Subs programs pegged as serious fiscal risks

The costs of acquiring nuclear submarines and terminating the French Attack-class subs have been identified as key fiscal risks.

Virginia-class attack submarine USS California.

The costs of acquiring nuclear submarines and terminating the French Attack-class subs have been identified as key fiscal risks.

The mid-year budget update said the initial 18-month consultation process with the US and Britain to flesh out the AUKUS program would be met from within the defence budget.

But it warns: “The costs associated with the acquisition of a nuclear-powered submarine capability will be assessed as part of this process and are not fully reflected in the budget estimates for Defence.”

Taxpayers have already paid about $2.4bn for the now-cancelled Attack-class submarines, and the government is in talks with France’s Naval Group and US combat system provider Lockheed Martin to determine the final bill for dumping the planned diesel-electric boats.

The budget update said the program continued to present a fiscal risk, noting “the quantum of termination costs” would be “subject to negotiations with the companies”.

It said while the ADF had withdrawn its personnel from Afghanistan, “Defence will likely have additional funding requirements for major operations beyond June 30, 2022”.

The statement of risks follows an Australian Strategic Policy Institute paper which warned the cost of acquiring nuclear ­submarines could hit $171bn over the life of the program.

Naval Group said in September the company would send a claim for compensation to Canberra to recover current and ­future costs for the cancelled Attack-class program. The compensation payout has previously been estimated at about $450m.

It comes as the Joint Standing Committee on Treaties prepares to release a report that is understood to recommend ratification of the AUKUS agreement.