AUKUS alliance: French subsmarines cash shuffle to limit the pain

Jim Chalmers says the AUKUS submarine project will have no ­impact on the budget bottom line over the coming four years.

Jim Chalmers aboard the USS Asheville in WA. Picture: AAP

Jim Chalmers says the AUKUS submarine project will have no ­impact on the budget bottom line over the coming four years, with the estimated $9bn in near-term spending to be “completely offset” by other defence provisions and savings.

The Treasurer said there would be a $6bn provision from the cancelled French Attack-class submarines, with the remaining $3bn to be drawn from reprioritising ­existing defence spending.

Dr Chalmers, speaking from Western Australia, said the 10-year AUKUS cost of between $50bn and $58bn would similarly be defrayed by $24bn in remaining provisions for the Attack-class boats.

Over the three-decade life of the project out to mid-2055, the AUKUS announcement was ­expected to cost between $268bn and $368bn – equivalent to an ­average 0.15 per cent of national GDP per year.

The commonwealth spends about 2 per cent of GDP on ­defence, and was already anticipated to spend 2.3 per cent of GDP on defence in a decade’s time.

“Yes, it is an enormous investment, but it also will deliver enormous returns for our national security and national economy, and here in Western Australia, as well,” Dr Chalmers said.

“Yes, this is a national security policy, but it’s also an industrial policy. And it’s also an economic policy, which will deliver big dividends for our national economy and our people.

“This will deepen and broaden our industrial base, and it will help create generations of prosperity and opportunities for more people in more parts of our country.”

Strategic Analysis Australia head of research Marcus Hellyer said the $268bn-$368bn price tag over three decades was an ­“informed guesstimate” at best, but it was “not implausible” that the final cost would fall around the upper end of that range.

Mr Hellyer said it was doubtful whether the money freed up by the cancellation of the Attack subs was still available to help meet the cost of AUKUS over the forward estimates.

“The previous government, after cancelling the Attack class, made a bunch of announcements. One of those was the big Signals Directorate cyber program, so some of that funding is already committed in cyber defence,” he said, noting there had also been announcements around new Blackhawk helicopters and long-range guided weapons.

“Defence has never spelled out what has happened to the Attack-class money. My sense is it has ­already been committed to other decisions by the previous government, so not all of it is available.”

Rich Insights principal Chris Richardson said the AUKUS ­announcement would add to the $50bn deficit repair task facing the nation over the coming decade and beyond.

“We’ve known the cost of running Australia has gone up – we’ve known that in terms of spending on social services and defence,” Mr Richardson said.

He said spending on social ­services such as aged care, healthcare and the NDIS had lifted by about $25bn a year under the former government – “and there’s ­obviously more coming”.

But the additional defence bill was more like an “known ­unknown”, and an additional 0.15 per cent of GDP per year associated with AUKUS spending “could be worse”. “Versus the guesses on how costly it could be, the early news isn’t that bad. The trouble is it does firm up the size of a budgetary hole that extends beyond the medium term,” he said.

Mr Richardson said the furore over legislating a $2bn-a-year change to super tax concessions suggested budget repair remained a daunting task. “The nation eventually has to find more than $50bn a year in savings, and it’s not clear that politics is going to let us get there.”