Defence figures show AUKUS submarine budget blows out by one third and may reach $96 billion

The bill for building the nuclear-powered AUKUS submarines and the facilities to build and maintain them has risen by 34 per cent to as much as $96 billion over the next decade.

The government’s National Defence Strategy today upgraded the $53 billion-to-$63 billion budget published in 2024 to $71 billion to $96 billion.

The new figures — roughly equivalent to 75 large cruise ships — demonstrate the enormous cost of the single most ambitious project in the Defence bureaucracy’s history.

Critics, including some in the ruling Labor Party, say a nuclear fleet will make Australia a target for nuclear weapons and tie Australia too closely to the US. Supporters say the submarines will be able to protect Australian sea trade from intimidation or attacks by the Chinese Navy, which already operates more ships than the US Navy.

Defence Minister Richard Marles said the AUKUS bill had increased because the updated budget included two years of construction costs.

In a presentation on the government’s Defence budget at the National Press Club, he said the government hadn’t changed its estimate that the submarines would cost about 0.15 per cent of the total economy.

“That reflects what will happen over the next ten years in respect of building our submarines,” he said. “It’s starting to encompass the full cost of the Osborne naval shipyard, work at Henderson [naval base in Perth]. What we are doing in terms of the submarine itself.”

The big bill

The total cost of the AUKUS alliance with the US and Britain is often cited at $368 billion. That figure, which government sources confirmed today, covers 30 years and includes the cost of operating the submarines.

Within ten years, the Royal Australian Navy plans to operate Virginia-class submarines built in the US. A new class of AUKUS submarine, which hasn’t been designed yet, is expected to begin operating in the early 2040s.

About 200 Australian sailors are working on US and British submarines or training with their navies to build up Australia’s expertise in operating nuclear-powered attack submarines, which can travel underwater for months without surfacing.

“I still think that AUKUS is value for money,” former Navy commander Jen Parker said. “As the project has gone along they would have got more certainty about the costs of supporting that.”

Some critics of the project, including former prime minister Malcolm Turnbull, have predicted the Australian Navy will never get a nuclear submarine because America can’t make enough to spare any.

Mr Marles said he was “really confident” Australia would receive the three American submarines ordered next decade, a purchase that has required Australia to spend billions subsidising American ship yards.

“They are on schedule to increase their production rates of their own Virginia-class submarines to create the space for the transfer of the Virginias to Australia in the early 2030s,” he said.

Long-range spending

Overall defence spending will increase $14 billion over the next four years in response to growing tensions in the Indo-Pacific and pressure from the United States. The government promised a total spending increase of $53 billion over the decade, but such long-term spending plans aren’t formalised in law and will depend on future governments’ decisions.

The extra money was welcomed by analysts who have warned for several years that Australia needs to spend more on the military in response to the rise of China, which is challenging America’s dominance of the Pacific.

“All the evidence around us is they should be spending more now rather than pushed back to the end of the decade,” said Malcolm Davis, a military analyst at the Australian Strategic Policy Institute, a Canberra think tank.

In recent months China has built an island at Antelope Reef in the Paracel Islands, an archipelago in the South China Sea controlled by China but claimed by Vietnam and Taiwan. In what could be its largest military base in disputed waters, China has built jetties, a helipad, buildings, according to satellite photos. There appears to be space for a runway.

In 2020 Australia told the United Nations it did not accept China’s claim of sovereignty over the Paracel Islands and accused Beijing of a “completely unlawful … campaign of bullying” in the area.