US asks Australia to increase defense spending to 3.5% of GDP

By Kirsty Needham

Australia's prime minister said on Monday his government would decide its defence capability needs before announcing defence spending, after U.S. Defence Secretary Pete Hegseth asked Australia to lift its defence budget to 3.5% of gross domestic product.

"What you should do in defence is decide what you need, your capability, and then provide for it," Prime Minister Anthony Albanese told reporters, adding his government had already committed to accelerate A$10 billion in defence spending for the next four years.

"We're continuing to lift up," he said, citing a 2.3% goal for 2033 previously set by his government.

Hegseth and Australian Defence Minister Richard Marles discussed security issues including accelerating U.S. defence capabilities in Australia and advancing industrial base cooperation during a meeting on Friday, a Pentagon statement said on Sunday.

"On defence spending, Secretary Hegseth conveyed that Australia should increase its defence spending to 3.5 percent of its GDP as soon as possible," the statement said.

The ministers' meeting on the sidelines of the Shangri-La Dialogue, Asia's premier security forum, is only the second between the security allies since U.S. President Donald Trump took office in January.

Albanese, who was re-elected in May and is yet to meet Trump, did not raise defence spending in this year's national budget, saying his government had already announced a A$50 billion boost over a decade.

Peter Dean, director of foreign policy and defence at the University of Sydney's United States Studies Centre, said Albanese was positioning ahead of his first meeting with Trump, where the pair are also expected to discuss tariffs.

Albanese would want the decision on a defence boost to be seen as a sovereign one not imposed by Trump, after the election showed standing up for Australia was popular domestically, he said.

Australia's defence spending in 1987 was around 3% of GDP or 10% of the national budget, compared to 2% of GDP or 6% of the budget in 2025, he said.

"To achieve self-reliance in the modern era, with the threat from China, and within our region, it is going to cost more money," Dean said. The U.S. would spend 3.5% of GDP on defence this year, he added.

Australia has comitted to spend A$368 billion over three decades on the AUKUS programme to acquire and build nuclear powered submarines, and is also boosting missile acquisition and manufacture.