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Senator the Hon David Johnston
Minister for Defence
21 November 2014
Topic: Cost estimates of the future submarine
Minister welcome to the program.
Good afternoon Michael.
How can these ball park figures vary so much?
Well look, the Labor Party when in power for six years had ASPI (Australian Strategic Policy Institute) do a run over of what the cost of these mythical 12 submarines was going to be and ASPI said it was about $36 billion. Now those were the numbers that ASPI said the cost of the program was running out, Labor themselves had costed the program at $41 billion, now where today’s numbers come from goodness only knows because we have not made any decision. What sort of submarine is this gentleman talking about? I think we need to get him on and have a talk to him – where he has plucked these numbers from.
According to Penny Wong he seemed perplexed about the $80 billion figure that has been talked about as well so…
Well the difference between out turn dollars, a program that runs over 20 to 25 years producing submarines one every two years is going to have inflation factored into the dollar value at the end of the program. So an upfront acquisition cost of about $40 billion is going to play out to something like $80 billion over the term of the program.
So in your view there’s no way these figures that Mr Whiley was talking about today in the evidence that he gave is anywhere near enough.
Well I am interested to know where he has got these figures from, now you know ASC hasn’t built a submarine for 20 years. The guy is a fascinating submarine sustainer but I am not sure he has built too many himself and I am not sure he has done any real cost work in recent history. I am fascinated that he has plucked these numbers and we are going to follow up where he is getting this from.
A lot Minister was made of the comments that you made at the submarine conference in Fremantle the other week where you confirmed the fact that there are no off-the-shelf designs that would really satisfy Australia’s defence needs, does that auger well for Osborne or not?
Osborne has been sustaining Collins, which is a bit on an orphan in terms of its design, there’s nothing else like it in the world, so any changes that are required in maintenance has to be done by us, this is very expensive. But the fact is that there is no off-the-shelf solution so that we need to engage a partner that has design, skill and experience, that’s the fundamental issue that we are grappling with.
Now the reason that we are grappling with that in just the first 12 months of the Abbott Government is because I actually took the Labor Party at their word, and that is that they had done some work on this project over the previous six years. So when I took the portfolio I found future submarines, nothing had been done. And I am waiting for the Labor Party to tell me what was done. There’s no contract, no requirement for a commitment, you would think that if they were keen they would have done a deal with even the South Australian Government to go forward with a training contract for instance. They’ve done nothing.
Now when I said that we thought it would be good to have the future submarine focussed on Adelaide I did that thinking that this wasn’t some sort of fraud on the Australian public which is clearly was.
And Penny Wong of course, the Finance Minister who delivered me a shipbuilding program more than $300 million over budget, she owned ASC by the way, she was the Finance Minister, so I have inherited a mess of her making - $300 million.
Taking people at their word, South Australians took you at your word, that these 12 subs would be built in Adelaide.
Sure, I said, if you look at what I said very carefully and nobody ever does of course, unless these options, options 3 and options 4, are fantasy, and let me tell you they are fantasy, there is nothing done.
Minister how long will it be before a decision is made on all of this, that you finalise the specs?
We have said that we will make a formal announcement, in the White Paper, adjacent to when we do our Force Structure Review and all of that, but what I have got to tell you is that we have done more in the first 12 months than Labor did in six years, we have been frantically seeking to avoid a capability gap, Collins is becoming more and more expensive by the moment, and so to avoid these massive costs in the second half of the next decade when Collins is due for retirement we have to get on with the job and we are doing that.
David Johnston, Minister for Defence, thanks very much for joining us on drive.
Thank you Michael.
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