The announcement, part of a broader effort under the AUKUS alliance, comes as countries around the world increase defence budgets amid rising geopolitical uncertainty.
Betashares investment strategist Tom Wickenden said the move mirrors global trends and could have lasting implications for investors.
“The recent announcement from the federal government to spend an additional $12 billion on defence is a timely reminder of the growing focus on the sector,” Wickenden said.
“The commitment comes amid increasing defence spending by countries around the globe – as the United States continues to make it clear that it will no longer foot the bill for the defence of the Western alliance. To that end, Australia’s increased commitment under AUKUS aligns with broader NATO trends, where alliance members have pledged to lift core defence spending to 3.5 per cent of GDP. This would equate to an approximate increase of US$324 billion in Europe alone.”
Globally, defence exchange-traded funds (ETFs) have attracted $27.3 billion in net inflows this year, now holding $74.4 billion in funds under management.
In Australia, defence ETFs collectively manage over $487 million, with $381 million of that invested since January 2025. Betashares’ Global Defence ETF (ASX: ARMR) has returned 62.85 per cent since its launch in October 2024, reflecting strong investor appetite.
Wickenden said the performance of global defence contractors underscores the sector’s appeal.
“The recent strength in defence stocks has been led by global leaders like Palantir, Rheinmetall, and BAE Systems, companies at the forefront of both traditional and next-generation defence technologies. As Australia ramps up its own defence capabilities, including procurement from firms like Hanwha Aerospace, we expect this strength to continue for the foreseeable future,” he said.
Order book growth is another indicator of the sector’s momentum. According to Wickenden, in 2024, the selected global defence contractors Betashares tracks collectively expanded their order books by US$119 billion – a 17 per cent rise on 2023 – with early 2025 reports pointing to further acceleration.
Wickenden said investors now face a key decision: whether to increase exposure to global defence contractors or local procurement opportunities.
“We continue to monitor growth in order backlogs as a leading indicator of future earnings potential,” he said.
Last month, InvestorDaily reported that the Global X Defence Tech ETF (DTEC) emerged as the best-performing ETF of 2025, delivering over 60 per cent returns since January.
At the time, Global X senior investment strategist Billy Leung told InvestorDaily that momentum in defence-focused ETFs was expected to continue, particularly following NATO’s June summit commitment to raise defence spending from 2 to 5 per cent of GDP.
“We see defence as a long-term structural growth story. Geopolitical tensions have accelerated spending but governments are increasingly treating defence as non-discretionary,” he said.
While defence ETFs have broadly performed well, DTEC has outpaced its peers largely thanks to its top holding, US software firm Palantir Technologies, whose share price has surged 372 per cent over the past year to 15 September, positioning it as the best-performing stock in the S&P 500 for 2025.
Looking forward, Leung said he expects DTEC to continue to attract demand across all channels, from retail investors through to advisers and institutions seeking to gain diversified exposure to the global defence theme without having to take concentrated single-stock options.
