Introduction
Coalition Senators note the findings in the Senate Economics References Committee's report on Australia’s sovereign naval shipbuilding capability, but do not agree with material elements of the commentary or the recommendations. In our view, the Majority Report does not provide a fair and reasonable recognition of the positive steps taken by the Government with respect to Australia’s sovereign naval shipbuilding capability.
For ease of reference, we repeat much of what was included in our Dissenting comments in the Second Interim Report of this Inquiry for the benefit of the reader.
AUKUS
On 16 September 2021, Prime Minister Scott Morrison, President Joe Biden and Prime Minister Boris Johnson announced an enhanced trilateral security partnership between Australia, the United Kingdom and the United States—AUKUS.
Since 2016 our strategic environment has become more challenging. The Indo-Pacific is now the centre of strategic competition. This has compelled a re-assessment of the capabilities Australia needs to meet the changed threat environment over the long term.
AUKUS is a key part of the response, but it is not a new defence alliance or pact. It is a change in capability, not a change in strategy. ASEAN will remain central to Australia’s engagement in our immediate region. Australia is as committed as ever to our established and valued partnerships, including the Five Eyes.
As a first initiative under AUKUS, the US and UK will support Australia to identify the optimal pathway to deliver nuclear-powered submarines, leveraging the decades of experience the US and the UK have gained through their respective submarine programs.
The Government has made significant and rapid progress in our trilateral effort with the US and UK to identify the optimal pathway for Australia to acquire a nuclear-powered submarine capability. There are no roadblocks.
AUKUS is more than acquiring a nuclear-powered submarine capability for Australia; it is a framework to enable deeper practical cooperation to develop leading-edge military capabilities and technologies, ensuring Australia remains a responsible and highly capable security partner in the Indo-Pacific.
The joint leaders’ statement, released at the time of entry into AUKUS, provides a summary of the rationale:
As the first initiative under AUKUS, recognizing our common tradition as maritime democracies, we commit to a shared ambition to support Australia in acquiring nuclear-powered submarines for the Royal Australian Navy. Today, we embark on a trilateral effort of 18 months to seek an optimal pathway to deliver this capability. We will leverage expertise from the United States and the United Kingdom, building on the two countries’ submarine programs to bring an Australian capability into service at the earliest achievable date…
Recognizing our deep defense ties, built over decades, today we also embark on further trilateral collaboration under AUKUS to enhance our joint capabilities and interoperability. These initial efforts will focus on cyber capabilities, artificial intelligence, quantum technologies, and additional undersea capabilities.
Shipbuilding
The Coalition Government’s commitment to continuous naval shipbuilding will support at least 15,000 Australian jobs by the end of the decade.
The Osborne Naval Shipyard in South Australia is one of two principal naval shipyards. Osborne will host the construction of nine Hunter-class frigates, plus major upgrades to the Navy’s three Hobart-class destroyers and full-cycle docking of six Collins-class submarines. It is also the Government’s intention that Australia’s future fleet of at least eight nuclear-powered submarines will be built at Osborne.
The Australian Marine Complex at Henderson, Western Australia, is the other of Australia’s two principal naval shipbuilding precincts. Henderson will remain a hub for naval shipbuilding and sustainment activities with three classes of naval vessels under construction now, major upgrades being integrated into our ANZAC-class frigates and the continuation of Collins-class submarine mid-cycle and intermediate dockings.
In addition, the Government has delivered on its commitment to provide our servicemen and women the vital equipment they need to keep us safe with Defence spending now above 2 per cent of GDP.
This is in stark contrast to the previous Labor Government which cut or deferred over $18 billion of expenditure from the Defence budget. In fact, under Labor, the Defence budget fell to 1.56 per cent of GDP (2012‒13 Budget). The lowest level since 1938.
Over a period of six years, the previous Labor Government did not commission the build of one naval vessel in an Australian yard.
In our view, as was the case in the Second Interim Report, the Final Majority Report fails to provide adequate recognition of this context.
Response to the Recommendations
Coalition Senators make the following points as regards to the recommendations:
Recommendation 1
The Department of Defence provide to the committee an explanation suitable for publication:
as to why the Bofors 57mm Mk3 gun used by the Royal Brunei Navy was deemed unsuitable for the Australian OPVs; and
an estimate of the final contract cancellation cost for the Leonardo 40mm gun.
In our view, the Department of Defence needs to be provided an opportunity to respond in general terms to the claims which have been referred to in the Majority Report. This could then form the basis of further detailed questioning.
Recommendation 2
That the Australian Government and the Department of Defence undertake a review SEA 5000 and issue a public statement clarifying:
the overall status of the Hunter-class Frigate project;
what problems have been identified and how they are to be resolved;
the current expected cost of the project including any further new expenditure; and
if a ‘Plan B’ is being considered should the project be cancelled as the Attack-class submarine contract was.
In our view, given the response of the Department of Defence at Estimates referred to in paragraphs 3.29 and 3.30 and the subsequent detailed commentary by external commentators quoted at length in the Majority Report at paragraphs 3.31 and following, an opportunity needs to be provided to the Department of Defence to respond to the range of matters which have been raised.
