The United States is facing multiple challenges to sustaining its military-technological edge in the Indo-Pacific:



- The proliferation of advanced missiles, submarines, satellites and other technology has raised the costs and risks for the United States in a regional conflict.



- Access to advanced technology and innovation has spread, raising the importance of the private sector in maintaining military superiority but also generating new centres of technological progress.



- The United States’ current defence strategy and capabilities are increasingly economically unsustainable, and its defence budget is stagnating due to political polarisation in Congress.



The Third Offset is a set of strategies that aims to bolster US conventional military power by mobilising innovation, new technologies and institutional reform:



- The United States is placing ‘bets’ on a series of new technologies, from artificial intelligence to hypersonic weapons, that will allow its military to project force in contested environments.



- Some of these technologies will, in theory, allow for more economically sustainable military operations and capabilities.



- Reforming US defence institutions to prioritise innovation, and seeking ways to take advantage of new technologies in the private sector, are attempts to embed and sustain US military advantage.



The direction of the Third Offset, and its success or failure, should inform Australia’s strategic outlook. Canberra should seek to expand engagement with the Third Offset, particularly through the following institutional aspects:



- A United States-Australia Defence Technology Workshop should be established to generate new ideas around Indo-Pacific technological trends, investment and new military concepts.



- Canberra should explore the possibility of hosting, or jointly funding, an international Defence Innovation Unit Experimental Office, providing strategic coordination on technological developments, resourcing and opportunities for Australian defence firms.



- Australia needs to expand its engagement with the United States on the testing, exercises and simulations that will form new Third Offset military concepts.



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