Labor's inclusion of over $10 billion in veterans' welfare payments in defence funding calculations sparks controversy, with the Coalition arguing it inflates real military capability. The change aligns with NATO-style accounting rules but raises questions about transparency as Australia faces US pressure to increase defence spending.
Coalition attacks Labor 's for including $10b in veterans’ welfare payments in defence funding calculations Labor ’s defence funding calculations have been called into question following revelations that billions in non-military spending are inflating Australia’s headline defence effort.
Fresh scrutiny has been raised over Labor’s classification of defence spending after it emerged more than $10 billion in veterans’ welfare payments have been included in its headline defence figure. The change sits within a broader shift in how Australia reports defence expenditure under NATO-style accounting rules. The government has maintained the approach aligns with international standards, while the Coalition has argued it inflates the real level of military capability.
The issue has become politically sensitive as Australia responds to increased pressure from the United States to lift defence spending to higher levels of GDP. Fresh scrutiny has been raised over Labor’s classification of defence spending. Picture: NewsWire / Martin Ollman It has emerged that more than $10 billion in veterans’ welfare payments have been included in its headline defence figure.
Picture: Department of Defence Shadow foreign affairs minister Ted O’Brien has questioned whether the changes improve national security outcomes, arguing the numbers do not reflect real capability.
“The number one job of government is to keep its people safe and there's been an enormous deterioration in our capability. “But you don't improve Australian safety by taking welfare payments from one spreadsheet and put it into the defence spreadsheet and suddenly Australia is safer. ” The government’s revised methodology has lifted Australia’s headline defence figure from about 2 per cent of GDP to a reported 2.8 per cent under NATO accounting definitions.
In total, more than $18.5 billion in non-defence administered expenditure has been incorporated into the headline figure for the current financial year. That shift includes expenditure not directly controlled by the Department of Defence, including veterans’ income support payments, superannuation liabilities and parts of intelligence agency funding. Officials have argued NATO methodology allows some of these categories to be counted in defence totals, particularly military pensions and related long-term obligations.
Mr O’Brien said the inclusion of welfare-style payments stretched the definition beyond what most Australians would understand as defence spending.
“He might have political cover, but to be honest with you, the real point is he making Australians safer, and the answer to that is no,” he said. The opposition has argued the figures risk creating a perception of stronger defence investment without a corresponding increase in deployable military capability. This comes as Australia’s defence posture is under renewed focus, with international partners urging higher and more sustained spending commitments.
Mr Marles on Sunday confirmed the nation would receive three second-hand Virginia-class submarines under the expensive defence deal. Australia was originally expected to receive two second-hand vessels and one brand new Virginia-class boat. Mr Marles has defended the adjustments, saying the revised approach simplifies the program and improves delivery certainty. Richard Marles on Sunday confirmed the nation will now receive three second-hand Virginia-class submarines under the expensive defence deal.
Picture: Getty Images He said while strategic alignment with the United States and United Kingdom was critical, delivery needed to match expectations. The Coalition said Australia cannot afford delays or reductions in capability at a time when increasing regional tensions are increasing and military preparedness is under scrutiny.
“The Minister is trying to celebrate the fact that he's not going to get a new first-class sub. In fact, they're all going to be second-hand... that just doesn't cut it,” Mr O’Brien said.
“It’s like a dodgy car salesman where you want a new vehicle and we walk away with a second-hand one and say, ‘isn’t this great’. “It's up to the Australian Defence Minister just to speak straight with the Australian people... I mean, Australians aren't fools. ” The Integrated Investment Program , which was unveiled alongside the 2026 National Defence Strategy, included defence spending of $14 billion over the forward estimates and $53 billion over the next decade.
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