AUKUS sub deal comes with hefty price tag for Australians

The submarine deal, which forms part of the AUKUS pact, might come at a high price for Australians, one of the country’s think tanks revealed in a fresh report that estimates the project’s ultimate cost at up to US$121 billion.

The agreement that already saw Canberra ditching its US$90 billion diesel-electric submarine contract with France in favor of new partners – the US and the UK – might now hit the Australian taxpayers’ pockets as well, the Australian Strategic Policy Institute (ASPI) warned in a report published on Tuesday.

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Australia is yet to determine the exact submarine designs it wants, and whether it will partner with the US or the UK to build them. Prime Minister Scott Morrison said in September that this would be done “through the rather significant and comprehensive program assessment” over the next 12 to 18 months.

The ASPI admitted that “any cost estimation is an extremely assumption-rich activity” at this stage since most parameters of the deal are not yet agreed upon. However, the think tank still calculated the deal’s total costs under a set of various scenarios.

Should Canberra choose a set of smaller subs and opt to build them “in the most efficient manner possible,” the total costs in constant prices would amount to between AU$70 billion (US$49.86 billion) and AU$78 billion (US$55.55 billion). If inflation is taken into account, this price will rise to between AU$116 billion (US$82.62 billion) and AU$129 billion (US$91.88 billion).

If the Australian government goes with a more expensive ‘continuous build’ approach and prefers larger underwater crafts, the costs might increase to between AU$77 billion (US$55.55 billion) and AU$78 billion (US$61.96 billion) or AU$153 billion (US$108.97 billion) to AU$171 billion (US$121.79 billion) in out-turn prices.

The ASPI believes that the project will be “a massive undertaking and probably the largest and most complex endeavor Australia has embarked upon” while some local media reported that it is about to cut a major slice off Australia’s GDP.

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The think tank’s analysts also believe that picking a partner for the project might be even more important than just determining the submarine design. The US is building underwater crafts 10 times faster than the UK. The British submarine program might begin by the end of the decade, while America might not start building the vessels until after 2030, the Australian media reported.

“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,” one of the report’s co-authors, Dr. Marcus Hellyer, told the Guardian Australia. He added that a collaborative approach that would let Australia’s industry be part of the project as well could save Canberra much time.

“That could make a huge difference to the schedule. It could aim for the early 2030s instead of the late 2030s or even early 2040s,” Hellyer said. The ASPI warns, though, that Australia’s existing six Collins-class submarines might retire well before the new underwater crafts become fully operational.

“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,” the report said, adding that “we may have already reached the point at which it’s impossible to avoid a serious and potentially enduring decrease in submarine capability.”