should also be enhanced, through stronger trade and investment rules and, potentially, the addition of India. Given the Asia-Pacific’s tremendous economic dynamism, more robust regional trade arrangements could serve as a powerful counterbalance to US protectionism.

Asia has other options to bolster intra-regional trade. China, Japan and South Korea should resume negotiations for their own free-trade agreement. Japan and South Korea are a natural fit, given their geographic proximity and shared democratic values. The inclusion of China raises some challenges—owing not least to its increasingly aggressive military posture in the region— but they are worth confronting, given China’s massive market and advanced technological capabilities. With the US putting economic self-interest ahead of democratic principles, Asian countries cannot afford to eschew pragmatism for ideology.

Beyond trade, Asia must build on the cooperation that began after the 2008 global financial crisis. The Chiang Mai Initiative Multilateralisation, which provides liquidity support to its member countries (the ASEAN+3) during crises, should be strengthened. Moreover, Asian central banks and finance ministries should work together to build more effective financial-stability frameworks—robust crisis-management arrangements, coordinated policy responses and clear communication—to stabilise currency markets and financial systems during episodes of external volatility.

Trump is not the only reason why Asia should deepen cooperation. The escalating trade and technology war between the US and China is threatening to divide the world into rival economic blocs, which would severely disrupt global trade and investment. But there is still time to avoid this outcome, by building a multipolar system comprising multiple economic blocs with overlapping memberships. By fostering economic integration, within the region and beyond, Asian countries would be laying the groundwork for such an order.

In an age of geoeconomic fragmentation, Asian countries could easily fall victim to the whims of great powers. But by strengthening trade partnerships, reinforcing financial cooperation, enhancing strategic collaboration and building economic resilience, they can take control over their futures and position Asia as a leading architect of a reconfigured global economy.

To counter China’s coercion of Taiwan, we must track it better

The threat of a Chinese military invasion of Taiwan dominates global discussion about the Taiwan Strait. Far less attention is paid to what is already happening—Beijing is slowly squeezing Taiwan into submission without firing a shot.

Instead of launching a full-blown attack, China is ramping up a full spectrum of coercion: political meddling, economic pressure, information operations, legal manoeuvres, cyberattacks and diplomatic isolation, all conducted within the pressure cooker of constant military threats. The goal? Wear Taiwan down bit by bit until it has no choice but to give in to Beijing’s demand for unification.

ASPI has launched State of the Strait, a weekly Substack that keeps track of all the ways China is putting the squeeze on Taiwan. The international community can’t afford to ignore China’s evolving tactics. These coercive strategies don’t just increase tensions; they create a serious risk of miscalculation that could spiral into a larger conflict. That’s why it’s important to keep a close watch on these developments. By tracking China’s actions, policymakers can better understand where the red lines are, strengthen deterrence efforts and help Taiwan remain a resilient democracy.

Chinese President Xi Jinping’s approach is clear: he’d rather pressure Taiwan into submission over time than launch an all-out invasion. In late 2024, US intelligence reported that while Beijing is still committed to taking control of Taiwan, it’s hesitant to start a direct war. China’s coercion tactics are carefully calibrated to stay just below the threshold of outright war, creating a new normal that benefits the Chinese Communist Party while avoiding an immediate international crisis, reflecting Sun Tzu’s principle of ‘subduing the enemy without fighting’.

Taiwan’s fall would have devastating consequences. A war over Taiwan could cost the global economy up to $10 trillion—far more than the economic damage caused by the war in Ukraine or the Covid-19 pandemic. Even without an actual war, ongoing tensions could cause financial chaos, with global markets taking a hit and a potential $358 billion trade disruption if China were to block imports from G7 nations. If China manages to annex Taiwan without starting a war, this would also send a dangerous message to authoritarian regimes everywhere that democracies aren’t willing to stand up against territorial expansion.

While other think tanks and intelligence analysts do a great job covering China’s military and paramilitary moves, there’s no widely trusted platform that tracks the full range of coercion tactics in one place. That’s where State of the Strait comes in. By compiling and analysing data on all aspects of China’s coercive strategy—not just military actions—it fills a crucial gap and gives a more complete picture of what’s happening.

One example of coercion is when countries engage with Taiwan in ways deemed unacceptable, Beijing typically responds with strong rhetoric in official statements designed to deter further interaction. As the graph below shows, in 2024, Beijing’s most common grievance (representing 48 percent of observations) was foreign governments ‘violating China’s One-China principle’—a broad category that encompassed any action perceived as recognising Taiwan as distinct or autonomous, even if it fell short of full diplomatic recognition. Another 22 percent of criticisms stemmed from foreign officials meeting with Taiwanese counterparts, reflecting former president Tsai Ing-wen’s increased participation in international security forums.

What are China’s reasons for criticising countries engaging with Taiwan in 2024? (Source: ASPI’s State of the Strait Database.)

In another form of coercion, Beijing consistently and deliberately revokes the tariff-free status of Taiwanese exports as a means of leverage and punishment, as indicated in the graph below. Taiwan’s Mainland Affairs Council, which is responsible for cross-strait relations policy, has characterised this form of coercion as ‘economic oppression’. In 2024 alone, China imposed trade restrictions on 169 Taiwanese exports, primarily through the removal of tariff-free status; the only exception was polycarbonate, which faced anti-dumping tariffs. Machinery and parts constituted the largest category of Taiwanese exports, followed by plastics.

China lifted its ban on the import of wendan pomelos, a type of citrus fruit from Taiwan, in 2024. That occurred two weeks before the Mid-Autumn Festival (2 September), but the ban was reinstated a week after the holiday (25 September), along with bans on 33 other Taiwanese imports. The pomelo symbolises prosperity and good fortune in Chinese culture and is often given as a gift during festival times.

On which Taiwanese exports did China put new trade restrictions in 2024? (Source: ASPI’s State of the Strait Database)

This is only data on two coercion tactics from one year. In future, ASPI intends to expand State of the Strait by developing a searchable public database and assessment platform. That interactive tool will visualise coercion data across domains and years, distil key insights and help policymakers track long-term trends with greater clarity.

The goal is simple: to help decision-makers and the public understand how China is ramping up the pressure, how close we are to a tipping point, and how these tactics are affecting Taiwan’s government, society, and decision-making. Over time, State of the Strait will become an essential resource for tracking China’s tactics and shaping the strategies to counter them.