US National Debt and Australia’s National Security
Written by: Peter Leahy and John Powers - Members of the RSL Defence and National Security Committee
The United States is on the verge of a debt crisis that will have severe implications on Australia’s national security and our ability to defend ourselves.
As a nation, Australia should be gravely concerned about this crisis, especially considering AUKUS, which tethers us even closer to the US economy.
Since the end of World War II, the US national debt has hovered around 100 percent of GDP. In the last decade, it has spiralled to 136 percent – the highest in US history. It is projected to reach 148 percent by 2030. This growing deficit is taking the US economy into unchartered waters.
By comparison, the 2023–24 Federal Budget forecasts Australia’s debt to be 36.5 per cent of GDP by the end of the 2026–27 financial year.
The sheer volume of America’s debt, coupled with a lack of political will to raise revenue or cut spending, has increased national security risks both for the United States and its global partners, including Australia.
The consequences of this debt are being masked because, in an election year, neither Presidential candidate wants to talk about it. The problem is set to get worse.
First, on 1 January the US national debt ceiling, which was suspended in 2023 returns; and second, all the tax cuts that were implemented in 2017 expire. When this occurred in 2023, before congressional emergency action, the US was on the precipice of financial default.
Economists fear that if the debt continues to grow it will result in global banking institutions and investors losing confidence in Washington’s financial reliability, The result could be a global monetary crisis, which would have an impact on Australia’s economic stability and national security.
The issue with US deficit spending arises when mandatory expenditures – debt interest payments, federal retirement schemes, and Medicare – become the predominant expense rather than discretionary items like defence, energy grids, critical infrastructure, and transportation networks.
The debt’s impact on national security decisions, international agreements, global military sales and force capability projections could be devastating.
For example, the Taiwanese representative to the US government said on 6 October 2024 that $29 billion AUD worth of military sales was currently overdue to Taiwan because of US production and supply chain shortages, which are the result of delayed US government funding streams caused by stop-gap funding measures and budgetary continuing resolutions. This leaves Taiwan’s defences in a precarious state.
Under AUKUS Australia could be in a comparable situation.
Much of Australia’s future defence capabilities could be as vulnerable as of those in Taiwan. Delays or disruptions within AUKUS supply chains, could result in our national security being jeopardised.
Under AUKUS, Australia will become more dependent on the US and their defence industrial capacity. Minister Marles has spoken of going beyond interoperability to interchangeability. This will mean that we will use more American equipment.
Aside from the debt issue we should also be concerned about the denial of the Sea Lines of Communications between Australia and America’s West Coast. Surely one of the primary reasons the Chinese are so active in the Pacific.
Another vulnerability is that there is limited capacity in the global availability of military equipment and ammunition with likely over demand and the need for supply constraints or rationing by operational theatre.
With America involved in multiple locations; Ukraine, Indo Pacific, Middle East there will be issues of priority of allocation of available military equipment and ammunition. Where will Australia stand in the queue?
That is why it’s important that government create and invest in a greater indigenous defence industrial capacity and sponsor a local defence prime. In this way we will have greater self-reliance through Australian businesses and manufacturers to supply the critical war equipment we need to bolster our national security.
The headline items of rockets and submarine parts manufactured in Australia are fine. But more depth, diversity and self-reliance in industry and manufacturing are necessary.
For too long we’ve not been disciplined in our budgetary choices and decisions. We have underfunded defence capabilities and local defence industries. In the near term, especially considering the US’s looming debt crisis, guaranteed Australian defence industrial capabilities should be a critical consideration.
Australia’s defence industry is a key element of our ability to defend ourselves and pursue our national interests. Now, it is seriously underdone with many companies wondering what their future, if there is one, holds.
Admiral Mike Mullen, the former Chairman of the Joint Chiefs of Staff warned the US Congress in 2012 that the US’s national debt would be the nation’s greatest security threat.
He was right and it is a threat to Australia as well. Australia should respond by increasing our defence industrial capacity across a broad base and investing in an indigenous Australian defence prime.
Peter Leahy is a former Chief of the Australian Army and a Professor at the University of Canberra. He is the Chair of the RSL’s Defence and National Security Committee.
John Powers is a naturalised Australian. He had an extensive career in US army special operations and national intelligence activities. He is a member of the RSL’s Defence and National Security Committee.
