Coalition to pull back military pork?

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ScreenHunter_3500 Jul. 28 11.40

By Leith van Onselen

I noted previously how the Coalition had flagged spending tens-of-billions of taxpayer dollars to local defence manufacturing, comprising locally built armoured vehicles, submarines and warships.

Today, it has been revealed that a defence discussion paper to be released tomorrow by Defence Minister, David Johnston, will question the notion that Australia’s next fleet of submarines should be built at home. From The Canberra Times:

“There is significant debate emerging about the future submarine and whether it should be built in Australia. This debate must consider the cost, risk and schedule as well as the benefits of the different options,” the paper stated.

The massive project to replace the Collins class fleet of boats will be Australia’s largest-ever military purchase, reaching tens of billions of dollars. The cost would likely be reduced significantly if the government opted for an off-the-shelf foreign design and had the boats built overseas, although this would mean the death of naval shipbuilding in Australia…

Defence Minister David Johnston said recently the government wanted to support local naval shipbuilding, which employs more than 4000 people, but not at any cost.

…every additional dollar the government spends propping up local industry is a dollar that cannot be spent on other much-needed military hardware.

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I am not a military expert, and cannot comment on whether building submarines locally offers material strategic advantages.

But spending billions of dollars extra on locally-built military hardware, when Australia could instead purchase proven, fit-for-purpose, hardware from abroad at a fraction of the cost, does not appear to be a good use of taxpayer money.

In this regard, the White Paper’s framing of the issue seems wise. It is also consistent with the Government’s claims of a “Budget emergency” and its “war on entitlements”. While there’s an argument for local jobs, this same argument could equally have been applied to manufacturers like Holden, Toyota, or SPC Ardmona, where industry assistance was denied by the Coalition and subsidies were small by comparison.

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Hopefully, the Government will take a similar approach when it comes to upgrading the military’s armoured vehicle fleet, along with its warships.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.