Australia’s defence ETF market has surged over the past year, with assets jumping 396 per cent to $665 million, as investors pile into the sector following a $53 billion long-term defence spending commitment from the Albanese government.
The sharp rise in allocations comes amid a broader global trend, with geopolitical tensions and government rearmament driving record inflows into defence exposures, positioning the sector as both a growth trade and a structural hedge against an increasingly contested world order.
It comes after the Albanese government announced a $53 billion increase in defence spending over the next decade on 16 April, alongside the release of the National Defence Strategy and Integrated Investment Program.
In a statement, the Albanese government said the program was in recognition of current dangerous and unpredictable strategic circumstances.
“These documents set out the Government’s plan to respond to our strategic circumstances and keep Australians safe.
“Not only are these investments acquiring and sustaining the capabilities needed to keep Australians safe, they are also supporting tens of thousands of highly skilled, well-paid Australian jobs directly and across supply chains.”
As a result, Defence spending as a proportion of Gross Domestic Product (GDP) will rise to 3 per cent by 2033 under the NATO approach.
Global defence ETF assets have grown from ~US$46 billion to ~US$107 billion over the past 12 months and attracted ~US$20 billion in net inflows since the start of the year.
Betashares investment strategist Tom Wickenden said retail, advised, and institutional investors are all adding defence allocations.
“The appeal is twofold. Short-term upside from governments raising defence budget targets and re-stockpiling munitions, as well as long-term structural exposure acting as a hedge to an era of growing geopolitical tension and shifting world order.”
Wickenden added that what’s particularly notable is that Australia is now following a broader global shift.
“The Albanese government’s $53 billion commitment to defence spending reflects a growing trend of nations materially increasing defence budgets in response to heightened geopolitical tensions.”
According to Betashares, this is not a story confined to one country.
“Defence spending is rising across allied economies as governments rebuild stockpiles, modernise military capability and respond to a more contested geopolitical environment. That is creating a more durable backdrop for the sector, with major global defence contractors reporting order books that grew by more than $100 billion over the past year, supporting a strong pipeline of future revenues and earnings,” Wickenden said.
“This is already being reflected in investor behaviour. Globally, defence exposures have seen a sharp acceleration in demand.”
