Alexander Downer: Why I am both enthusiastic and yet pessimistic about last week’s AUKUS announcement

I’m both enthusiastic and yet pessimistic about the dramatic AUKUS announcement, writes Alexander Downer. Enthusiastic because it contributes to peace. Pessimistic because it’ll cost us.

I’m both enthusiastic and yet pessimistic about last week’s dramatic AUKUS announcement.

I’m enthusiastic because this demonstrates that Australia is a significant country in the Indo-Pacific region which is prepared to spend serious money to make a contribution to the peace of that region.

How does building nuclear submarines contribute to peace?

Because the submarines are an essential part of a network of deterrence assembled by the world’s liberal democracies.

We send out a strong message in particular to a rising, more aggressive and more arrogant China, that, while on the one hand, we are very willing to engage with China and develop an appropriate modus vivendi, we know that peace can only be guaranteed if there is a balance of power.

Some think that task should be left to the Americans. I’ve never held that view.

We are a country with international responsibilities and we should share the burden of maintaining the peace in the Indo-Pacific region. After all, we are great beneficiaries of a peaceful region.

That means we need a highly effective defence force with force-projection capabilities.

There are all sorts of assets we need to achieve that. But, without any doubt, nuclear-powered submarines which are able to submerge for long periods of time are going to be a really effective platform to contribute to regional deterrence.

Premier Peter Malinauskas and UK Defence Procurement Minister Alex Chalk at the Barrow-in-Furness nuclear submarine shipyard operated by BAE Systems. Picture: Paul Starick

The Australian government has managed to secure a deal with the British and the Americans, which gives us access to the technology for nuclear-powered submarines.

That is, in and of itself, quite an achievement. It’s a tribute to Australia that both the Americans and the British trust us with this technology and are confident we can use it well.

Where I’m a little pessimistic about the AUKUS deal is the cost. It is astronomical. The current back-of-the-envelope estimates are that it will cost the Australian taxpayers more than $360bn.

To put that into some perspective, that is three times the gross state product of South Australia.

Of course it doesn’t all have to be paid out in one year. This will be $360bn over many years.

But it is still a huge amount of money. It will involve a significant increase in the defence budget as a percentage of GDP. What is more, this eye-watering bill comes at a time when the public is demanding ever more expenditure on social and community services. And politicians are telling us they are going to achieve net zero by 2050.

Well, to achieve net zero – if that’s even possible – will involve simply massive public expenditure.

So what will happen in the years ahead as the bills for AUKUS start to mount?

I’m sorry to say, as a South Australian born and raised, that the temptation for future governments will be to have the new AUKUS class submarines built in Britain.

It is estimated that to build those submarines in Adelaide will incur a 40 per cent premium. That is a tens-of-billions-of-dollars premium to build submarines in Adelaide rather than at Barrow-in-Furness in England.

It’s always been nice for South Australian federal politicians – including myself – to boast about defence jobs coming to the state. In my time as foreign minister, we diverted the air warfare destroyer project to Adelaide.

It created a lot of jobs and generated some pride in the state. But it certainly cost a good deal of money.

South Australians should reflect on whether any of this pork-barrelling makes long-term sense for the state.

An Air Warfare Destroyer (AWD) at the Techport Australia shipyard in Adelaide, 2017. Picture: AAP / David Mariuz

Let’s just suggest that it costs about $40bn extra to build the submarines in SA rather than in England. This, the federal government claims, will create thousands of jobs in SA.

But wouldn’t it make more sense for the federal government to provide billions of dollars of support for South Australian advanced technology businesses? This would turn SA into the national technology hub and invest in Adelaide‘s universities, rather than spending all that money on building submarines in Adelaide.

So, in that sense, I am a South Australian heretic. I know almost no one in the state agrees with me, but I think for less money we would get a much better outcome for the welfare of the state than we will ever get from building submarines.

Submarines should be built where there is a comparative advantage to build them and that in this case is at Barrow-in-Furness.

Australia will get much cheaper submarines that way and an SA compensation package could create more jobs, more wealth and more growth than could ever come from building submarines.