The Australian Strategic Policy Institute released its analysis of the 2026/27 defence budget on Thursday after the 2026 National Defence Strategy earmarked an additional $53 billion in funding over the next decade.
It found about four cents of every extra dollar stemming from the announcement was appropriated for next financial year.
The remaining 96 cents sat in forward estimates promises, decade out-year profiles, contingency reserves and unspecified alternative financing plans.
"The bottom line is that we're still waiting for the reality to match the rhetoric," the report's authors wrote.
Under the NATO model, the $53 billion commitment is slated to push Australia's defence spending to three per cent of gross domestic product by 2035, compared to a previous forecast of 2.3 per cent.
The move followed the US pressuring its allies to increase their defence spends to 3.5 per cent of GDP.
When announced in April, Defence Minister Richard Marles described it as Australia's biggest peacetime increase in defence spending.
But the report found the whole-of-government defence spend for next financial year was falling in nominal terms, leaving the present-day force "less prepared".
While 2026/27 workforce funding will grow by $815 million, acquisition outlays will fall by $724 million and sustainment drop by $283 million.
The present Australian Defence Force was being asked to "carry the deterrence load with less", the authors argued.
"Defence is buying a future and is doing so by accepting that the ADF will be able to do less today," they wrote.
"That trade-off is defensible if the strategy demands a future force more than a current force, but it should be named for what it is."
Between 75 to 80 per cent of spending in 12 capability priority areas remain unapproved and backloaded into the 2030s, the decade the strategy identified as Australia's period of greatest strategic risk.
Integrated air and missile defence was cited as the most severe example, with $850 million in spending approved from an allocation of $21 billion to $30 billion.
The report warned pillar one of AUKUS - dedicated to Australia acquiring nuclear-powered submarines - had become the "centre of gravity" for the defence program and the country remained "heavily dependent" on US production, technology and decisions.
Defence's shopping list was "huge" and fitting it all into the constrained budget was "like trying to stuff a doona into a pillowcase".
"To cover it all would require additional funding of up to $45 billion a year on average, which is almost as much as the costs of the National Disability Insurance Scheme," the report said.
"And the apparent boost disappears once foreign exchange adjustments, contractor cuts and other movements are considered."
Nonetheless, the report suggested Australia's "strategy of denial" was achievable if it could sustain workforce growth, accelerate sovereign capability, and restore present-day preparedness in the 2027/28 budget.
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