Australia, explained.
Housing policy and defence questions might not immediately seem related (Xia Yuan/Getty Images)
To be safer in the world, Australians might need to be less secure at home.
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Australia can’t prevaricate on tough economic and security trade-offs anymoreAustralia can’t prevaricate on tough economic and security trade-offs anymore
When members of the Australian Turf Club turned down a $5 billion offer from the New South Wales state government to buy Rosehill Racecourse in May, few punters would have thought their votes could set up a showdown between developers and the Navy.
Not even five years’ free membership – plus a $5,000 bar tab – could convince ATC members to hand over their western Sydney racecourse to develop 25,000 new homes.
The NSW Government quickly scrambled to find alternative locations to help meet its target of 337,000 new dwellings by 2029 amid a housing affordability crisis. One of its new proposed development sites: converting the port at Glebe Island, which sits at the western end of the iconic ANZAC Bridge, into 10,000 new homes close to Sydney’s CBD and public transport.
But there’s a hitch: Glebe Island is the last working deepwater port in Sydney Harbour – an important piece of commercial and defence infrastructure. Defence analyst Jennifer Parker explained its significance:
“We saw during World War II that the US Army from about 1942 onwards pushed about a million troops through Sydney Harbour, and this was predominantly through Glebe Island … if we are to have another regional conflict … and Glebe Island disappears, we lack that surge capacity for our maritime activities.”
The issue is an unexpected conjunction of two seemingly disparate policy issues: housing affordability and maritime security.
But Australia now faces converging domestic and global pressures that are making these kinds of trade-offs – between Australians’ social security and Australia’s international security – both more common and harder to resolve.
Often these pressures manifest in difficult discrete choices. As with Glebe Island, the binary between national security and economic efficiency is a common point of tension.
The Navy in Sydney Habour (Paul McCallum/Defence Imagery)
Take the Port of Darwin. The government faces an invidious choice between either tolerating the security risks of Chinese ownership of critical infrastructure or undermining the confidence of foreign investors.
Similarly, looming Foreign Investment Review Board decisions regarding Santos and Austal pit sovereign control of energy supply and shipbuilding against Australia’s ongoing need to attract foreign capital.
Such choices are symptomatic of more fundamental dilemmas that Australia cannot defer much longer.
The Albanese government faces twin political pressures, to grow expenditure both on the care economy – a pillar of its electoral platform – and on defence.
One of these is to find a settling point between two poles of economic policy: openness to trade and investment and accepting the primacy of market forces on one hand, and on the other, an activist industry policy, a government-led rebuild of domestic manufacturing, and sovereign capability and infrastructure.
Australians appear unprepared to reconcile this trade-off, with the Lowy Institute’s polling delivering a perplexing result: more than three-quarters of Australians support free trade – but also making more goods in Australia.
Even tougher choices lie, however, in public spending.
Australia faces ongoing budget deficits, with the greatest structural pressures in defence spending, the care economy and servicing public debt.
Treasurer Jim Chalmers is right to say that the “best defence against global volatility and the best way to lift living standards is with a more productive economy, a stronger budget, and more resilience.” The government’s productivity roundtable in August is the first step towards this, aiming to address fiscal sustainability by boosting economic growth.
The problem is that the Albanese government faces twin political pressures to grow expenditure both on the care economy – a pillar of its electoral platform – and on defence.
The prime minister and treasurer recently rejected US calls to lift defence spending to 3.5 per cent of GDP. However, four factors make further growth in defence spending seem inevitable: a deteriorating strategic outlook, the cannibalisation of the defence budget to fund AUKUS, NATO members’ commitments to reach 5 per cent, and growing expectations from the White House on allies.
So, with meaningful tax reform yet to crystallise and Australia facing persistent productivity stagnation, any pathway that avoids ballooning public debt will more than likely necessitate ruthless prioritisation of spending.
To date, the government has sought to manage the growing confluence of international and domestic pressures through a “whole-of-nation” framework for foreign and defence policy that seeks to harness all dimensions of Australian statecraft. Though this framing is welcome (not least because I’m complicit in its perpetuation!), its underlying assumption is essentially positive sum: through a more effective alignment of national means we can realise greater international ends.
Sometimes, however, decisions are zero sum.
The increasingly sharp reality is that maintaining Australia’s international security is clashing more and more with domestic economic and policy objectives.
The Albanese government has started both its terms with major domestic economic policy roundtables: the Jobs and Skills summit in 2022, and now its 2025 sequel focused on productivity. But to seriously consider how Australia should balance its security with its prosperity and social safety net, a bigger discussion about the national interest is required.
Australia cannot afford to wait, however, until 2028 for such a major national conversation.
In the next year, the government will have to confront many difficult choices – plus others yet to materialise. Each decision will generate winners and losers, so the government must soon engage voters with a stark reality: to be safer in the world, Australians might need to be less secure at home.
About the author
Hugh Piper
Hugh Piper is a director at Ancrum Advisory.
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