While Australia correctly prioritises the development of domestic industry, the Australian Defence Force is not a sufficient customer to sustain deep industrial capacity across every capability. A central takeaway, from multiple sessions at the 2026 ASPI Defence Conference, was that Australia’s industrial resilience and self-reliance are strengthened not by pursuing an extreme conception of self-sufficiency but through deeper cooperation with allies and partners.
Stronger security cooperation can open opportunities for Australian firms to participate in diversified defence supply chains, providing the scale and resilience that Australia’s domestic market alone cannot. Achieving this, however, will require new mechanisms for cooperation and reform of existing regulatory and policy barriers.
As Australia promotes Australian-made components and capabilities to strengthen its domestic defence industrial base, small to medium technology and manufacturing enterprises are increasingly adapting civilian-use products for defence applications. For example, Redarc, a maker of civilian four-wheel-drive vehicle parts, has shifted into defence, which now accounts for 15 percent of its business. While this trend is improving what industry can build in Australia, it also means that small and medium enterprises are exposed to the volatility of defence markets, particularly Australia’s reliance on a single dominant buyer. As Matt Opie of Defence SA said during the Defence Conference panel titled Industrial Resilience and Australia’s Freedom to Act, the size of a prime defence contractor is a buffer against volatility, but access to other markets provides another.
Australia’s allies and partners also recognise that pursuing sufficient military capability alone is inefficient, so they’re looking for industrial cooperation. And Australia itself is seeking export markets to supplement constrained domestic demand.
The European Union established Security Action for Europe as a scheme to support common procurement among member states and close critical capability gaps. By procuring a capability with others, each country in the agreement does not need to develop it from end to end. This point was raised by Kristijonas Vizbaras, co-founder of Lithuanian–Danish technology company Brolis, in the ASPI Defence Conference session Allied Industrial Power. Collaboration allowed each country to do what it did best, and it also removed barriers to accessing others’ components, he said. France and Germany, for example, might produce semiconductor components that Lithuania then used to manufacture weapons domestically.
Unlike Europe, the Indo-Pacific lacks supranational institutions or collective security arrangements that can coordinate regional defence industrial cooperation. Instead, countries are reforming their domestic laws and strengthening bilateral and minilateral partnerships to achieve many of the same outcomes.
During the panel on allied industrial power, Osamu Nishiwaki from the Ministry of Foreign Affairs of Japan said Japan’s reforms to accelerate capability delivery were a case in point. The changes were intended to make it easier for Japan to cooperate with allies. These included exporting complete systems, everything from interceptor missiles to warships, as well as critical materials and components that could support production in Australia, the United States or Europe. Japan recognises that cooperation requires domestic reform, not just political agreements.
This is a lesson Australia is learning through practice. On the same conference panel, Jennifer Moroney of RAND described AUKUS Pillar Two as an unprecedented ‘experiment in technological minilateralism’, enabling the sharing of sensitive technologies that the US has traditionally been reluctant to export.
Australia’s production program for GMLRS battlefield rockets has played a similar role. As Minister for Defence Industry Pat Conroy said in his Defence Conference fireside session, AUKUS has acted as a ‘pipe cleaner’, identifying the legal, regulatory and industrial obstacles to making US missiles in Australia. The lesson is that practical cooperation drives reform by exposing barriers that block stronger industrial integration.
Australian businesses, particularly small and medium ones, need access to international markets and supply chains that provide the scale and diversity of demand necessary to sustain advanced manufacturing. While Australia should keep investing in making priority equipment domestically, it must rely on critical components from allies and trusted partners. The specialisation model goes both ways. Australia can contribute industrial and technological capabilities in areas where it already excels, such as drones, other autonomous systems and quantum computing, feeding these into global supply chains while drawing on allied technologies and components that would otherwise be inefficient to develop indigenously.
Achieving this level of integration depends on government-to-government agreements that reduce regulatory barriers. Australia’s security partnerships with AUKUS countries, Japan, South Korea, India, the European Union, and potentially, in time, all NATO members, can help build the trusted relationships and mechanisms needed to make deeper integration possible.
However, as Conroy said at the conference, ‘the main challenge is getting the licensing, the certification and getting the sort of middle of each of our respective bureaucracies to open up, take risk and transfer IP effectively.’ Australia’s industrial resilience is being built not only in its factories but through the agreements, regulatory reforms and trusted partnerships driven by Canberra.
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