Australia's torpedoed French submarine program could eventually cost taxpayers up to $5.5 billion, despite the contract being torn up well before construction was to begin.
Defence officials were quizzed about ongoing compensation discussions with French company Naval Group during a Senate estimates hearing on Friday.
They revealed a $1.3 billion contract for American-made armed drones had also been cancelled.
The $90 billion future submarine contract, first awarded in 2016, was dumped when the federal government announced a plan last year to pursue a nuclear-powered submarines option under the AUKUS partnership with the United Kingdom and United States.
Under questioning from Labor's Penny Wong, Defence Department deputy secretary Tony Dalton confirmed the final cost of the aborted program could exceed $5 billion.
"We now have a situation where the taxpayer will pay up to $5.5b for non-existent submarines?'' Senator Wong asked.
Mr Dalton responded that: "The final negotiated settlement will be within that price, senator."
He said final estimates of the costs were not exact, because demands for compensation were ongoing.
The Defence Department's chief financial officer Steven Groves also confirmed negotiations with companies that lost major works were ongoing and could extend into next year.
"We do not have a better specific number for 2022-23, I don't have a different number,'' Mr Groves said.
Asked if he was "embarrassed" at the revelation, Finance Minister Simon Birmingham defended the government's actions.
"You could wish that we had more information and the availability of nuclear-powered submarines at an earlier time. We didn't have that technology available to us, we didn't have that information available to us," he said.
Shadow Defence Minister Brendan O'Connor demanded the government disclose any possible cuts to programs to pay for the French submarines that will never arrive.
"The government hasn't made proper provisions in the budget for termination costs, treating the budget papers as a voluntary exercise," he said.
"Murky numbers from the Morrison government on the Attack Class [French] submarines is sadly unsurprising," Mr O'Connor added.
"This is a government that boasts about their spending on Defence, but their cost blowouts run into the billions of dollars."
Armed drone contract cancelled
The estimates hearing was told Australia cancelled a planned $1.3 billion purchase of American-made armed drones originally known as Reapers to help fund a new multi-billion-dollar cyber package.
Under the SkyGuardian program, the US had approved the sale of up to 12 of the lethal unmanned aerial vehicles to the ADF.
The revelation came as Senator Wong asked about how the ADF was funding the REDSPICE cyber program unveiled in this week's budget.
"There's a project cancellation," Defence associate secretary Matt Yannopoulos told the committee.
When further pressed, he said: "I think we have notified parties now, so it's the SkyGuardian project."
A Defence spokesperson said the department could "adjust and reprioritise" funding for "new and emerging priorities".
"Based on advice from Defence, the government has decided to not proceed with [SkyGuardian]," they said.
"The decision allows government to allocate that money to expand our response to attacks against Australia online through the REDSPICE program."
