Australia is committing hundreds of billions of dollars to a more self-reliant defence force as military competition intensifies across the Indo-Pacific. The harder task is building enough industrial capacity at home to deliver it.

This week in Market Watch: Aerospace, Defence & Security, we examine Australia’s A$425bn decade-long capability investment programme, the expanded US$3bn Defence Industry Growth Facility and what Canberra’s push for greater sovereign capability means for suppliers.

The opportunity for domestic industry is substantial, but greater self-reliance will not mean self-sufficiency. AUKUS, US weapons programmes and allied supply chains will remain central, requiring Canberra to decide which capabilities it must be able to manufacture and sustain at home.

Visiongain Top Takeaways

• Australia has allocated A$425bn to defence capability through 2035-36, with undersea warfare, maritime capability, long-range strike, guided weapons and missile defence among the largest priorities.
• Canberra has recast its underused US$3bn Defence Export Facility as the Defence Industry Growth Facility, widening support to domestic sovereign capability as well as exports.
• Greater self-reliance will still depend on allies. AUKUS and international technology and supply chains will remain central to many of Australia’s most important programmes.
• Industrial capacity, not funding alone, is the test. Workforce, specialist manufacturing, component supply and procurement speed will determine how much of the build-up Australia can deliver at home.

Canberra Puts A$425bn Behind a More Focused Force

Australia’s 2026 National Defence Strategy continues the shift away from a broadly balanced military towards what Canberra calls an “integrated, focused force”, built around deterrence by denial and greater self-reliance.

The 2026 Integrated Investment Program allocates around A$425bn to capability priorities over the decade to 2035-36, including an additional A$14bn over four years and A$53bn over the decade compared with previous plans. Much of the additional decade-long investment falls beyond the first four years, increasing the importance of sustained political commitment and effective procurement as programmes move towards delivery.

Undersea warfare receives an indicative A$94bn-A$130bn, including nuclear-powered submarines and uncrewed maritime systems, while A$62bn-A$77bn is allocated to maritime capabilities. Another A$28bn-A$35bn is directed towards targeting and long-range strike, A$26bn-A$36bn to guided weapons and explosive ordnance, and A$21bn-A$30bn to missile defence. Defence also identifies A$12bn-A$15bn of investment in autonomous and uncrewed systems across the wider capability programme.

That force design has direct consequences for industry. Australia wants to hold potential adversaries at risk at longer range, sustain operations from its northern bases and reduce its exposure to disrupted overseas supply. The Army is being reshaped for littoral operations across the northern approaches, increasing demand for landing craft, long-range strike and supporting infrastructure. Delivering that force will require not only new platforms and weapons, but the domestic capacity to produce, maintain, repair and replenish them.

Canberra Widens Access to Defence Finance

Canberra is also trying to remove a financing constraint on industrial expansion. On 28 August, the government announced that its US$3bn Defence Export Facility will become the Defence Industry Growth Facility, extending support beyond exports to projects that expand facilities or develop sovereign capabilities aligned with Defence priorities.

This is not another US$3bn added to defence spending. The government is broadening an existing financing pool that has seen little use: its predecessor had been used only three times since 2018 and not at all since 2020.

The new facility will provide loans, bonds, guarantees and equity and is designed to attract private finance alongside government support. That could help smaller suppliers fund technology, machinery and additional production capacity before new Defence orders translate into revenue.

Canberra is also putting more money into direct industry support. The 2026 Defence Industry Development Strategy adds A$80m to Defence Industry Development Grants, taking total investment in the programme to around A$250m, alongside reforms intended to speed contracting and capability delivery.

Finance alone will not persuade companies to build capacity that may sit underused. Suppliers still need credible demand signals, sufficient production volumes and confidence that orders will persist long enough to justify investment in facilities, equipment and skilled workers.

Self-Reliance Still Depends on Allied Supply Chains

Australia’s push for greater sovereign capability still depends heavily on foreign technology and industrial partners.

