Australia’s Aukus nuclear submarines could cost as much as $171bn, report finds
Australia’s eight planned nuclear submarines will cost $70bn at an “absolute minimum” and it’s “highly likely” to be more than that, defence analysts say.
With inflation, the cost could be as high as $171bn, according to a new report from the Australian Strategic Policy Institute.
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The thinktank’s report contained a series of estimates ranging from low to high and conceded that estimating the final cost of the project is necessarily an “extremely assumption-rich activity”.
Under the low range, for a smaller submarine with a more efficient build, the “constant” cost (not including inflation) would be about $70bn. Including inflation (the “out-turned” cost), it would be $116bn.
Under the high-range scenario, the constant cost would be $79bn and with inflation it could cost up to $171bn if the schedule stretches out, further compounding the effect of inflation.
The prime minister, Scott Morrison, has said the planned nuclear-powered submarines, part of the Aukus deal with the United States and the United Kingdom, would likely cost more than the scrapped plan for conventional submarines, which would have cost $90bn.
The Aspi report co-author Dr Marcus Hellyer said there was some confusion about the cost of the deal signed with France’s Naval Group. After initially announcing it would cost $50bn, defence officials said that was the out-turned cost, but eventually it was revealed that was the cost before inflation.
Australia will partner with either the US or the UK to buy their boat designs, and a nuclear-powered submarine taskforce is working through the details.
“We haven’t determined the specific vessel that we will be building, but that will be done through the rather significant and comprehensive program assessment that will be done with our partners over the next 12 to 18 months,” Morrison said in September.
“Now, that will also inform the costs that relate to this, and they are yet to be determined.”
The authors of the Aspi report, Implementing Australia’s Nuclear Submarine Program, wrote that while the Aukus deal has seemed to move fast, the enterprise would still be “a massive undertaking and probably the largest and most complex endeavour Australia has embarked upon”.
“The challenges, costs and risks will be enormous. It’s likely to be at least two decades and tens of billions of dollars in sunk costs before Australia has a useful nuclear-powered military capability.
“At an absolute minimum, an eightboat [nuclear-powered] program will cost around $70bn … However, it’s highly likely that it will cost substantially more once the cost drivers are more clearly understood. To channel [former US defence secretary] Donald Rumsfeld, there are things we know we don’t know, and things we don’t know we don’t know; both will drive up the estimate.”
The French were furious at the decision to end the contract for 12 Barracuda-class submarines in favour of the Aukus deal. The federal government said the decision was made because of the superior technology that the US and the UK would now share with Australia.
Hellyer told Guardian Australia the government needed to work out its priorities and would need to balance capability needs, scheduling and the Australian industry content. He emphasised that picking which submarine to build was “secondary” to picking a strategic partner.
The US is building submarines at a rate 10 times higher than the UK, he said.
“Who has the capacity to ramp up to help us? If we want one every three years, the UK would have to double their production. The issue is which partner has the capacity to help us get there.”
The report outlines a range of options for how the build could progress. The government has said boats will be built at Adelaide’s Osborne shipyard, but Hellyer said there is some wriggle room to start the build overseas while training Australian workers before transitioning the work here.
Another option is a collaborative build, like the “Joint Strike Fighter on steroids”, he said, referring to the air combat program. Australian industry is part of the JSF supply chain, but the final assembly happens in the US.
“That could make a huge difference to the schedule. It could aim for the early 2030s instead of the late 2030s or even early 40s,” Hellyer said.
The report canvasses other issues that will need to be resolved.
There are likely to be legislative changes needed to allow nuclear reactors in Australia. The government should consider appointing an internal nuclear regulator, an inspector general of nuclear safety, and how it will responsibly dispose of radioactive waste once the reactors that power the submarines reach the end of their useful lives.
The report also warns of a capability gap as the existing six Collinsclass submarines might have to retire before the new submarines are in the water.
“We may have already reached the point at which it’s impossible to avoid a serious and potentially enduring decrease in submarine capability,” the authors wrote.