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Australia—Record global military expenditure bolsters export potential
Global military expenditure hit a record US$2.9 trillion or 2.5% of GDP in 2025. The US remained the world’s largest military spender at US$954 billion. Europe and Southeast Asia saw the highest regional increases at 14% and 15% respectively. Middle East countries maintained some of the highest expenditure as a share of GDP, including Israel (8% of GDP), Saudi Arabia (6%), Oman (6%), Kuwait (5%) and Jordan (5%).
Increased NATO commitments and conflict in the Middle East will push expenditure even higher in coming years. The capabilities of Australian defence exporters align with some of the spending priorities of Australia’s large strategic partners, suggesting new export opportunities. For example, the US budget request of US$1.5 trillion in FY2027, if approved by congress, includes funds for weapons systems, drone capabilities and shipbuilding. Japan will become the third-largest defence spender with a JPY9 trillion (US$58 billion) FY2026 defence budget, prioritising longer-range missiles, air and missile defence capabilities, unmanned assets, and space and cyberspace capabilities. Canada’s pledge to increase investment in core military capabilities to 3.5% of GDP will include spending on submarines, aircraft, drones, sensors and radar systems. Germany plans to spend €83 billion on defence in 2026, up €20 billion compared to 2025, with new funds used for combat drones, helicopters, fighter jets, maritime patrol aircraft, infantry vehicles and protective clothing for soldiers.