AUKUS is the clearest example. Australia’s future nuclear-powered submarine force relies on deep integration with the United States and United Kingdom, while Pillar Two now has its first signature capability project. The three countries are developing payloads and enabling systems for uncrewed undersea vehicles, with initial delivery planned from 2027.

Guided weapons follow the same model. Canberra is expanding production at home through partnerships with established overseas manufacturers rather than attempting to reproduce complete weapons supply chains domestically.

Northrop Grumman Australia has been selected as the preferred industry partner for local solid rocket motor production, backed by an initial A$126.9m investment. GMLRS rocket motors are due to be produced at Mulwala by 2030, followed by a dedicated manufacturing complex capable of high-rate production of multiple motor types from 2033.

Kongsberg’s missile factory near Newcastle takes the model further. The government is investing up to A$850m to manufacture and maintain Naval Strike Missiles and Joint Strike Missiles in Australia. Production is scheduled to begin in 2027, with full-rate production expected in 2028 and capacity exceeding 100 missiles a year, supplying both the ADF and international partners.

Australian self-reliance therefore looks less like industrial independence than deeper participation in allied production networks. The objective is to bring critical manufacturing, technology and sustainment into Australia while retaining access to overseas expertise and supply. The test is whether Canberra gains enough control over essential capabilities to keep them available when international supply chains come under pressure.

Where the Industrial Constraints Will Bite

Australia faces a timing problem as well as a capacity problem. Shipbuilding, missile production, undersea systems, autonomous platforms, air and missile defence and military infrastructure are expanding now, while some of the production capacity intended to support them will not mature until the end of the decade or later. Many of these programmes also compete for the same engineers, technicians, skilled trades and specialist suppliers.

Munitions provide an early test. The 2026 IIP identifies A$26bn–A$36bn for guided weapons and explosive ordnance, covering larger stockpiles as well as greater capacity to produce, maintain and repair selected weapons in Australia.

An A$72m contract with Rheinmetall NIOA Munitions will establish a new forging capability at Maryborough in Queensland for 155mm M795 projectiles. Production is due to begin by the end of 2028 at an initial 15,000 rounds a year, with capacity to increase as demand grows.

The build-up will also push demand deeper into the supplier base, particularly across propulsion, energetics, electronics, testing and sustainment.

Domestic production alone, however, does not guarantee resilience. A weapon assembled in Australia can remain exposed if a critical motor, seeker, electronic component or material depends on a single overseas source. Canberra will have to decide which parts of those supply chains require domestic capacity or alternative sources, and where reliance on trusted allies remains an acceptable risk.

Market Outlook

Australia’s A$425bn capability programme creates a substantial market, but it is not an equivalent addressable opportunity for domestic suppliers. Major multinational programmes, imported equipment, infrastructure and sustainment will absorb a significant share.

The strongest domestic opportunities are likely to lie in areas where Australia needs greater control over supply, including guided weapons and energetics, undersea systems, autonomous platforms, electronic warfare, sensors, missile defence, northern-base infrastructure and sustainment. AUKUS Pillar Two could widen that market as joint projects begin delivering operational systems.

The longer-term question is one of scale. Australian demand alone will not support deep domestic capacity across every capability, making access to allied programmes, international supply chains and export markets increasingly important. Canberra’s challenge is not simply to build more at home, but to establish industries that can remain viable while providing the resilience Defence requires.

Visiongain Insight: The best-positioned suppliers may be those able to serve both Australian and allied demand. Companies that can meet sovereign requirements while entering larger international production networks should have a stronger case for sustained investment beyond the current build-up.

From Visiongain

Explore Visiongain’s Undersea Intelligence Hub for analysis of AUKUS, undersea autonomy, maritime systems and the technologies shaping future undersea capability.

Related 2026 market intelligence:

• Naval USV/UUV Market Report 2026–2036
• Undersea Defence Infrastructure & Security Market Report 2026–2036
• Hypersonic Missile Defence Systems Market Report 2026–2036
• Military Artificial Intelligence (AI) Systems Market Report 2026–2036

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