At the heart of democratic governance lies a simple social contract: public interest must trump private profit. Yet in Australia this contract increasingly appears compromised by the convergence of three powerful forces: the global arms industry, government defence procurement, and institutional investment vehicles. Together they form a structural loop of influence, profit and policy that calls into question whether Australia still controls its own strategic decisions.
This treatise argues that a key example in the future-looking decisions of the sovereign wealth fund, the Future Fund, investing in an Israel-linked weapons manufacturer crystallises the undue influence of the arms industry on public policy. It suggests that Australia is not just buying weapons; in effect it is underwriting the industrial base of conflict, while simultaneously embedding that conflict within its domestic investment and policy structures.
1. The Weapons Industry’s Leverage Over Government Policy
The arms industry has always maintained formal lobbying channels affecting defence contracts, jurisdictional exemptions, and national security arguments. But its leverage extends far beyond registered lobbying. Consider these mechanisms:
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Procurement dependency: Major Australian defence programmes such as submarines, jets, missiles, drone, lock governments into multibillion-dollar contracts across decades. The implications are heavy for domestic industrial base, jobs, regional policy and alliances.
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Institutional investment entanglement: When sovereign funds or large institutional investors hold shares in global weapons manufacturers, governments and regulators become indirectly stakeholders in the profitability of the arms business.
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Media and political capture: Defence and arms companies sponsor policy forums, think-tanks, media institutions. They support relationships with senior ministers, former defence officials, advisory boards. This creates recurring access, recurring influence, and recurring alignment of narrative.
Together, these factors amount to more than influence: they embed the arms industry within the rhythms of government strategy. Political decisions about alliances, procurement priorities, export licences and investment policy become partly shaped by corporate interests in the global trade of weapons.
2. The Future Fund-Elbit Case: A Window into Industry Captivity
One of the most striking recent cases is the involvement of the Future Fund (Australia’s sovereign investment fund) in the Israeli arms manufacturer Elbit Systems.
2.1. Investment data
Public reporting shows that the Future Fund has increased its holdings in defence-oriented companies, including Elbit Systems. In September 2025 the fund disclosed that holdings in Elbit rose from approximately AUD 489,000 to around AUD 2.69 million between December 2023 and 30 June 2025. The fund’s total value has exceeded AUD 250 billion.
2.2. Ethical and legal concerns
Elbit Systems is described by critics as a “key supplier” to the Israel Defence Forces (IDF) and thus implicated in the military operations in Gaza. For example, the Guardian reported that a contract between Australia and Elbit Systems for $19.8 million in “iron fist” counter-measure munitions was signed in September 2025 just two weeks before a UN commission found that Israel was committing genocide in Gaza. Australian human-rights expert Chris Sidoti characterised Australia’s dealings with Elbit as “morally indefensible”.
2.3. Investment screening and policy statements
In testimony to Senate Estimates the Future Fund’s CEO and Chief Corporate Affairs Officer were asked why the fund still held shares in Elbit, which had previously been excluded in 2018 for producing cluster munitions. They responded that due diligence in 2023 found Elbit was “no longer involved” in the excluded activities and thus became “investable once again”. Their position was that because Elbit was not subject to Australian or US sanctions, it did not fall under the fund’s exclusion framework.
2.4. Implications for law and governance
The United Nations Independent International Commission of Inquiry found that Israel has committed genocide against Palestinians in Gaza which is a finding Australia must take seriously. Under the 1948 Genocide Convention, states have a binding obligation not only to punish but to prevent genocide. When a sovereign fund invests public capital into an entity that helps sustain a military campaign implicated in genocide, the lines between state policy and corporate profit blur dangerously.
3. How Influence Operates within Australia’s Decision-Making Structures
Beyond the Future Fund case we can see systemic patterns:
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Industrial capture of strategy: Australia’s ambition to become a major weapons-exporting country by 2028 (per the 2024 submissions) points to a long-term alignment with weapons industry growth.
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Investment as policy driver: When public wealth instruments hold shares in major weapons makers, the state becomes a stakeholder in the arms‐industry business model. That creates incentives to ensure returns from conflict environments, making conflict a financial input rather than purely a defence necessity.
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Narrative control: By sponsoring media institutions, industry forums and policy outlets, arms firms embed themselves in public discourse. Their interests enter the room when defence ministers speak, when procurement committees convene, and when sovereign-wealth boards review portfolios.
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Export/import subsidies: Australia’s own supply chain in the F-35 programme, domestic manufacturing of munitions, and partnerships with allied arms industries create interdependence between the national economy and global conflict systems. For example, the Guardian noted the fund’s holdings in companies whose weapons have been used in Gaza.
4. The Political and Moral Risk
The outcome of this structural influence is serious:
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Australia risks becoming complicit in international crimes of which it may have indirect involvement.
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Decisions about sovereignty, arms exports, alliances and procurement may no longer be shaped purely by strategy or defence need, but by financial logic and industrial momentum.
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Domestic accountability erodes when institutional investors, defence firms and government share aligned incentives.
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Public trust falters when the “arms-industry umbrella” shadows independent oversight, media commentary and policy debate.
5. What Should Be Done? Reform Agenda
To restore balance and protect democratic agency, the following reforms are essential:
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Legislate exclusion criteria for sovereign investments: The Future Fund must adopt a legal framework that reflects Australia’s obligations under the Genocide Convention and humanitarian law.
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Declare and publish arms-industry revenue flows transparently: procurement contracts, export licences and investment holdings must be open to public scrutiny.
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Establish independent procurement oversight: Arms deals, alliances and industrial partnerships should be reviewed by a genuinely independent body free of industry entanglement.
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Diverge sovereign wealth from arms-industry profit: Public investment vehicles should avoid holding stakes in weapons manufacturing firms whose business model is conflict-driven.
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Rebuild public narrative channels: Media institutions, policy forums and think-tanks must reduce dependence on weapons-industry sponsorship to safeguard independent scrutiny.
Conclusion
The case of Australia’s sovereign fund investing in a weapons manufacturer implicated in genocide is not an isolated anomaly. It is symptomatic of a broader governance architecture in which the arms industry now casts long shadows over democratic decision-making. If Australia wishes to claim integrity in its strategic posture, it must disentangle defence strategy from private profit, restore institutional independence, and recognise that the public interest must not be for sale to the highest bidder. The question is not merely one of policy choice, but of democratic self-possession.
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