Redirecting defence spending to local firms could boost GDP by AUD $8.2 billion

New economic modelling suggests directing a greater portion of Australian Defence spending towards Australian-owned prime contractors could deliver significant benefits to the national economy and workforce. The analysis, conducted by DeltaPearl Partners, estimates that modest shifts in procurement could add up to AUD $8.2 billion annually to Australia's GDP and result in up to 43,205 full-time jobs.

Economic effects

The study modelled scenarios where 5% of Defence spending is moved away from imports, and 10% of domestic Defence contracts are shifted from foreign-owned subsidiaries to Australian companies. These changes, made with no increase to current Defence budgets, could drive GDP gains ranging from AUD $5 billion to AUD $8.2 billion and create between 25,569 and 43,205 jobs each year. The research emphasises that keeping profits, intellectual property and tax revenue within Australia helps build resilience and control over key capabilities.

Sovereign capability

Beyond the economic uplift, the modelling highlights the impact of local procurement on strategic sovereignty. Decisions on intellectual property, management, and dividends differ significantly between domestic primes and foreign subsidiaries, affecting the retention of knowledge and high-value skills.

Craig Wilson, Managing Director at DeltaPearl Partners and the study's lead researcher, noted the broader importance of procurement policy for national resilience.

"In undertaking the analysis, we modelled only modest changes, sought to identify any adverse implications, and held everything else equal. The results show that on a budget-neutral basis, but with an improved set of procurement criteria, the Australian Government's Defence procurement program, which makes up 56% of the value of total federal government procurement, can achieve expanded economic and sovereign outcomes - a Defence Dividend. This confirms what Australian industry has been saying for years, that who we award Defence contracts to matters enormously for Australia's long-term resilience," said Craig Wilson, Managing Director, DeltaPearl Partners.

Current procurement

The report identifies a persistent mismatch between stated policy intentions and procurement outcomes. Despite high-level commitments to growing sovereign capability, the majority of major Defence contracts by value continue to be awarded to foreign-owned multinationals. The analysis references recent changes to the Commonwealth Procurement Rules and points to calls from Defence leaders and the Australian National Audit Office for stronger local industry participation.

Policy recommendations

The study outlines several recommendations for the Australian Government, including redefining "value for money" in procurement to incorporate sovereign capability and broader economic multipliers. It proposes use of a quantitative Sovereign Dividend Scorecard to support procurement decisions, and suggests stronger guidelines for identifying Australian businesses-with majority local ownership, a domestic supply chain, and control over critical intellectual property. The recommendations also include empowering procurement officials with clearer decision-making authority and treating Defence procurement as a tool of national strategy.

Industry response

The report was commissioned by the Sovereign Australian Prime Alliance, whose members include Australian-owned Defence contractors. Proponents of the shift argue that supporting local primes reinforces both economic outcomes and national security.

"Our research shows even modest shifts in procurement settings will deliver billions in GDP uplift, thousands of skilled jobs, and a stronger sovereign base," said Wilson. "This evidence provides a clear, defensible basis for refining procurement rules to deliver maximum national benefit without additional cost to the taxpayer."