A new policy brief from the United States Studies Centre at the University of Sydney proposes the creation of a multi-sovereign public-private innovation fund to finance the development of AUKUS’ Pillar II advanced technologies – in fields such as electronic warfare and artificial intelligence.

Financing AUKUS Pillar II: Building a multi-sovereign public-private innovation fund by USSC Research Associate Sophie Mayo calls for the establishment of a AUKUS Pillar II innovation fund that taps into the latitude of private capital to overcome barriers to defence funding.

“Around the world, nations are trying to work out how best to finance defence innovation at pace and scale,” said USSC CEO Dr Michael Green. “This policy brief investigates how trilaterally harnessing the power of private capital could allow AUKUS to do this.”

In a deteriorating strategic environment, the United States, Australia and the United Kingdom have recognised the urgency to unlocking barriers to defence innovation.

In 2021, they announced the AUKUS security partnership to transform defence cooperation across two areas: Pillar I nuclear-powered submarines and Pillar II advanced military capabilities, in fields such as quantum technologies, electronic warfare, and artificial intelligence.

However, all three governments have since acknowledged that government funding alone will not be enough to finance Pillar II advanced technologies at pace and scale.

The report argues that a multi-sovereign wealth fund seeded with AUKUS government funds and private ‘innovative finance’ – such as venture capital and private equity – would vastly increase the investment available for technology start-ups, particularly in Australia and the United Kingdom where private funding of the defence sector has historically been low.

Mayo uses the NATO Innovation Fund as a case study and explores how the AUKUS partners could emulate a similar model to create an innovation ecosystem which matches capital with promising start-ups. Mayo argues an AUKUS Pillar II fund would allow for the implementation of a uniform investment strategy, aligned to government-defined aims and objectives for AUKUS.

Read the brief

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