Treasurer Jim Chalmers has ruled out scrapping the $243 billion stage three tax cuts to pay the $368 billion bill for new nuclear-powered submarines, as Opposition Leader Peter Dutton flagged he would support the government if it took a knife to disability and aged care spending.
Chalmers said Australia would spend 0.15 per cent of its GDP on the submarine program each year until the 2050s as it shored up its long-term national security by partnering with the US and UK to build a new fleet of eight submarines.
The treasurer said the government was not adding to the substantial pressures on this year’s federal budget because it had already found $9 billion to offset spending over the next four years. However, government figures still show a need to find up to $31 billion by the end of the decade.
“We’re being up front about the cost of this,” Chalmers said in Perth on Wednesday. “It is a big cost, but it will deliver big returns for our national security and national economy… Australia can’t afford not to do this.”
He said the government’s position on the stage three tax cuts had not changed and it would find other ways to make the budget more sustainable over time, citing the recent “modest but meaningful change” to superannuation tax concesssions as an example.
But Dutton, who has opposed Labor’s superannuation changes, said the Coalition would support the government if it wound back spending on the National Disability Insurance Scheme or aged care to help pay for defence.
The NDIS, which serves about half a million Australians, will cost about $35 billion this financial year but is expected to rise to $50 billion in 2025-26. The NDIS, aged care and defence are three of the five spending areas named by Chalmers as the budget’s biggest pressures.
Dutton said both the NDIS and aged care were incredibly important but needed to be sustainable.
“We’re an opposition prepared to work with the government if they’ve got changes to make,” he said. “If there’s legislation required … then we’re willing to support that through the Senate if the government can’t get the support of the Greens.”
The Greens vowed to obstruct the government’s submarine deal on Tuesday, warning the $368 billion price tag would force the government to make cuts to spending on health, education, housing and Indigenous Australians.
“Unlike the Coalition, the Greens will not be co-operating with the government to force budget savings on critical public services to pay for these submarines,” Greens senator David Shoebridge said.
“[Tuesday’s] announcement will force Labor to deliver austerity budgets to funnel billions of dollars offshore to fund the US and UK nuclear submarine industries. With this one decision, Labor is mortgaging our future in order to stoke regional tensions with a dangerous escalation in regional defence spending.”
The Greens also objected to relying on the United States’ submarines and crew until the new vessels were ready, saying it compromised Australian sovereignty, and raised concern the alliance would cause unrest with Australia’s regional allies while fuelling an arms race.
Defence Minister Richard Marles said Australians would have to wait until the May budget to judge how the government planned to pay for a rise in defence spending to 2.2 per cent of GDP.
“Now, the cost is significant. But I would be quick to add that the sort of numbers that you have seen [stretch] out to the mid-2050s,” he said. “You can look at a number of capabilities of governments beyond defence which, if you cost it out to the mid-2050s, have similarly large numbers.”
Dutton, who was defence minister in the Morrison government when the AUKUS alliance was formed, warned that the government should not pay for the submarines by trimming spending on other areas of defence, such as the army or air force.
“There is an honest conversation the government has to have, there’s no ‘magic pudding’. There’s no way in which you can sugarcoat it,” he said.
“But I think the most important element here, is we need to achieve the capability given the circumstances that we’re in at the moment. Everybody agrees with that… This is a necessary decision that’s been taken by the government.”
Prime Minister Anthony Albanese on Tuesday morning said the AUKUS agreement to build eight new vessels in Adelaide represented the biggest single investment in Australia’s defence capability in its history, and would create about 20,000 direct jobs for Australian engineers, scientists, technicians, administrators and tradespeople.
“The scale, complexity and economic significance of this investment is akin to the creation of the Australian automotive industry in the post-World War II period,” he said.
South Australian Premier Peter Malinauskas said his state was very excited about the news.
“The numbers [of jobs] are eye-watering. [What] matters most from a South Australian perspective is it gives us the ability in the long term to genuinely build up the capability and improve our state and nation’s economic complexity, unlike ever before,” he said.
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