The Albanese government faces the prospect of a blowout in defence spending, with analysts warning that the nuclear-powered submarines will cost “significantly more” than the cancelled $90bn French project.
A new report has also questioned whether the Australian defence force would be able to meet a target to increase the number of uniformed personnel by 20,000 over the next 20 years, given that it is averaging net annual growth of only 300.
Australia’s total defence funding stood at $48.6bn this financial year, or 2.11% of GDP.
That figure – which included the Department of Defence and the Australian Signals Directorate – worked out to be $133,191,781 a day, according to the Australian Strategic Policy Institute’s annual report on the defence budget.
The report’s author, senior analyst Dr Marcus Hellyer, said there was “no doubt that the ADF was getting better” but he also warned of risks inherent in an acquisition program built around “megaprojects”.
“Such projects take years or decades to design and deliver, while spending huge sums for little benefit in the short term,” Hellyer wrote.
“When they encounter problems, those problems are big.”
The report noted that the now-abandoned French Attack-class submarine program had “cost over $4bn and delivered nothing”, while the Hunter frigate program continued to experience delays “and won’t get a vessel into service for over a decade”.
It said even though the nuclear-powered submarine program envisaged under the Aukus deal had “the potential to deliver a huge step-up in undersea warfare capability”, it was “the mother of all megaprojects” with a risk profile to match.
The sobering report was largely funded by ASPI’s annual block grant from the Australian Department of Defence, which stands at $4m a year. ASPI has also received funding from defence contractors, but the thinktank said it remained independent in its research content and editorial judgments.
The Australian defence strategic update, published in 2020, outlined plans to spend $270bn on new and upgraded capability over a decade – a proposal that was supported by both major parties.
However, the ASPI report, published on Wednesday, warned it was “not clear” that the funding line included in that plan was “even sufficient to deliver the current investment plan”.
“That program includes platforms far larger or more numerous than those they’re replacing as well as entirely new capabilities, all requiring a much larger workforce,” it says.
“Many capabilities have ended up costing more than was originally budgeted for in Defence’s investment plan. The [nuclear submarine] program will cost significantly more than the Attack class; it’s anybody’s guess how much more. So the first order of business should be for the government to understand the affordability of the current plan.”
The new defence minister, Richard Marles, has signalled that one of his top priorities would be addressing the capability gap between the existing Collins class submarines and the introduction of at least eight new nuclear-propelled submarines under Aukus.
The ASPI report said the increased funding for the submarines would need to cover not only the boats themselves, but also the national infrastructure required to operate the enterprise safely and in accordance with Australia’s nuclear non-proliferation obligations.
The outgoing independent South Australian senator, Rex Patrick, complained of a “total policy failure” on submarines.
In a new episode of the Australian National University’s Democracy Sausage podcast, Patrick said the idea the first nuclear-powered submarines would not be available until about 2040 was “like trying to build the best possible football team to arrive after the grand final”.
“No one’s been held accountable for the delay that we have in terms of capability to the Royal Australian Navy from a national security perspective or for the taxpayers’ money that’s been spent,” Patrick said in the podcast.
The ASPI report said the new government would also have to assure itself that the planned force structure was aligned with what the government thought the ADF should be doing.
The report suggests “doing more with what we’re already getting, such as increasing the lethality of the offshore patrol vessels that are soon to enter service”.
It also argued that investing more in cheaper, disposable, highly autonomous systems that could be produced rapidly by Australian industry was “a crucial hedging strategy against the risk inherent in the megaprojects”.
The report said rising inflation would not only affect household budgets, but would also put additional pressure on the defence budget by eating into planned increases in funding and reducing buying power.
The consolidated defence funding of $48.6bn in 2022-23 includes $16.3bn on acquisitions, $14.2bn on defence workforce, and $17.6bn on operating costs including sustainment.
It reflected annual growth of 7.4% in nominal terms and 3.8% in real terms.
The new government was expected to release a budget in October and the prime minister, Anthony Albanese, promised to ensure at least 2% of GDP was spent on defence. The finance minister, Katy Gallagher, has mentioned defence as one of the areas that is putting long-term pressure on the budget.
The ASPI report said the new government “has its work cut out for it”.
