Federal Election 2025: Coalition gunning for $21b defence spend with increased tax

The Coalition will increase income taxes to rapidly scale up defence spending over the next ten years, pouring an extra $21 billion into the coffers this decade without revealing where the money will be spent.

Peter Dutton on Wednesday confirmed that if he won the election, Australia’s defence spending would reach 2.5 per cent of GDP by 2030 and 3 per cent by 2035, which would be paid for by repealing Labor’s legislated tax cuts.

Under the current trajectory, defence spending is on track to reach 2.33 per cent by 2033-34.

Defence experts have increasingly called for a ramp up of the budget, amid intensifying geopolitical conditions in Australia’s backyard and further abroad, and the United States becoming a more unreliable ally under Donald Trump.

The Trump Administration had also called for Canberra to get to 3 per cent of GDP to counter China’s rise. Beijing’s recent circumnavigation of Australia and regional posturing, as well as the strengthening relationship between Russia and Indonesia, have also added to calls.

Speaking from Perth alongside shadow defence minister Andrew Hastie, the Opposition Leader denied Mr Trump was his sole motivation as he declared he was confident he could close that multi-billion-dollar gap by repealing the $5 a week tax cuts, which he described as “recurrent spending”, and finding other savings.

“What the government’s done with their tax policy (is) in 15 months’ time, they give 70 cents back per day. Now, as you know, that costs about $17 billion over the forward estimates, more than what we’re proposing in relation to this policy,” Mr Dutton said.

“In addition to that, there’s about a $7 billion a year recurrent built in cost in what they’ve proposed … so we have no commitments in relation to that recurrent spend.”

That raises questions about how the Coalition will fund its other commitments, like the one-off $10 billion cost of living tax offset, and the one-year halving of the fuel excise which will cost $17bn.

It’s positive to see this discussion, but the devil is in the details.

It also comes just a week after Mr Dutton revealed his “aspiration” to eliminate bracket creep. He vowed to say more about his costings before May 3.

His defence announcement also came without details on where, exactly, the additional money would be spent.

Mr Dutton only offered up the already-announced plan to expand the F-35 fleet as a concrete example and nominated drones, guided weapons. munitions production and boosting the frigate program as areas he would prioritise.

But he wouldn’t make concrete commitments.

“I don’t think there is a government in our history that has been elected outlining what contracts they will sign in relation to defence,” he said.

Prime Minister Anthony Albanese was quick to launch a political attack, saying the Coalition’s defence announcement was “a media release in search of a policy… of some detail”.

“He is unable to say where the money would come from, except for saying, confirming that they will put up income taxes… On top of that, there’ll be more cuts needed,” he said.

“He also hasn’t been able to say what the money would be used for. It’s extraordinary that you make this announcement with a very large figure in the tens of billions of dollars and you can’t say what you will use the money for and you can’t say where all the money will come from.”

Defence and security experts welcomed the Coalition’s pitch to ramp up defence spending, which they argue is drastically overdue.

But they say it carries less weight without details of where it will be spent.

Andrew Carr from the ANU said: “you don’t buy security by achieving a neat, round number tied to the size of the economy”.

“I think that’s a poor proxy,” he told The Nightly.

“What we really need is for both the Opposition and the Government to be explicit about the core security troubles they’re concerned about.”

Jennifer Parker, a defence analyst with two decades of experience in the defence department, said the details of where the money would be spent were important.

She said the expanded F-35 fleet, announced earlier in the campaign and referenced as an example of expenditure on Wednesday, were “not a priority for defence right now” and risked chewing up a significant chunk of the $21bn that could be better spent elsewhere.

“The priorities need to be on integrated air and missile defence systems, counter-drone capability, hardening of bases, and addressing the reserve structure,” she told The Nightly.

“As well as building out the gaps in our naval capability. We have under-invested in the navy for 30 years, so even with Labor’s investment it hasn’t addressed these shortfalls.

“These are some of the things I think are key priorities for this money… So it’s positive to see this discussion, but the devil is in the details.”

Ms Parker said there were other issues beyond just defence spending, namely the ability to get money out of the door, streamlining procurement, and looking at whether the current defence hierarchy is fit for purpose.

“Is the structure, the way we deal with decision making, fit for the future crises we might be facing?”

David Uren, a senior fellow at ASPI, said while the extra $21bn had the potential to ensure Australia met the geopolitical and strategic conditions, there was still a “long way to go to get anywhere close to three per cent of GDP”.

He too said the best strategy was for “strategic decisions to precede the budget” announcements.

Mr Dutton defended his decision to make the announcement so long in the campaign, after 542,000 Australians had already cast their ballot on Tuesday, saying he had wanted to get a “better understanding of where the finances are and how much money we can put into defence”.

The strategic environment has been a motivator for many countries to ramp up their defence spending. The UK vowed to spend 2.5 per cent of GDP on defence by 2027 as the Trump Administration shook up European security.

One of the President’s top Pentagon picks last month explicitly called out Australia to lift defence spending to three per cent

Mr Dutton said the US’ demand was not the main motivation for his announcement.

“China, under the CCP, is a very different country and has ambitions in relation to Taiwan and a naval blockade in the region is not out of the thinking of the defence experts. Let’s be frank about it but it’s not just that,” he said.

“It’s the fact that when you look at what’s happening in Europe, the prospect of Russia emboldened going into countries beyond the Ukraine and Europe like that has Nato countries deeply concerned at the moment.”

Mr Hastie said Mr Trump was “hard to predict” and Australia can’t take security from the US for “granted”.

“President (Donald) Trump is rebalancing the terms of trade and security with all of their partners, and so the message for us is we need to be able to be strong on our own two feet,” he told ABC.

“Yes, we have a deep relationship with the United States, but a lesson from Ukraine is often times you have to demonstrate strength yourself if you want your friends to help you.”

Asked whether Labor would match the Coalition’s pledge, Defence Minister Richard Marles said they had already ramped up defence spending significantly over the past three years.

“We will continue to assess what the strategic circumstances demand in terms of what the appropriate defence spend is going forward,” he said.

Mr Albanese said Labor was “following the Defence Strategic Review”.

“We’ve put in $57bn additional funding over ten years... We’ve turned AUKUS from an announcement into something tangible, and we’ve also invested in our relationships,” he said.

“We will make budget decisions every year.”