Expenditure within the Australian defence market increased at a compound annual growth rate (CAGR) of 6.03% over 2008-2012, reaching a value of US$26.3 billion in 2013.
Through to 2018, the focus of the Australian government will be on the modernisation of its armed forces, participation in peacekeeping operations, and counterterrorism activities.
The Defence industry is in the mature stage of its economic life cycle, defined by its status as a government funded agency. The industry is unlikely to ever reach a stage of decline, as the Australian Federal Government will continue to fund the force in order to ensure Australian security.
Funding for the Australian Defence Force (ADF) has faltered slightly over the past few years, as the Australian Federal Government begins to pursue surplus federal budgets. Government funding is worth approximately 90% to 95% of industry revenue each year, and declined by 2.0% in 2010-11.
Recent budget cuts in conjunction with widespread criticism over the quality and legitimacy of the 2009 Defence White Paper (DWP), has resulted in the acquiescence of the Australian government for a new DWP.
While Germany has, historically, been the leading supplier of arms to Australia, since 2007 the dynamics of the market have changed significantly with the US taking the lead, followed by France. This trend has been facilitated by the close military relationship Australia shares with the US, which will also offer the US an advantage over other supplying countries through to 2018.
Over 2008-2012, the US accounted for the largest percentage share. Most of the procurement programs from the US have been executed under Foreign Military Sales (FMS). This includes contracts with General Dynamics, and local subsidiaries of Lockheed Martin, Boeing and Raytheon.
As a result of its highly competitive domestic shipbuilding industry, ships account for the majority of Australian exports. The industry has recently recorded achievements such as the construction of AZNAC frigates, Huon mine hunters, and Collins class submarines, which are the largest conventionally-powered submarines in the world. The majority of exports were made to New Zealand and the Netherlands.
For more information on the Australian defence market, see the latest research: Australian Defence Market
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