Andrew Davies, Marcus Hellyer
Security, Asia Pacific
Even if we don’t know yet how much it will cost.
We’ve known for a while that SEA 1000, the Defence Department’s future submarine program, is going to cost a lot of money—we just haven’t known exactly how much. But as time moves on and Defence releases more data, we’re starting to get a better sense of the program’s cost.
Let’s review what we know about the cost of the program. In 2012, ASPI estimated it to be around $36 billion, in constant dollars, which doesn’t take inflation into account. But the Australian government, including the Defence Department, works in ‘out-turned’ dollars, which includes an allowance for inflation. Once out-turned, that number becomes $50–60 billion.
While many commentators suggested that that was way too high, the 2016 integrated investment program provided a number of ‘>$50 billion’. But later, at Senate estimates, Defence officials conceded that that was a constant-dollar figure, so ASPI converted it to an out-turned number of $79 billion based on a projected annual inflation rate of 2.5%, a pretty modest amount for military equipment.
Those dollars aren’t ‘approved’ in Defence’s parlance, which means the department doesn’t have the government’s approval to spend all that money. The recent release of Defence’s 2018–19 annual report confirmed that the total approved budget is now $5,963 million after the government approved the latest tranche of funding of $3,723 million (web table D.3). That apparently gets the program to the end of the design phase and to the start of construction in 2022–23; $6 billion doesn’t buy us any actual submarines.
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