The hidden cost of cutting defence spending
Cutting defence spending is not a saving, it is a deferral. The cost of maintaining credible deterrence is always lower than the cost of responding after deterrence has failed, and Europe's post-Cold War experience, decades of cuts followed by a war on its border it was unprepared for, is the most r
Peace among major powers is not a default state that maintains itself. It is an outcome, produced and sustained by credible deterrence, and when countries stop paying for that deterrence on the assumption the peace will hold anyway, the record shows they eventually find out how wrong that assumption was.
What deterrence actually requires
Deterrence works by making the cost of aggression exceed its benefit in the mind of a potential aggressor, and it depends on three things holding together: capability, the genuine ability to impose unacceptable costs; credibility, a demonstrated willingness to use that capability; and communication, the aggressor actually believing both. When capability erodes through years of underinvestment, deterrence does not collapse overnight. It erodes progressively and invisibly, because the entire point of successful deterrence is that nothing happens. You cannot observe the war that didn't occur because an adversary judged the cost too high.
Europe spent thirty years finding out what a peace dividend costs
After the Cold War ended, European NATO members cut defence spending sharply in pursuit of a so-called peace dividend, with spending among European members falling 22 percent between 1992 and 1999. NATO's 2 percent of GDP commitment, agreed in 2006, was missed by most members for the following fifteen years; as recently as the early 2020s, only a minority of NATO's 32 members hit that threshold. When Russia invaded Ukraine in 2022, European defence industries discovered they lacked the production capacity, stockpiles and trained personnel to respond at scale. A shortfall thirty years in the making could not be fixed in months. Ukraine's survival demanded immediate industrial output and logistics depth, precisely the capabilities Europe had let atrophy, and the cost of re-arming now dwarfs what sustained investment across the preceding decades would have required.
Australia's own arithmetic is shifting
Australia currently spends around 2.02 percent of GDP on defence, meeting the NATO benchmark but below what Australia's own strategic assessments increasingly recommend. The 2026 National Defence Strategy and Integrated Investment Program commits $887 billion over the coming decade, one of the largest peacetime defence commitments in the nation's history, and AUKUS alone commits $368 billion over 30 years to nuclear-powered submarines and their supporting infrastructure. Australia's Defence Minister has argued spending should exceed 2 percent given a deteriorating regional environment, citing China's military build-up, the demonstrated fragility of the rules-based order in Europe, and Australia's own exposure as a relatively small population defending a vast continent and an enormous maritime approach.
Why deterrence is always the cheaper option
The asymmetry is structural, not incidental. Deterrence costs are sustained but manageable: capability maintenance, training, equipment refresh cycles. Response costs, when deterrence fails, are emergency procurement at premium prices, lives lost, economic disruption, and sometimes irreversible territorial or strategic loss. Every historical case where deterrence failed and conflict followed produced costs that dwarfed what maintaining deterrence would have required. The political economy of defence spending in democracies works against this logic anyway, because the savings from cutting defence are immediate and certain while the costs of reduced capability are contingent, future, and easy to discount until the moment they stop being contingent.
The debate this frames in Australia
AUKUS is the defining defence commitment of the current era, and its $368 billion price tag is frequently cited by critics in isolation, without being weighed against the cost of the strategic vulnerability the submarines are meant to address. Australia's underdeveloped domestic defence manufacturing capability, exposed by COVID-era supply chain disruption and reinforced by lessons from Ukraine, remains a recurring strategic weak point. None of this means every dollar of defence spending is well spent, or that trade-offs against social spending aren't real. It means the trade-off needs to be made honestly, acknowledging that reduced capability carries a real cost even in the years before that cost is called in.
Frequently asked questions
Does higher defence spending guarantee peace?
No single level of spending guarantees anything. The evidence is about relative deterrence: capability that is credible and communicated reduces the probability an adversary judges aggression worthwhile, it does not eliminate risk entirely.
Why is deterrence's success so hard to measure?
Because a successful deterrent produces an absence, a war that didn't happen, and absences don't generate data points, headlines, or casualty figures the way failures of deterrence do.
Is Australia's 2 percent of GDP enough?
Australia currently meets the NATO benchmark of 2 percent, but Australia's own defence leadership has argued the strategic environment now justifies more, and the $887 billion decade-long investment program signals that assessment is already shaping policy.
Does this argument apply to all government spending on capability, or just defence?
The core logic, that underinvestment in a low-probability, high-cost risk looks cheap right up until the risk materialises, generalises to other domains, but defence is the case with the clearest historical record because failures of deterrence are visible, costly, and well documented.