Abbott pulls back on military pork

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ScreenHunter_05 Apr. 15 22.08

By Leith van Onselen

Back in February, I noted how the Coalition had ear-marked tens-of-billions of taxpayer dollars to local defence manufacturing, including a $10 billion to $15 billion-program for 1,000 locally produced armoured vehicles, as well as locally designed and built submarines for around $40 billion.

Then last month, I reported how Defence Minister, David Johnston, was pushing for a multibillion-dollar warship project, to be announced within months, to be built in Australia, despite these locally-built ships being around 30% more expensive than competitors overseas. I also questioned whether such defence spending was justifiable, in light of the Coalition’s hard line on industry assistance, as well as the growing pressures facing the Budget.

Today, The Canberra Times is reporting that the Coalition is considering scaling back plans to build 12 new submarines and may instead buy an off-the-shelf design from offshore, in a bid to save the Budget billions of dollars:

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The dramatic shift in a key area of defence policy could reap the government massive savings. Designing 12 submarines in Australia is expected to cost up to $40 billion…

[David Johnston] is expected to the tell the Australian Strategic Policy Institute submarine conference that the future submarines program is “not a job-creation program” – a shot across the bows of local shipbuilders that they need to be competitive…

Senator Johnston will also tell the conference in Canberra that 12 submarines is “not a given”…

The Government’s apparent back-down on locally-built submarines is good news. It makes no sense developing military hardware locally when proven, fit-for-purpose, hardware can be purchased from abroad for a fraction of the cost.

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.