Missiles, drones and warships the priority as Australia plans $32 billion defence boost

By Lewis Jackson

SYDNEY (Reuters) - Australia will boost defence spending by A$50.3 billion ($32 billion) over the next decade and reshuffle its weapons programs to emphasise missiles, drones and warships as it looks to the possibility of a Pacific conflict between China and the U.S.

The bulk of the new spending, part of a A$330 billion decade-long budget, will only kick in after five years, and ultimately take defence spending to 2.4% of GDP by 2034 from just over 2% today.

Announced by Defence Minister Richard Marles on Wednesday, the new funding reflects new priorities, such as long-range missiles, that Australia believes are necessary in a world where a potential conflict between China and the United States could upend the region.

"The optimistic assumptions that guided defence planning after the end of the Cold War are long gone," Marles said in a speech at the national press club. "Our environment is characterised by the uncertainty and tensions of entrenched and increasing strategic competition between the United States and China."

Just over 40%, or up to A$145 billion, is set for the navy, including a beefed-up surface fleet, the AUKUS nuclear-powered submarine program as well as other priorities such as the Ghost Shark undersea drone.

A fifth, or up to A$74 billion, will go toward missile-related programs, whose importance was flagged in a review last year. There will be new longer-range missiles for the air force and army, missile defence programs and domestic manufacturing of guided weapons, the review said.

Military bases across the country's north, where U.S. Marines are based for months of training and exercises each year, will be allocated up to A$18 billion for upgrades.

($1 = 1.5574 Australian dollars)

(Reporting by Lewis Jackson. Editing by Gerry Doyle)