Strengthening National Security and Economic Prosperity Through Enhanced Sovereign Capability

The Imperative for Sovereign Capability

Australia’s reliance on Primes to build defence and national security capability has left us vulnerable to geopolitical tensions. This can be exploited to interfere with our sovereign capacity to design, develop, produce and sustain Defence equipment and technologies that are critical to our national security.

Context, Definition, and Importance

The global Defence industry is characterised by an oligopoly of Defence hardware and software providers, colloquially referred to as the ‘Primes’. These Primes were originally established either as government-sponsored entities to service their military capability requirements, or they were private sector enterprises seeking to capitalise on their host country’s military requirements.

This symbiosis evolved into a sophisticated military-industrial complex where the Primes, in search of profits, expanded their markets outside their host nations; initially to allied countries and eventually evolving into the oligopoly that exists today. Apart from prohibitions on providing military capabilities to sanctioned nations and regimes, this oligopoly of Primes operates today in an open capital market where they provide the full array of Defence hardware, software, and professional services to numerous nation states.

In the post-WWII context, the pre-eminent Primes were anchored in Allied nations such as the US and UK, and while the list of recognised Primes today still boasts a majority of US and UK companies, over recent decades other nations from Europe and Scandinavia have joined this exclusive club. In addition to recognised Defence Primes, nations - such as Israel and South Korea - have developed advanced Defence production capabilities which have expanded well beyond the capacity required to meet their own military requirements, exporting major Defence assets to other nation states.

Australia has not developed its Defence industry in this manner. It has largely relied on global Defence Primes and ‘allied’ nation Defence manufacturers to supply major capabilities such as aircraft, naval surface and sub-surface platforms, land assault vehicles, and satellites. Like all nations which adopt this approach, it has built a modest Sovereign Defence Capability to augment its global procurement strategy.

Sovereign Defence and Interoperability with Allies

A sovereign defence industry does not mean isolation from strategic allies. Rather, sovereignty must be balanced with interoperability, ensuring that:

• Australia’s defence technology and systems remain compatible with AUKUS, Five Eyes, and regional allies.

• Joint development programs - such as hypersonic weaponry, quantum computing, and cyber security capabilities - continue under a “Sovereign-First, Interoperability-Compatible” framework.

• The Defence Integrated Investment Program (DIIP) prioritises co-development opportunities in missile defence, undersea warfare, and next-generation communications infrastructure.

Current Geopolitical Environment

The geopolitical environment features multiple intersecting dynamics:

• Global Tensions: Increased multi-party conflict in the Middle-East (e.g. Israel v. Hamas, Hezbollah, Iran, and Yemen); bilateral conflicts which draw in unilateral and multi-lateral participation (e.g. Ukraine, Russia, NATO, and North Korea); aggression and hegemonistic intent by China against smaller North and South-East Asian nation states; and geostrategic positioning by allies which subsequently invoke direct threats to Australia (e.g. increased US forces based in Australia).

• Increased Militarisation: In response to the evolving geopolitical context, nation states are significantly expanding their military capability and capacity. Australia, by way of example, has increased its modest investment in Defence capabilities to 2.02% of GDP over the last decade. Current political discourse indicates this commitment is likely to increase to 3% of GDP, resulting in additional tens of billions of dollars being invested in Defence capability.

• Asymmetrical and Space Capability Evolution: The evolution and advancement of Defence capability is no longer measured by the number of aerial, maritime, land, personnel, and ballistic assets that a nation state has managed to accumulate. The advent of emerging critical technologies has exponentially increased the proliferation and efficacy of asymmetrical war fighting capabilities and has created new contested battle fronts such as information, space and the cyber sphere.

• Supply Chain Vulnerabilities, IP Protection, and Isolationism: Globalised supply chains present potential disruption risks through natural hazards such as pandemics and disaster events, or through threat actors deliberately targeting military supply chains to degrade or disrupt capability. Isolationist trade policies can disrupt supply chains for component parts, such as critical minerals required to produce computer processing chips. Intellectual property protection, including trade embargoes, is becoming increasingly more prevalent as nation states seek to preserve their technological edge over rivals.

• Technological Advancements: Rapid developments in cyber warfare, artificial intelligence, quantum technology, sonar weapons, and armed unmanned systems require nations to be at the forefront of innovation.

The Role of Global Defence Primes in a Sovereign Strategy

While this paper acknowledges the challenges posed by over-reliance on global defence primes, it is essential to recognise their critical role in Australia’s defence ecosystem. Rather than decoupling, Australia should pursue a hybrid approach, leveraging collaborative models that:

• Ensure IP developed in Australia remains under sovereign control, though still contributing to allied nations, through structured technology transfer agreements present within AUKUS pillars reforms.

• Require increased reinvestment into Australian defence industry, particularly in critical capabilities such as AI, cyber defence, and advanced manufacturing.

• Implement clear compliance mechanisms to enforce Australian Industry Capability (AIC) requirements, ensuring local SMEs benefit meaningfully from defence contracts.

This model ensures Australia retains control of its strategic defence capabilities while still benefiting from global expertise and innovation.