Defence Minister Richard Marles wants to increase military spending by up to $25 billion to pay for new warships

Defence Minister Richard Marles wants to increase military spending by up to $25 billion to pay for new warships, weapons and base upgrades as he battles growing anger from contractors over the paralysis gripping big projects.

As Mr Marles prepares to convince sceptical cabinet colleagues of the need to increase defence spending, decisions and announcements have been put on hold while several reviews are underway to reshape the military.

Defence Minister Richard Marles at last week’s Indo Pacific Maritime Exposition in Sydney.

Mr Marles was berated by some company executives over the uncertainty when he visited last week’s Indo Pacific Maritime Exposition in Sydney, the southern hemisphere’s biggest navy trade show and conference.

Several attendees told The Australian Financial Review that the mood among stallholders at this year’s expo was subdued, as the government had failed to make any announcements on projects or contracts.

“The Australian public has been constantly told that we live in the most dire strategic circumstances since before the Second World War and yet there is no additional funding, there is no urgency from government to actually do anything,” said Australian Industry and Defence Network chief Brent Clark, who represents small and medium enterprises.

“Without a large injection of funds, this government may well preside over the largest reduction in Australia’s defence industry in decades. It simply is not satisfactory that this is occurring,” Mr Clark said.

Defence funding is forecast to hit $52.6 billion this financial year, or 2.04 per cent of GDP. The government has pledged that this will rise to 2.3 per cent by the end of the decade.

But it has faced criticism from security hawks for not increasing the funding over the next four years, despite locking in the acquisition of nuclear-powered submarines and agreeing to $19 billion for Defence Strategic Review recommendations. Instead, money has been cut from the defence portfolio and reallocated elsewhere.

One source said Mr Marles had privately acknowledged that he would need an extra $25 billion over a decade in new budget funding to pay for the recommendations of a series of coming reviews.

The biggest unknown is the make-up of the navy’s surface fleet. The government is considering the findings of a review tipped to recommend cutting the number of anti-submarine warfare frigates to be built in Adelaide in favour of missile-laden warships.

British shipbuilders BAE Systems and Babcock, and a partnership of Australian shipbuilders Austal and Civmec and Spain’s Navantia, have put forward fresh proposals for a guided missile frigate, a light frigate and a corvette, respectively, for Defence’s consideration.

A separate review into the “defence estate” – essentially landholdings – is due to be handed to the government before the end of the year. This is expected to recommend that assets in the southern states be sold and the proceeds used to beef up military bases in the north.

The government is also revising the Integrated Investment Program, (IIP) Defence’s 10-year blueprint for the acquisition of new weapons and systems, after complaining that the Morrison government had over-committed $42 billion in acquisitions without allocating new money in the budget. Several defence sources said a huge amount was under way to rejig the IIP.

Mr Marles would not be drawn on the $25 billion figure, and a spokeswoman said: ″⁣The government recently received the independent Surface Fleet Review and will not pre-empt the outcomes of its response.

“The government’s response to the review will be released in the early part of next year”.

One industry insider said companies’ “frustration came with a price tag”.

“Every day of delay is a day paying someone you have to keep on the payroll in case you win a program,” the person said.

“Businesses are losing money as government prevaricates.”

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