Paul Starick: $90bn Adelaide naval shipbuilding program under growing threat

Adelaide’s $90bn naval shipbuilding program is under growing threat from China’s rising belligerence, writes Paul Starick.

The $90bn naval shipbuilding program centred on Adelaide is under growing threat of being dramatically eroded by tectonic geopolitical shifts, particularly China’s rising belligerence.

A substantial reduction in the number of submarines built at the Osborne Naval Shipyard in a $50bn project – 12 are planned to be constructed – is being speculated about in political and defence circles.

Reports about replacing the ageing Adelaide-built Collins-class submarines with an updated version of the original boat continue to be the subject of informal discussion.

Likewise, the $35bn project to build nine frigates at Osborne has drawn controversy. Shipbuilder BAE Systems Australia has been unable to quell speculation that the frigate design has been compromised by navy demands, particularly reports that increased size specifications could affect speed and stealth.

Peter Dutton’s appointment as Defence Minister on March 30 has triggered a sea-change in the outlook for the huge concentration of defence projects at Osborne.

They were secured substantially because of the influence of ex-defence minister Christopher Pyne, who relentlessly pushed former prime ministers Tony Abbott and Malcolm Turnbull to build the submarines and frigates in Adelaide. But the pace has been sluggish since Mr Turnbull five years ago announced French firm DCNS, now Naval Group, had won the $50bn contract to build 12 new submarines at Osborne.

Shortfin Barracuda submarine. Picture: Naval Group

Mr Dutton has set about changing that. As a senior private sector source said upon his appointment: “He gets s. t done.” This has involved working through the labyrinthine contract process with Naval Group.

The Advertiser yesterday reported a major contract covering two more years of work on the Future Submarines program might not be signed for another five months.

South Australian senator Rex Patrick, a former submariner, told The Advertiser the Federal Government must consider a Plan B for the troubled submarine project.

“Alarm bells should be ringing in Canberra,” he said. He described the partnership between Defence and Naval Group as “more like an estranged marriage” and said: “We should be considering a divorce.”

Senator Patrick is not alone in this contention, even if the Federal Government remains committed to Naval.

Suggestions refuse to abate that Defence will enter into talks with Saab, which owns Collins-class builder Kockums. The Australian Financial Review has suggested Prime Minister Scott Morrison is exasperated over the project, as tensions rise between Naval Group and Defence. This would, by no means, be the first time powerful sections of Defence have sought to undermine an Adelaide-based naval shipbuilding project.

This happened in 2005 when sections of Defence preferred Melbourne’s Williamstown shipyard as the constructor of the then $6bn project to build three air warfare destroyers – Adelaide-based ASC won out that May.

Likewise, ASC was for some years maligned as the builders of “dud subs”, primarily because of powerful Defence interests pushing the argument that the noisy Collins boats sounded like an underwater rock concert.

Importantly, SA is far less crucial as a battleground for the next federal election than it was when the air warfare destroyers contract was awarded. Back then, SA had four senior Cabinet ministers and five marginal seats. Now, only the southwestern Adelaide seat of Boothby is likely to be the scene of a spirited contest.

The Coalition government is more concerned about winning seats in other states, particularly Queensland and Western Australia.

There are legitimate questions to be asked about whether the rapidly evolving strategic environment means a submarine project commissioned in 2016, to build 12 conventionally powered boats, remains the best option for Australia’s defence.

Speaking on Anzac Day, Mr Dutton said a military battle over Taiwan’s independence “should not be discounted”, declaring Australia must be “realistic” about China’s antagonistic behaviour.

Home Affairs secretary Michael Pezzullo said in his Anzac Day message that the “drums of war” were beating as tensions with China escalated, urging Australians not to fall into the trap of thinking “war might leave us be” if we simply “wish away the curse”.

During a visit to Adelaide last month, Mr Morrison announced development of a $1bn weapons-manufacturing centre would be accelerated to supply guided missiles to Australia’s defence forces.

The geopolitical ground is shifting rapidly while Adelaide shipbuilding contract talks are grinding on slowly.

Adelaide will remain the centre of naval shipbuilding, but perhaps in a different from to what has been envisioned for some years.