SPOTLIGHT: Building Australia's missing middle – how DIDS reshapes defence industry economics

Australia's 2026 Defence Industry Development Strategy (DIDS) signals a significant shift in how Defence acquires capability, moving beyond traditional procurement models towards earlier collaboration with industry and a greater focus on innovation, software and continuous capability development. The 2026 Defence Industry Development Strategy marks a doctrinal shift in how Australia approaches defence acquisition: rather than locking capability requirements and then inviting industry to bid, Defence should explore available technologies with industry partners before committing resources – fundamentally rewriting the commercial relationship between procurer and supplier. Rebecca Humble, CEO of Aurizn, a private equity-backed Australian defence technology firm, discusses what the strategy means for Australian defence companies and why building sovereign capability requires more than policy intent alone. She explores the need for deeper engagement between Defence and industry, the role of private capital in helping Australian businesses scale, and the importance of developing a stronger ecosystem of mid-sized defence companies capable of translating innovation into enduring capability. The conversation also examines how software, AI and digital experimentation are changing traditional acquisition approaches, why commercial incentives must support SME growth, and what Australia can learn from international models while developing an approach tailored to its own strategic and industrial environment. Without effective implementation, the ambitions of DIDS risk remaining aspirational. But if Defence, industry and investors can work together to create stronger pathways from innovation to capability, Australia has an opportunity to build a more resilient and sustainable sovereign defence industrial base. Critically, Humble notes Australia lacks the social licence for defence investment that the United States enjoys and has been hesitant to embrace private equity as a force multiplier for SME growth – precisely the funding model driving emerging companies towards scale. Without deliberate policy enactment and commercial accountability, the DIDS risks remaining aspirational rather than transformative. Enjoy the podcast, The Defence Connect Spotlight team