Why The Economics of War in Australia Matter

14 February 2026 AIMN Editorial, By Denis Hay

Australia’s defence spending is rising at a time when housing stress, health system pressure, and energy transition demands are also intensifying.

Public debate often treats defence and social investment as separate conversations. They are not. Both draw on the same public money, skilled labour, industrial capacity, and political attention.

This article examines how the war economy functions, how Australia’s major defence commitments shape long-term fiscal settings, and what opportunity cost means in practical terms. It does not argue for ending defence. It does not dismiss strategic risk.

Instead, it asks a structured economic question: when public funds are allocated to long-duration military programs, which alternatives are delayed or constrained?

Unlike earlier articles on Monetary Sovereignty that focus on financial capacity, this piece concentrates on real resource allocation and political incentives within defence policy.

The Problem: The Economics of War and Locked-in Spending

Rising Global Military Spending

The Stockholm International Peace Research Institute reports that global military spending reached US 2.7 trillion in 2024. Australia is part of this global expansion…………………….

Australia’s Major Defence Commitments

Under the Department of Defence strategy and the AUKUS submarine pathway, Australia has committed to multi-decade procurement and sustainment programs………………………………………………………

Systemic Causes

Alliance integration priorities
Strategic deterrence doctrine
Industrial policy embedded within defence
Long-term contracting frameworks

Political Incentives

Regional job creation promises
Perception of strength and security
Limited scrutiny of lifecycle costing
Concentrated contractor influence

Beneficiaries of the Status Quo

Large defence primes
Specialist subcontractors
Regions hosting major facilities
Political actors are able to signal security leadership

This does not imply corruption. It shows structural incentives.

The Economics of War in Australia and Opportunity Cost

Opportunity cost is not abstract. For example, if $10 billion in defence procurement employs engineers and advanced manufacturers, those same skilled workers are not simultaneously available to expand public housing construction…………………………………………………………………………………………………………………………………………………………………………………………

Conclusion

The economics of war in Australia are about allocation, not ideology.

Defence commitments such as AUKUS are long-term and capital-intensive. Housing shortages, healthcare strain, and energy transition pressures are immediate and socially destabilising.

Public money reflects political priorities. The central question is whether more military capability delivers greater marginal security than investment in social resilience.

Australia has the institutional capacity to pursue both strategic security and domestic stability. Outcomes depend on policy choice, not inevitability.

The economics of war in Australia are not just about defence budgets or alliance commitments. It is about choices. Every dollar committed to long-term military expansion is a dollar not invested in housing, healthcare, education, and productive industry. A balanced approach to the economics of war in Australia requires transparent costing, clear strategic purpose, and a serious national discussion about opportunity cost. https://theaimn.net/why-the-economics-of-war-in-australia-matter/