Pushing the boat out – huge expansion planned in Australian navy as Australia and U.S. deepen defence ties

The Australian government announced a long-anticipated major overhaul of its surface fleet on 20 February 2024, which will double the number of warships, increasing its current fleet of combat-ready warships from 11 to 26, plus 25 new minor war vessels to contribute to civil maritime security operations.

The updated surface fleet will consist of 11 new general-purpose frigates, six new large optionally crewed surface vessels (LOSVs), three upgraded Hobart-class destroyers and six Hunter class frigates. Australia will spend AU$11.1 billion (approximately US$7.25 billion) over the next decade creating what Defence Minister Richard Marles described as “the largest fleet that we will have since the end of the Second World War”.

The move follows a report by retired U.S. Navy Vice-Admiral William Hilarides on changes needed to the navy fleet in parallel with the supply of nuclear-powered submarines through the AUKUS alliance. The report found that the current fleet was “not appropriate for the strategic environment we face” and argued that Australia needed a surface fleet with “greater capability in integrated air and missile defence, multi-domain strike and undersea warfare”.

The report urged that the recommendations be implemented immediately and that “any delay will exacerbate the risk” to Australia’s security. The total cost of the upgraded navy (including AUKUS stage one investment, accelerated delivery of the surface combatant fleet and the expansion of Australia’s shipbuilding industry) is anticipated to be in the region of AU$54 billion (US$35 billion).

Australia – U.S. collaboration

This rapid expansion should be seen in the context of an increasingly volatile international environment and a new era of strategic cooperation between Australia and the United States, along with other initiatives involving Japan, India and the UK. During a visit by the Australian Prime Minister Anthony Albanese to Washington last October, both he and President Biden emphasised their “shared commitment to a peaceful, open, stable and prosperous Indo-Pacific”.

The two leaders announced the “pursuit of new areas of cooperation on science and critical and emerging technologies” that would augment and complement the two nations’ economic cooperation and trade, cooperation on climate change and “our foundational security and defense ties”.

The two leaders welcomed “the progress on the delivery of our ambitious trajectory for Enhanced Force Posture Cooperation, including the rotation of U.S. Army Watercraft in Australia commencing in July 2024, and scoping of upgrades at key Australian bases in the north.” The statement strongly endorsed work underway “to establish guided weapons co-production” and applauded the implementation of the Australia-Japan Reciprocal Access Agreement.

The statement noted the “substantial progress being made to support Australia’s acquisition of conventionally-armed, nuclear-powered submarines through the trilateral AUKUS partnership.” The two leaders also welcomed the significant steps to streamline defence trade controls and information sharing, as well as enhanced collaboration in terms of strengthening cyber security resilience.

Enhancing capabilities

In April 2023, the Australian government published the latest version of its Defence Strategic Review,1 a move seen by analysts as a significant change in posture for Australia. July 2023 saw the launch of the Advanced Strategic Capabilities Accelerator (ASCA), having been described as “part of the most significant reshaping of defence innovation in decades, designed to deliver vital capabilities for the Australian Defence Force”. The Albanese government is investing AU$748 million in ASCA.

In December 2023, the Australian government announced that it seeking industry and research partners to co-design projects as part of the commitment to transforming Australia’s defence innovation ecosystem.2 The paper sought views on how Australia might “degrade and infiltrate advanced integrated air defence systems”, which would allow Australia to conduct effective long-range strike operations. It also asked how the processing of large amounts of intelligence data could be improved.

According to a paper by the Australian Strategic Policy Institute (ASPI), the emphasis now is on rapidly acquiring disruptive technologies, such as weapons systems based on artificial intelligence, autonomous systems and hypersonic missiles.3

The paper highlighted that the new technologies would “require huge computing power”. Decentralisation was emerging as a “crucial strategy to address a critical capability gap in northern Australia, given that there are no core data centres in the region, and interoperability will be paramount”.

Recent developments showcasing the enhanced collaboration include:

1. Increased rotations of U.S. capabilities in Australia;
2. More frequent and longer US nuclear powered submarine visits to Australia;
3. Upgrades to Northern bases including RAF bases Darwin and Tyndall; and
4. The pre-positioning of U.S. Army stores and materials, a first step towards establishing an enduring logistics support area in Australia.4

Further developments in the defence sector are anticipated over the coming months including a defence estate review, the bi-annual update of the National Defence Strategy and ahead of the federal budget in May 2024, the Integrated Investment Program, a comprehensive program of capability-related projects proposed by the Department of Defence.

National reconstruction fund open for business

As well as the dedicated defence initiatives highlighted above, on 30 November 2023 the Minister for Finance announced that a AU$15 billion National Reconstruction Fund would unlock billions of dollars in investment finance “to rebuild Australia’s competitiveness across the manufacturing value chain”.5

The associated investment mandate set out seven key priorities of which defence capabilities and enabling technologies was one, along with renewables and low emission technologies, medical science, transport, value-add in agriculture, forestry and fisheries; and value-add in resources.

The National Reconstruction Fund Corporation will oversee the programme and target a rate of return of between 2 and 3 per cent above the five-year Australian government bond rate over the medium to long-term.

All these developments spell opportunities for investment and collaboration.