Shares in Australian defence companies with exposure to the US are trending higher on Friday after comments overnight from US President Donald Trump that he'd like to see a massive increase in defence spending.
President Trump said that the 2027 US defence budget should be US$1.5 trillion, well above the US$901 million so far approved.
Unsettled times ahead
Mr Trump said in a post to social media site Truth Social that he had determined that military spending needed to be increased "in these very troubled and dangerous times".
He added:
Our military budget for the year 2027 should not be $1 trillion dollars, but rather $1.5 trillion dollars. This will allow us to build the 'Dream Military' that we have long been entitled to and, more importantly, will keep us SAFE and SECURE, regardless of foe.
Mr Trump also credited an increase in revenue from his tariff measures as allowing the substantial increase in military spending to take place.
US defence stocks such as Northrop Grumman and Lockheed Martin increased substantially following the comments, although both were coming off weakness in the previous session.
Closer to home shares in Austal Ltd (ASX: ASB), DroneShield Ltd (ASX: DRO) and Elsight Ltd (ASX: ELS) were higher in early trade on Friday.
Austal has significant facilities in the US and could stand to benefit from an increase in US defence spending.
It has a shipyard in Mobile Alabama where it is working on the construction of a new surface ship assembly building which is on track for completion in 2027.
The company's website says it has delivered 34 ships to the US Navy since 2009.
Austal also has production facilities in Australia, the Philippines and Vietnam.
DroneShield has significant business in the US, announcing in November that it had been awarded three contracts worth $7.6 million for counter-drone packages, with those contracts to be fulfilled in 2025 and payments to come in by the end of the current quarter.
The company said at the time it was looking to greatly expand in both Europe and the US by the end of 2026, "including commencement of European and US-based assembly plants''.
Elsight also has US interests, announcing just this week that it had received a $682,000 order from a US commercial customer in the public safety sector.
Austal shares were 2.9% higher at $8.03 on Friday morning. DroneShield shares were up 1.8% at $3.92 and Elsight shares were 2.9% higher at $3.57.
