Richard Marles promises no tax increases to pay for Australia’s nuclear submarines

With cost of nuclear submarine acquisition expected to exceed $85bn, defence minister moves to reassure taxpayers as he prepares to depart Washington for Tokyo.

Australian Defence Richard Marles (right), with Chief of the Australian Defence Force, General Angus Campbell, participates in a meeting with US Defence Secretary Lloyd Austin and the UK’s Secretary of State for Defence, Ben Wallace, at the Pentagon yesterday. Picture: Getty Images

Deputy prime minister Richard Marles has ruled out any tax increases to pay for the government’s promised fleet of next generation nuclear-powered submarines, which are expected to cost in excess of $85bn – more than double the annual defence budget.

Speaking to reporters in Washington overnight (Thursday morning AEDT) after two days of high-level meetings with US and UK defence and foreign ministers, Mr Marles said the government would provide a “sense of scale” of the cost of the submarines in its defence review and AUKUS updates slated for early next year.

“No, the cost of this is something we have said will be addressed in the announcement in the first part of next year,” Mr Marles said, when asked if the submarine program could lead to tax increases.

“We’re talking about a very long program that goes over decades, and as we go through the various budget processes, and we’re dealing with the next four years, you’ll see costs associated with this program start to appear.”

The AUKUS security pact announced in September last year undertook to provide Australia with eight nuclear-powered but conventionally-armed submarines, the first slated to arrive in the late 2030s, although details of construction specifics are yet to be finalised.

A November report by the US Congress Research Service estimated the incremental, per unit cost to the US government for its own program of next generation “SSN(X)” attack submarines, the type Australia would likely be seeking, at between $US5.6 and $US7.2 billion.

“The optimal pathway is now crystallising but there’s still a process to go through. This is a huge endeavour we are embarking on but it’s doable,” Mr Marles said, who has promised Australian shipyards would build significant components of the future submarines.

In December 2021, the Australian Strategic Policy Institute estimated the total cost of the program, which is expected to include construction of the boats in South Australia, could exceed $171bn.

Mr Marles was speaking after the first trilateral meeting of AUKUS defence ministers, where US secretary of defence Lloyd Austin reiterated at the start of the meeting that the US hoped Australia would obtain the submarines “at the earliest possible date”.

UK Secretary of State Ben Wallace said he was “delighted” Australia would “join that club” of nations with access to “some of the most complex machines on earth, to give a strategic reach to Australia. [This] will that allow us to make sure that we‘re ready and match fit for the end of this decade”.

Mr Marles will tonight fly to Tokyo with foreign Minister Penny Wong to discuss with their Japanese counterparts how Japan might join Australia-US troop exercises and rotations in Australia, one of the outcomes of bilateral AUSMIN meetings with the US on Tuesday (Wednesday AEDT).

“Expanding force posture co-operation was a key outcome of the AUSMIN meeting and we hope it will be a key outcome of our meeting in Japan, which in essence is an invitation from the US and Australia to Japan to do more force posture co-operation with us,” the defence Minister said.

.@SenatorWong and I were delighted to join @SecDef Austin and @StateDept@SecBlinken for the 32nd #AUSMIN in Washington DC.

The Alliance has never been stronger, and today we had the opportunity to discuss ways we can deepen cooperation between our two countries. pic.twitter.com/f4gQnBshuK

— Richard Marles (@RichardMarlesMP) December 7, 2022

When the Morrison government cancelled a contract with France’s defence industry to build conventionally-powered submarines, incurring a break fee of $830m, the lifetime cost of the program of acquiring 12 diesel submarines was expected to be $90bn.

Australia’s defence budget this financial year is forecast at $38bn in the latest budget papers.

Mr Marles said he had “really good indications” from the Americans that they would change domestic laws and regulations to make it easier for US industry to share advanced military technology with Australia, as per the AUKUS agreement.

“At the highest level of policy making, speaking to secretaries Austin and Blinken, congressional leaders, there is I think unanimity of purpose in wanting to create a seamless environment where information and technology can be shared more freely”.