The announcement that Australia will spend between $268 billion and $368 billion to become the world’s seventh nation to operate nuclear-powered submarines is most welcome, given the years of obfuscation and false starts that have plagued finding a replacement for the troubled Collins-class. The gargantuan price tag, however, will place significant pressure on the federal budget, and it is incumbent on the Albanese government to explain how it proposes to foot the bill.
Prime Minister Anthony Albanese said AUKUS represented the “biggest single investment in Australia’s defence capability in our history” when he announced the initiative standing beside United States President Joe Biden and British Prime Minister Rishi Sunak in San Diego on Tuesday. But the details are hazy and much of it is a way into the future. Not only are the total provided costs somewhat rubbery but the number of ships being supplied seems unresolved.
Australia will buy at least three – maybe five – American-manufactured and possibly second-hand Virginia-class submarines. Australia will also share the building of and the operation of a new SSN-AUKUS-class with the UK using American combat systems. The new class will be built in Adelaide. Submarines are expected to be commissioned every two years from the early 2040s through to the late 2050s. As part of the AUKUS arrangements, Australia will host visits by more US submarines this year and UK vessels from 2026. From as early as 2027, four US and one UK submarine will start rotating through Western Australia, to be known as the Submarine Rotational Forces West.
The decision to buy the submarines is long overdue. Canberra has been fiddling around since a 2009 Defence white paper recommended the replacement of the Collins-class. In the intervening years, Australia opted out of buying Japanese ships, ditched a contract with the French, before finally signing on for the US and UK submarines as part of the AUKUS announcement last September.
Regrettably, the government has been less than upfront about the costs. Albanese was keen to deliver the good news that the submarines would create 20,000 jobs, but there are variations that make calculating the bad news, the actual costs of the project, difficult to gauge. The uncertainty surrounding the Virginia-class craft is a case in point: will Australia get three, four or five boats? Will they be second-hand or new? Further, sale of the Virginia-class boats is conditional on congressional support and, given the vagaries of US politics, that is by no means assured at this stage.
The AUKUS submarines, together with a defence strategic review, the biggest defence shake-up in nearly four decades, will challenge the Albanese government to find the money to fund the new military reality in the upcoming budget.
Australians have a right to know the real cost of that reality but the fogginess and omissions in Tuesday’s announcement obscure the impact of potential delays and cost overruns. Defence Minister Richard Marles remained tight-lipped on Tuesday about where money will come from – and what in the budget will be sacrificed – saying payment for the boats would only amount to a 0.15 per cent increase as a percentage of GDP over the life of the project. Not much joy for those concerned about living costs.
The submarines have made unlikely allies. The federal government and the Coalition are in lockstep over Australia acquiring nuclear-powered boats. But Opposition Leader Peter Dutton says he will not extend the bipartisan spirit to support tax rises to pay for the submarines. Rather, he suggested the National Disability Insurance Scheme could allow the government to make budget savings in the national interest.
It is a misjudged call. The NDIS serves about half a million Australians, and will cost about $35 billion this financial year, but that expense is expected to jump to $50 billion in 2025-26. Clearly, something has to be done to rein in runaway costs, but the NDIS is a separate issue. The vulnerable and the disabled must not be made to pay for the cost of defending Australia.
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