Coalition Stays Committed to Defence Spending Pledge, Seeks Tax Reform Discussion

The Coalition remains committed to lifting defence spending to 3% of GDP, but won't detail where the money will come from. Shadow Finance Minister James Paterson suggested the opposition is open to considering broader tax reform. The government plans to meet with the US to discuss defence spending, amid pressure from the US to increase defence spending to 3.5% of GDP.

The United States has urged Australia to significantly increase its defence spending to 3.5% of its GDP, a call that has sparked discussions within the Australian government. The request came from US Defense Secretary Pete Hegseth, who met with Australian Defense Minister Richard Marles on the sidelines of the Shangri-La Dialogue in Singapore [1, 2, 3, 4, 5].

Hegseth conveyed that Australia should boost its annual military spend by tens of billions, aiming to reach the 3.5% target as soon as possible. This call follows months of pressure from the US, which has been vocal about the need for its allies to meet the NATO target of spending at least 2% of their GDP on defence [2, 4].

Australia is currently on track to lift its defence spending from about $53bn a year, or about 2% of GDP, to an estimated $100bn, or 2.4% of GDP, by 2033-34 [1]. However, an additional annual spend of about $40bn would be required to meet the 3.5% target [1].

The Australian government has been cautious in its response. Prime Minister Anthony Albanese has stated that the government will determine its defence policy and has not yet provided details on how the additional funds would be raised. Shadow Finance Minister James Paterson has suggested that the opposition is open to considering broader tax reform as a potential source of funding [1].

The US push for increased defence spending is part of a broader strategy to strengthen its alliances and partnerships in the face of a more complex and challenging security environment. The US views its allies as critical partners in maintaining global security and stability and is seeking to ensure that they have the necessary resources to contribute to this effort [2].

The Australian government is expected to meet with the US to discuss defence spending, amid pressure from the US to increase its defence budget. The meeting is likely to focus on the need for Australia to enhance its defence capabilities to better address emerging security challenges, including those posed by China's military modernization and assertive behavior in the region [2].

References:
[1] https://www.theguardian.com/australia-news/2025/jun/02/anthony-albanese-pushes-back-on-us-demand-for-australia-to-increase-defence-spending
[2] https://www.ainvest.com/news/urges-australia-boost-defense-spending-3-5-gdp-2506/
[3] https://www.facebook.com/Reuters/posts/us-defense-secretary-pete-hegseth-asked-australia-to-increase-its-defense-spendi/1244068380917225/
[4] https://www.capitalbrief.com/briefing/us-urges-australia-to-hike-defence-spending-42f6e2e0-0deb-4149-b3dc-5fb6596b92de/
[5] https://www.9news.com.au/national/us-asks-australia-to-lift-defence-spending-by-billions/2fc1cef9-a256-41cb-b581-6c9b49f903e9