AUKUS is a defence security partnership among Australia, the United Kingdom and the United States aimed at promoting a free and open Indo-Pacific that is secure and stable.
AUKUS has two pillars. Pillar I is Australia’s acquisition of nuclear-powered submarines. This paper focuses on Pillar II which is the collaborative development of advanced capabilities in six technological areas: undersea capabilities, quantum, artificial intelligence (AI) and autonomy, advanced cyber, hypersonic and counter-hypersonic capabilities, and electronic warfare. These technologies are supported by two Pillar II enablers: innovation and information sharing.
AUKUS Pillar II is, at its core, a national defence initiative designed to accelerate the development and integration of advanced military capabilities. This paper does not propose to redefine that mission. Rather, this paper aims to help ensure Australia can meet its requirements in this partnership and clarify how the objectives of Pillar II can be strengthened through two interlinked insights:
- A stronger national innovation base is essential to achieving the ambition of Pillar II, ensuring its success at scale and over time.
- Pillar Il can act as a catalyst for broader national innovation performance, extending its benefits beyond immediate capability outcomes to strengthen Australia’s economy and resilience.
Advancing Pillar Il and elevating national innovation capacity are mutually reinforcing imperatives- each enabling the other to deliver enduring advantage.
Success will depend on mobilising industry, private capital, and public trust to deliver defence capability while also driving innovation and economic resilience. And it’s an opportunity Australia must seize now.
With Australia’s strategic circumstances deteriorating, the 2024 National Defence Strategy states that Australia must take “a coordinated, whole-of-government and whole-of-nation approach that harnesses all arms of national power to defend Australia and advance our interests.” By aligning national technological capacity, research excellence, and private-sector dynamism, Australia can meet its defence strategic goals and fulfil Australia’s commitments to our AUKUS partners.
Private sector capital can assist in funding the development of AUKUS Pillar II technologies if the right incentives are in place. To realise Defence’s whole-of-nation ambition, sectors like banking, advanced manufacturing, resources, telecommunications, technology, health and academia need to understand what AUKUS Pillar II offers and how they can contribute.
This paper proposes three projects to illustrate how Australia can immediately operationalise Pillar II for both strategic and economic benefit:
- Al test and evaluation sandpit
- quantum-enabled secure communications demonstrator
- Al-driven cyber threat emulation platform
All three emphasise dual-use capability, integration, and rapid prototyping, deepening interoperability with AUKUS partners. They combine strategic urgency with technological readiness, offering low-risk, high-impact pathways for early capability delivery.
Alongside defence, Australia faces other national challenges – low productivity growth, an undiversified economy, the high cost of living and lagging competitiveness. Technology and innovation will be fundamental to addressing all these issues.
If successfully implemented, a stronger national innovation base will help AUKUS Pillar II deliver advanced defence capabilities and improve Australia’s broader economic diversity and resilience. By fostering new technologies that are globally competitive and commercially viable, Australia’s ability to navigate intensifying strategic competition will improve. A strong and diversified economy is a valuable strategic asset in its own right.
This report was produced as part of an American Chamber of Commerce in Australia and Business Council of Australia partnership.