Given that our relative wealth and strategic position in the region are diminishing, the aptly named ‘Asian century’ brings with it a challenge: Australia needs to get real, seriously real, on defence spending, especially in the maritime domain.

Governments say that the defence and security of Australians and Australia are their highest priorities. Conversely, disinterest and lack of knowledge lull the public into thinking that we’re now actually spending as much as we need to. People are focused on things that affect them every day, such as jobs, health, education, welfare and housing. Those things cost real money. That’s what determines votes, and therefore who governs.

However, unless we make a step change now, defence and national security threats will begin to affect Australians’ daily lives, with ruinous results. Tax cuts and budget frugality sound great, but the consequences of spending too little are dire.

The 2017 foreign policy white paper ^[1] has a diagram of GDP forecasts to 2030 for Australia and key regional countries. It shows that we’ll be much weaker ^[2] in economic power relative to our neighbours. The paper notes that the defence capability edge we have enjoyed will shrink significantly. The government’s response, the paper says, will include delivering a more capable, agile and potent ADF, with a particular focus on modernising our maritime capabilities.

The key word here is ‘modernising’. Yes, we’re doing that, but from a low base. Despite excellent people and platforms, the Royal Australian Navy is just too small, too limited and too dependent on the United States to fight and win a major battle at a distance.

Under current procurement plans, Australia can provide a degree of independent maritime defence near our coasts, but there’s little ability to deter adversaries at a distance across the Indo-Pacific, impose our will on them or cause them strategic stress within their own territory. Uncertainty about future US intentions remains, but even so, depending so completely on another nation is hardly sensible, as we have learned before ^[3].

I wrote earlier in the year that a clever Australia ^[4] needs a larger, more potent navy. I also wrote that spending 2% of GDP on defence each year won’t cut it. The stark reality is that our worsening strategic situation means we probably need to be spending around double that, or $60–70 billion a year.

Because of the maritime nature of our region, the bulk of that increase needs to go towards enhancing the size, persistence and lethality of the navy, including providing a maritime air capability via the air force. That will require a significant boost in personnel numbers, and people are expensive.

We also need to establish some strategic depth and influence in the region, showing strength through intent. As has been alluded to recently, we should build and operate ^[5] a naval base on Manus Island in Papua New Guinea, as we once did ^[6], and on other islands in the Pacific, to assist those countries economically and also to send a clear message.

Voices in the RAN’s senior leadership are talking of concentrating on our north and the islands of the Pacific. That’s very sensible, but I am deducing this is code for ceasing our longer-range coalition activities, especially in the northwest Indian Ocean and the Middle East, because we just can’t do both. However, as a nation surrounded by sea and economically dependent on distant maritime trade and a globalised laws-based system, we probably should.

To be strategically consequential at sea, we need to have the ability to project power via capable surface and subsurface action groups. With the RAN’s current force structure, we can probably support two surface action groups, for a short period. But given our extensive maritime geography, a compelling case can be made for maintaining at least five. An action group consists of around five surface platforms, plus submarines and a support ship. Each group must be capable of air, surface and subsurface dominance, taking the fight to an adversary, or deterring that nation from action in the first place.

The uncomfortable fact is that we need a much larger navy. As we move towards 2030 and beyond, 12 combat ships, 12 submarines, 12 offshore patrol vessels and no air capability at distance just doesn’t cut it. In essence, this gives us less capability, relative to others in the region, than we had back in the 1970s. For a start, we need more ships of every class that’s scheduled to be built.

As a first sign of intent, the government should stop the planned decommissioning and sale of the last two upgraded Adelaide-class guided missile frigates, the Melbourne and the Newcastle. I estimate that these ships have about a third of their hull and engineering life left. They are excellent multirole platforms, equipped with advanced missiles, tactical data links and modern systems. They are force multipliers. At a time when Chinese intentions in the Indo-Pacific are obvious, these excellent ships offer much into the future, just a few years after we spent a considerable amount of money upgrading them.

My guess is that we’re selling them because we can’t crew them and can’t afford to run them. The budget doesn’t allow it. It would seem that strategic need wasn’t factored into the decision to sell these ships. This shows that the navy and the Department of Defence just don’t have enough people or money.

The navy is too small, in both people and capability, with a structure based on a budget that’s also too small. Linking defence spending to a percentage of GDP isn’t the answer. Despite the modernising programs and money currently allocated to building new ships, we need a navy and a defence budget that are based on strategic need.