Spotlight on Australia - September 2025

Whether it be from US pressure, the need to support Ukraine, or a flexing China, western governments are cranking up their defence spending. Australia is no different. Meanwhile, investors sense an opportunity. Stocks such as Germany’s Rheinmetall have surged nearly 300% over the last year. But did you know that Australian company NIOA has a joint venture with Rheinmetall?

The gross value added of Australia’s defence industry increased by 12.4% in 2023-24 and over the last eight years has regularly outpaced the overall Australian economy (see chart below).

Growth will likely accelerate going forward, with many new projects planned and the government’s desire to strengthen the sovereign capabilities of the Australian defence industry.

The structure of the Australian defence industry    

Australia’s defense industry added AUD 11.8 billion in value to the Australian economy in 2023-24. The defence industry includes all business activities used to provide goods and services for the Department of Defence. It does not include the wages of Australian Defence Force personnel.

By industry and sub-industry, the largest contributors to the defence industry’s GVA in 2023-24 were: professional, scientific and technical services; computer system design and related services; and transport equipment manufacturing (see chart below).

In terms of organisational units, Australia’s defence industry comprises a mix of local subsidiaries of large foreign companies, large Australian companies, local small and medium enterprises, and government-owned producers. In 2023-24 there were 5,539 companies employing over 69,000 direct employees. 97.9% of value added came from the private sector.

The five largest defence companies by turnover in 2024 are shown in the table below. The top ten largest companies comprised 59% of total turnover.

Source: Australian Defence Magazine, ADM’s Top 40 Defence Contractors 2024

In 2023-24, the Department of Defence awarded AUD 67.2 billion in contracts (single and multi-year), which represented 67% of all federal government procurement for 2023-24 by value.

Military fixed wing aircraft was the largest single item of procurement at 9.2% of total government procurement while war vehicles was third with 5.3%. Military rotary wing aircraft was 4.1%, aircraft was 3.6%, and missiles was 3.3%.

A local success story

Bill and Barbara Nioa started off in the 1960s selling fruit and vegetables at a dusty roadside stall. After a few years they sold their farm and bought a service station. Over the next ten years, this grew into several service stations, a fuel depot, and several tyre shops in regional Queensland. They had an eye for distribution! 

1973 was pivotal. Bill, a keen shooter, started to sell firearms and ammunition at his various shops. He even sold from a truck in nearby towns. As the business grew, Bill took the business into the wholesale space.

In 1996, Australian gun laws tightened and many suppliers left the industry. In contrast, Bill Barbara, and son Robert, saw an opportunity. They decided to partner with international companies to supply local law enforcement agencies. In 2007, Nioa Group won its first contract with the Australian defence force.

Today, NIOA supplies firearms and ammunition to the Australian and New Zealand militaries, owns Barret Firearms Manufacturing in Tennessee, is developing Australian-built laser guided missiles (Australian Missile Corporation), and has a joint venture with Rheinmetall to produce 155mm artillery ammunition and armoured piercing projectiles for F-35 Joint Strike Fighters. It is also looking to expand into the UK and Europe. In 2024, it ranked 21st in turnover for the Australian defence industry.

Prospects for long-term growth

“Even our most trusted security partners will be stretched in the event of a regional war, … So, Australia must have more independent capacity to defend ourselves and to be a strong partner with our allies in collective defence.” Robert Nioa.

It is no secret that western allies, including Australia, are feeling the pressure and need to increase their defence spending.

In its “Defence Strategic Review 2023”, the Australian government committed to increasing defence spending from below 2% of GDP to 2.3% or more by 2033-34. Some critics are even calling for 5%.

The Review also called for new military capabilities. This includes Australia’s commitment to building nuclear submarines with the UK as part of the Aukus agreement. The US will provide key technology and training and will sell Australia up to five second-hand Virginia class nuclear submarines as an interim solution. The Trump administration is currently reviewing the deal. The total program is expected to cost AUD 368 billion over 30 years.

Australia also recently announced a AUD 1.7 billion program for Australian designed and built large underwater autonomous drones, called “Ghost Sharks”. The Ghost Sharks will provide stealth surveillance, reconnaissance, and strike capabilities.

In addition to new capabilities and big ticket items, the Review also called for Australia to,  “... become more self-reliant to meet its national defence needs and contribute to regional stability,”.  

To increase the capability of the local defence industry, the Defence Department released its “Defence Industry Development Strategy” in 2024. 

As part of the strategy, Defence will create an internal defence industry intelligence unit to strengthen and look for new opportunities in Australia’s sovereign defence industry.

In particular, it will focus on helping many of the SMEs in the Australian defence industry to scale up and increase their innovation. The aim is for many of the SMEs to evolve from providing consumables and services (“tier 3”) to “businesses delivering major equipment, systems, assemblies and services realising specific functions (“tier 2”). Tier 1 are prime system integrators.

To help local SMEs scale, Defence will provide grants and will encourage private sector investment, including from managed funds. It will also continue to lean on its Australia Industry Capabilities and Global Supply Chain programs. It will also look for areas where SMEs can partner with foreign companies. Further, it will use new procurement guidelines to prioritise the growth of local SMEs where possible.

The Development Strategy also set out seven key priority areas for the Australian defence industry to focus on. These include: continuous naval shipbuilding and sustainment, domestic manufacture of guided weapons, maintenance and upgrading of aircraft, and the construction and integration of autonomous systems.

Final thoughts

The Australian defence industry has been growing fast over the last few years but a new world with new priorities should see government defence spending on the local defence industry increase. This should also open up new exports. Opportunities will also increase for private sector investors from Australia and overeases to benefit from these new strategic developments.