“National disgrace” submarine debacle blows out to $90 billion

The Department of Defence has told a Senate estimates hearing that Australia’s new submarine fleet is now expected to cost $89.7 billion. This is a 12% increase on the previous estimate of $80 billion in November.

Defence says the revised forecast takes into account factors such as foreign exchange rates and inflation when expenditure on the submarines project actually begins. Work on the first of 12 submarines is not slated to begin for several years, and the first vessel will not go into active service until at least 2034:

Defence told Senate estimates that the cost of the 12 Attack-class boats in 2016-17 dollars was unchanged at $50bn. But the “out-turned” cost of the French-designed boats — the cost when the money will be spent — is now estimated at $89.7bn… [And] it doesn’t include the whole-of-life cost of about $145bn of sustaining the boats…

“The government originally promised the future submarines would be delivered from the mid-2020s at a cost of $50bn,” [Opposition Defence spokesperson Richard Marles] told The Australian.

“Now they won’t start building the first submarine for another four years, and they come with a $90bn price tag.

A few months back, The Australian’s Greg Sheridan labelled the project a “national disgrace”:

Any exit ramp would be incredibly expensive in dollars — literally money for nothing — but even more expensive in time.

Australia is like the traveller in the Irish joke…

No one has been more critical of the subs acquisition process than me — it’s been a national ­disgrace for much more than a decade…

Much of the cost has nothing to do with French avarice but flows from our decision that the subs be built, or at least assembled, in South Australia. But we have had a series of elections which have ­established that as a national decision which is now settled.

All of which reminded me of the prescient testimony from defense expert Brian Toohey three years ago:

…everything is wrong about the Turnbull government’s decision to build 12 extremely large submarines in Adelaide.

…The government’s refusal to go with an off-the-shelf design will cost more billions, because the first of new submarines won’t be operational until after 2030 and the last until almost 2060.

This means the decrepit Collins class submarines will have to be kept going for more than 20 years beyond their planned 2025 retirement date – necessitating new capital spending and very high maintenance and operating costs that will soon pass $1 billion a year.

Last year, Senator Rex Patrick – a former submariner – seized on official figures obtained through the Senate committee process to claim that the cost of building and sustaining the 12 submarines may ultimately reach $200 billion over their life:

“Right now that project is approaching recklessness and that needs to be addressed by government,” Senator Patrick said.

Whatever the case, it is clear that the decision to build the submarines in Adelaide is shaping up as a giant budgetary milestone that only came about to pork barrel the seat of former Defence Minister Christopher Pyne by ‘creating’ 3,000 jobs.

And to think, the same Coalition Government chose to jettison 40,000 to 200,000 jobs in the car industry into the sea by refusing to pay a paltry $500 million in assistance.

The submarines debacle ranks as one of the worst examples of government waste and mismanagement on record.

Unconventional Economist
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