Military spending last year by European NATO members and other non‑US members increased to significantly narrow the gap with the United States’ level of investment, according to research by an economist at The University of Western Australia.
Professor Peter Robertson, Dean of UWA Business School, said for every $100 the US spent, all the other NATO countries combined spent $85 and, if Canada and Turkey were excluded, European NATO spending amounted to 73 per cent of the US spend.
“The figure is much larger than usually thought because it adjusts for exchange-rate distortions and differences in defence-sector costs across countries,” Professor Robertson said.
“Without these adjustments, European NATO’s military spending (excluding Turkey) appears much smaller – just 58 per cent of the US spending.”
The revised figure puts Europe on a more equal footing with the US at a time when European countries have been heavily criticised by US President Donald Trump.
“European military spending is being systematically underestimated relative to the US,” Professor Robertson said.
“Standard comparisons that convert euros and pounds into US dollars use market exchange rates that are influenced by currency markets and the role of the dollar. It doesn’t necessarily reflect the relative costs of military procurement, personnel and operations.”
Professor Robertson’s data analysis also found in the Indo-Pacific region, the low value of the Japanese yen, Korean won and Chinese yuan distorted common perceptions about the size of Japan’s military spending.
“In nominal terms, Japan’s spending of $62 billion is somewhat larger than Australia’s ($35 billion),” he said.
“In purchasing-power terms, this amounts to around $100 billion – almost three times the size of Australia’s spending. A similar adjustment also applies to South Korea.”
Today’s Budget is expected to announce a $14 billion increase in defence spending with the intention of moving Australia closer to the new NATO targets and countries like South Korea.
“The Government faces a delicate balance in signalling commitment to allies – but the more important issues are defence priorities in response to the rapidly changing geopolitical climate and new types of autonomous weapons systems,” Professor Robertson said.
Professor Robertson’s military purchasing-power methods have previously been used to correct impressions about the relative size of China’s military spending.
The updated data showed in 2025 China’s real military spending was approximately $600 billion, or 64 per cent of the US total – around twice the nominal estimated, while India’s military spending at $330 billion was more than four times its nominal value.
“Getting the numbers right is necessary to understand military balance and the importance of alliances for a medium power like Australia,” Professor Robertson said. “It is also important for understanding the geopolitical landscape more broadly.”
In a five-year collaboration, Professor Robertson’s methods for adjusting nominal military spending have been used in The Economist’s annual military spending updates to provide a more accurate overview of global spending.
The analysis builds on updated data released by the Stockholm International Peace Research Institute. The adjusted data is available at militaryppp.com.