Defence in Australia: Market Size, Businesses & Forecast 2026

The Australian defence industry comprises domestic businesses providing goods and services through direct commercial transactions with the Department of Defence. According to the Australian Bureau of Statistics (ABS), the industry contributed $12.0 billion in gross value added in 2024-25 (ABS Australian Defence Industry Account 2024-25), representing 0.46% of the total economy. Supported by the Commonwealth's commitment to strategic initiatives like the AUKUS agreement and the 2026 National Defence Strategy, the industry is transitioning toward increased sovereign manufacturing capability and advanced professional services despite temporary consolidations in operational numbers.

Industry snapshot

Key public data points

Historical & forecast

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What does the Defence in Australia industry cover?

The Australian defence industry is officially quantified through transactions where local entities supply goods or services directly to the Australian Department of Defence. Economic output spans various commercial sectors, primarily driven by professional technical services, specialised equipment manufacturing, and infrastructure construction rather than basic military operation itself. Its operational boundaries include technical consultancy, technology maintenance, and high-tech component production designed to satisfy sovereign defense specifications.

• •Professional, scientific, and technical services formed the largest industry block, contributing $5.0 billion to industry gross value added in 2024-25.
• •Manufacturing and construction segments contributed $2.2 billion and $1.8 billion respectively to the sector in 2024-25.
• •The sector involved transactions with 5,165 active Australian businesses during the 2024-25 financial year.

Who operates in the industry and how is it structured?

The industry is highly dependent on a small group of major prime contractors who manage complex, multi-year procurement programs on behalf of the government. Underneath these primary tier-one entities sits an extensive network of small-to-medium enterprises providing specialised engineering, components, and maintenance services. Geographically, corporate activities are heavily concentrated in states hosting major naval and infrastructure hubs, notably New South Wales and Victoria.

• •The sector supported 63,500 employees across Australia in 2024-25.
• •New South Wales was the largest geographic contributor with $3.2 billion in gross value added in 2024-25.
• •Victoria and the Australian Capital Territory followed as major hubs, generating $2.4 billion and $2.1 billion respectively in 2024-25.

What drives demand in the industry?

Demand in this industry is strictly dictated by public capital deployment, long-term national security policies, and shifting geopolitical frameworks within the Indo-Pacific region. Strategic programs such as AUKUS Pillar 1 and the 2026 National Defence Strategy serve as the foundational pipelines for multi-decade procurement projects. Fluctuations in the federal budget directly expand or contract the pipeline of active acquisitions and equipment sustainment programs.

• •The total defence portfolio allocations are projected to reach $887 billion through to 2035 under the Integrated Investment Program.
• •The Australian government allocated $425 billion of its long-term funding toward accelerating the modernisation of the Australian Defence Force.
• •The 2026-27 federal budget outlines a defence spend of $66.9 billion, a nominal decrease of approximately 1% from the revised 2025 allocation of $67.1 billion.

Who are the notable companies in the industry?

The competitive environment features intense bidding processes among global aerospace and defence conglomerates operating through prominent local Australian subsidiaries. These prime contractors form deep strategic partnerships with the Department of Defence to deliver highly technical maritime, aerospace, and land combat solutions. Notable multinational entities commanding significant presence in local procurement include BAE Systems Australia, Thales Australia, Boeing Defence Australia, and Lockheed Martin Australia.

• •BAE Systems Australia represents a primary industrial contractor, managing major naval sustainment and shipbuilding projects.
• •Thales Australia operates heavily across munitions manufacturing, protected vehicles, and domestic aerospace technologies.
• •Boeing Defence Australia and Lockheed Martin Australia lead substantial portions of the technical systems integration and aerospace maintenance programs.

What are the recent trends and outlook?

The industry is experiencing a deliberate pivot toward domestic self-reliance, with policy frameworks explicitly treating sovereign industrial capability as a critical asset. Short-term budget rebalancing has temporarily curbed acquisition and sustainment lines in favor of workforce funding, yet long-term outlays indicate substantial upcoming growth. Major domestic manufacturing programs, particularly in guided weapons and satellite infrastructure, are scheduled to scale over the next decade.

• •Workforce funding increased by $815 million in the 2026-27 budget, while acquisition lines were reduced by $724 million.
• •The government plans to invest up to $18 billion in domestic missile manufacturing to build 4,000 guided missile systems annually starting from 2029.
• •Defense spending is projected to scale up over the decade, targeted to reach approximately 2.5% of GDP by 2033-34 on traditional appropriation measures.

How is the industry regulated?

Operators must strictly navigate rigorous national security protocols, export control frameworks, and defense-specific commercial guidelines. Regulations are designed to protect intellectual property and control the transfer of sensitive military technologies under international agreements. The federal government shapes these industrial frameworks via direct legislative controls and strategic oversight via dedicated statutory guidance.

• •Compliance is strictly enforced under the Defense Trade Controls Act, which regulates the export and supply of military and dual-use technologies.
• •Procurement frameworks adhere directly to the Commonwealth Procurement Rules overseen by the Department of Finance.
• •Security clearance protocols are managed centrally under the Australian Government Protective Security Policy Framework (PSPF).

Government, statistical and trade sources used for this Claight analysis.

• ABS Australian Defence Industry Account 2024-25 ·
• Australian Department of Defence Portfolio Budget Statements 2026-27 ·
• ASPI Defence Budget Brief 2026-2027 ·
• ABS Australian and New Zealand Standard Industrial Classification 2006