Costs blow as unions target critical defence projects
Australia’s biggest defence projects are facing a massive wages cost blowout with BAE’s troubled Hunter-class frigate program the latest target.
Australia’s biggest defence projects are facing a massive wages cost blowout, with BAE’s troubled Hunter-class frigate program the latest target in a union-led campaign leveraging sector pay disparities and workforce shortages.
More than 500 BAE workers walked off the job in Adelaide on Monday, demanding a 30 per cent pay rise over three years, claiming they are underpaid by an average of 20 per cent compared to other workers in the industry.
The campaign follows an 18.5 per cent upfront wages boost for ASC submarine workers at the same Osborne shipbuilding precinct in November, which was achieved after a bitter industrial campaign to achieve pay parity with their West Australian counterparts. Other defence companies are watching the latest dispute closely after weathering a 22.5 per cent jump in workforce costs over the past four years.
Australian Industry Group chief executive Innes Willox warned unions were taking advantage of critical defence projects to demand unsustainable wage increases that would ripple across the sector and into the wider economy.
“The reality is that the defence industry has to compete for labour in a tight job market while also seeking very specific trade and broader skills,” Mr Willox said.
“This will undoubtedly push up wage costs not just in defence but across the broader manufacturing sector, as well as mining and resources, at a time when many industries are already struggling for labour and skills.”
The latest pay claim is set to push up the price of the Hunter-class frigates, which are already shaping up to be one of the world’s most expensive warships at about $4bn per hull without even allowing for weapons and combat systems. Mr Willox said: “As in all publicly funded projects, like we are seeing in the cost blowouts in many infrastructure projects, it is taxpayers who ultimately bear the burden of paying for project delivery.”
But the metal workers’ union said pay rates needed to be aligned across big defence projects to ensure they could hold onto highly mobile workers.
“If you’ve got two shipyards side-by-side, and a future shipyard that’s going to be building the AUKUS submarine, you’re going to have to have consistency,” Australian Manufacturing Workers Union national president Glenn Thompson said.
“If you don’t have the skilled workforce, you’re not going to be able to deliver these things.”
He said workers seeking value for money for their labour should not be held responsible for blowouts on defence mega projects.
“It’s a small part of these projects in the scheme of things, and they are effectively working to ensure that they are able to do what’s needed for them and their families,” Mr Thompson said.
A spokeswoman for Defence Minister Richard Marles said the government was monitoring the dispute closely and expected the parties to negotiate in good faith.
BAE, which is offering a 12 per cent pay rise over three years, said it was looking to negotiate an outcome that rewarded workers while ensuring the sustainability of the project and value for money for the taxpayer.
Last year’s ASC pay dispute cost the Collins program more than 29,000 lost work hours, wreaking havoc with submarine maintenance schedules and undermining preparations for life-extending upgrades to the boats.
As The Australian revealed on Monday, the government is now considering a scaled-back life-of-type extension for the first Collins boat to be overhauled next year because ASC has not done the necessary design work to integrate key systems.
The “LOTE lite” upgrade would leave the submarine with a nearly 30-year-old motor, diesel engines and generators, risking a capability gap before the arrival of the nation’s nuclear-powered subs. Mr Marles, who had previously declared the LOTE program was “doable”, declined to comment on the unravelling upgrade plan.
Opposition defence spokesman Andrew Hastie lashed the government’s handling of the Collins overhauls as “shambolic”.
“Australia’s submarine capability is degrading under Labor at a critical time,” he said.
“Just weeks ago, Richard Marles assured Australians that the LOTE program was ‘doable’, and that the government was ‘going to be really smart and really clever in the way in which we do it’.
“How can we trust Labor to deliver AUKUS to schedule if they can’t manage our own Collins submarine program?”
The debate came as former prime minister Malcolm Turnbull ramped up his attack on the AUKUS submarine pact, describing it as “a terrible deal” that was “so unfair to Australia”.
Despite mixed messages from the Trump administration on whether it would support the initiative, Mr Turnbull said there was no danger Donald Trump would axe the plan because “it’s such a bad deal for us”. “He’ll be thinking: ‘Who are these dumb guys that agreed to this deal?’”
He cited longstanding submarine production shortfalls in the US, arguing no American president would agree to hand over a promised three to five Virginia-class submarines to Australia.
“The most likely outcome … is that we will end up with no submarines of our own,” Mr Turnbull said. “There will be Australian sailors serving on US submarines.”
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