Defence Strategic Review shifts $7.8 billion to deal with 'missile age', deter regional adversaries

Prime Minister Anthony Albanese and Defence Minister Richard Marles announced the federal government will respond by strengthening defence's presence in the country's northern bases and investing in long-range missiles as it enters a period of potential conflict in the Indo-Pacific.

The Albanese government agreed, or agreed in-principle, to 62 publicly-released recommendations of a total 108, identifying six priority areas for urgent action.

The previously announced AUKUS submarine deal is one priority area while longer-range strike missiles, increasing presence in the northern bases, improving workforce retention, deepening diplomatic and defence partnerships and growing capacity to turn new technology into ADF capability make up the other five.

"This represents a document for today and tomorrow. It is the most significant work that's been done since the Second World War looking in a comprehensive way at what is needed," Mr Albanese said at a press conference on Monday.

"It demonstrates it in a world where challenges to our national security are always evolving.

"We cannot fall back on old assumptions. We must build and strengthen our security by seeking to shape the future rather than waiting for the future to shape us."

The significant shift reprioritises $7.8 billion in savings over the next four years, and will result in 21 projects being rescoped, six being delayed and another six cancelled.

"There are a lot of tough decisions which need to be made, but in doing so, we are making in the best interest of our defence force and our nation," Mr Marles said.

"Work to implement the review starts today, ensuring our ADF and our Defence personnel has the capability they need to keep Australians safe."

Led by former defence force chief Angus Houston and former defence minister Stephen Smith, the Defence Strategic Review, released Monday said the defence force was "not fully fit for purpose".

It recommended improving undersea warfare and long-range strike capabilities, increasing the military's presence and ability in Australia's northern bases and developing an integrated air and missile defence capability.

While the landmark 110-page report acknowledged the threat of an invasion remained "only a remote possibility", it warned adversaries could use military force and coercion from greater ranges.

Instead, Australia needed to shift from a "balanced force" defending Australia from low and middle powers to a "focused force", which can defend its land and deter threats in the region.

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The strategic review also found Australia could no longer rely on its remote geographic location in the modern military age.

The rise of the "missile age" meant trade and supply routes could be more quickly disrupted or affected, reducing any "warning time" Australia once had.

"Ending warning time has major repercussions for Australia's management of strategic risk," the report said.

"It necessitates an urgent call to action, including higher levels of military preparedness and accelerated development."

The report recommended defence invest in long-range strike and other guided weapons to hold adversaries, adding a senior officer or official should be appointed to oversee the project.

The shifting priorities will result in major changes to the Army, which will be reshaped to become more adept at long-range missile strikes and littoral.

The federal government announced cuts on Friday to the Land 400 project, leading to a reduction in infantry fighting vehicles from 450 to 129.

The army's self-propelled howitzer project, Land 8116 Phase 2, will also be rescoped as part of the changes.

Defence Industry Minister Pat Conroy confirmed on Monday he had spoken to government representatives in Germany and South Korea, which will be affected by the project cuts.

The navy will also experience a shift with Mr Marles announcing a "short, sharp" review into the surface fleet, expected to be delivered in the third quarter of this year.

"The first is that the surface fleet, as it's currently constructed, was determined at a time when Australia was still pursuing a diesel electric powered submarine," he said.

"Now that we are going to be operating a nuclear powered submarine, that is a dramatically different capability, and it obviously has some implication in terms of the overall structure of the Navy, not only as we think about the next decade, but as we think about the next three decades.

"The Defence Strategic Review has observed that navies around the world are moving in the direction, to put it kind of crudely, of having a larger number of smaller vessels.

"Now, with those two ideas in mind, we are thinking about the long-term structure of our surface fleet. But we are completely committed to having a domestic build right now."

Workforce growth and retention has plagued the military in recent years as record low unemployment rates and skills shortages cause havoc for recruitment efforts.

The review acknowledged the "significant workforce challenges", suggesting it will only worsen unless creative and flexible responses are enacted.

Recommendations to improve the dire situation included improving the eligibility pool of applicants and to align recruitment efforts to key technical and specialist trades.

It also suggested changing policy and risk settings to achieve recruitment targets and to centralise personnel management into a single system, headed by a Chief of Personnel and reporting directly to the Chief of the Defence Force.

The government agreed to all recommendations, noting people were defence's most important asset.

Mr Marles was handed an incoming government brief from his department in May last year, warning the defence needed to grow or risk major projects, including AUKUS, being understaffed or outsourced to labour hire.

Better pay, an increase in staffing caps and more senior level public servants are all key to solving the unfolding situation, the department brief outlined.

"The successful delivery of the AUKUS partnership cannot come at the expense of other critical capability investments that are equally vital to responding to our rapidly changing strategic environment," the document said.