The Hunter-class frigate will form an integral part of Australia’s state-of-the-art joint force of surface and air assets including the Hobart-class destroyer, which is Navy’s primary air and missile defence warship.
The Hunter-class frigate project will deliver nine state-of-the-art general-purpose frigates optimised for anti-submarine warfare.
The 2016 Defence White Paper noted that within the next two decades, half of the world’s submarines would be operating in the Indo-Pacific. The 2020 Force Structure Plan noted that countries across the Indo-Pacific are expanding and modernising their maritime forces, introducing growing numbers of advanced submarines.
A credible anti-submarine warfare capability is essential for Australia to shape, deter and, if necessary, respond with appropriate military force.
The Hunter-class frigate will be equipped with a suite of offensive and self-protection systems, including the Australian-developed CEA phased array radar, the Aegis Combat Management System and an Australian interface developed by Saab Australia. These systems will be complemented by an array of lethal guided weapons able to strike and neutralise air, surface and land targets.
The strategic environment continually evolves and defence is constantly monitoring the implications for its future force. The continuous naval shipbuilding program will give Australia the opportunity to modify designs between batches to evolve the capability in line with the threat and maintain interoperability with coalition partners.
Recommendation 3
The Australian Government re-issue a revised Naval Shipbuilding Plan at the earliest possible opportunity.
In our view, there needs to be an opportunity for the Department of Defence to provide detailed observations regarding the current status of the Naval Shipbuilding Plan and the proposed timetable for the Department to undertake a review and updating. This response could then inform the making of a recommendation.
The Naval Shipbuilding Enterprise is a major national undertaking, as bold and ambitious as anything in our history. The Australian Government’s program of concurrent naval design, construction and maintenance is unparalleled in Australia’s post-war history, with the Government planning to invest over $200 billion in naval shipbuilding out to the 2060s.
The overall program will still encompass over 70 vessels built in Australia, by Australian workers, with Australian steel. The Government’s investment in naval shipbuilding and sustainment will provide intergenerational employment for thousands of Australians and unprecedented opportunities for small and medium businesses in every state and territory.
At least fifteen thousand jobs will be created across shipbuilding and sustainment, from welding to advanced manufacturing and hi-tech design. The shipbuilding workforce is at the forefront of this modern naval ship design and construction activity, driving digital transformation and underpinning our advanced manufacturing sector.
Coalition senators note the Government is committed to working with employers, universities, and the vocational education and training sector to ensure we have the right people with the right skills to fill the thousands of new jobs. The Government’s vision is to build a robust, resilient and internationally competitive Australian defence industry base that is better able to help meet defence capability requirements, advance Australia’s economy, and create and sustain Australian jobs.
Recommendation 4
The Australian Government clarify, at the earliest possible opportunity, Australia’s obligations regarding the exchange of nuclear technology from the US and UK and how this affects Australian sovereignty.
Again, in our view, there needs to be further analysis and consideration of this matter through providing an opportunity for the Department of Defence to provide a detailed response to the issues which have been raised in the Majority Report.
AUKUS is about enhancing joint capabilities and interoperability through the sharing of technology and places no restrictions or obligations on our nation’s freedom to operate independently in support of Australia’s sovereign interests. In the case of submarines, we would see no change to our independent command and control of operations and need for sovereign support of that capability.
Similarly, this Agreement does not restrict the Australian Government’s ability to make sovereign decisions about the optimal pathway to deliver a nuclear-powered submarine capability for Australia. Rather, this Agreement ensures Government has access to naval nuclear-propulsion related information necessary to make informed decisions about Defence capability.
The Agreement is required under United States law (The Atomic Energy Act) and the US-UK bilateral treaty on military cooperation (the 1958 Mutual Defense Agreement) to enable the US and UK to share naval nuclear-propulsion related information with Australia during the current 18-month consultation period.
Recommendation 5
The Senate re-refers the Australia’s sovereign naval shipbuilding capability inquiry to the Senate Economics References Committee or the Senate Foreign Affairs, Defence and Trade References Committee in the 47th Parliament.
We leave this matter for the consideration of the Senate as a whole. In our view recommendations 5 and 6 should be considered in cognate. Ideally, there would be a single committee which had oversight of the important issues considered in this report. Moreover, there needs to be a review of the terms of reference to take into account areas which require particular focus.
Recommendation 6
That the Parliament consider establishing a Joint Select Committee on AUKUS in the 47th Parliament to examine in detail the progress of the nuclear submarines acquisition and other related matters. The Terms of Reference should also include strategic, diplomatic and financial considerations of the AUKUS arrangements.
Again, we leave this matter for the consideration of the Parliament as a whole. These are important issues requiring Parliamentary oversight. This should occur in the most effective and efficient way possible to maximise the utilisation of resources and to avoid duplication of efforts relating to oversight.
Conclusion
Coalition Senators support the Government's commitment to a strong and sustainable shipbuilding pipeline in Australia.
Senator Paul Scarr
Deputy Chair
Liberal Senator for Queensland
Senator Andrew Bragg
Member
Liberal Senator for New South Wales