Cost, timing and US approval: The most crucial AUKUS ‘known unknowns’

As former UK prime minister Boris Johnson put it when AUKUS was launched in 2021, the trilateral submarine deal “will be one of the most complex and technically demanding projects in the world, lasting for decades and requiring the most advanced technology”.

Naturally, with such a large, costly and time-consuming project, there are lots of unknown factors at play. Below are some of the most crucial “known unknowns” according to observers in the US, UK and Australia. 

How much will the project cost? 

The Australian government has said the overall cost of AUKUS will be 0.15% of gross domestic product until 2055. In dollar figures, that means $268-368 billion. 

But calculating the cost is not as simple as it seems: first of all, there’s a $100 billion gap between those figures. Secondly, the Parliamentary Budget Office (PBO) said in April the AUKUS budget has a $122 billion contingency baked into the $368 billion figure.

That means the contingency is 50% of the base budget — an unusually large proportion. 

“What we’re doing is prudently budgeting here for the unexpected,” Defence Minister Richard Marles said after the PBO costings were released following a request by the Greens.

“That’s what contingency budgeting involves. Hopefully that we don’t have that amount of issue. But we have been very upfront and very consistent with the Australian people, both about the challenges involved here but also about the cost.”

Former Australian Strategic Policy Institute senior analyst Marcus Hellyer told the AFR the $368 billion was a “strange figure” — because it’s arbitrarily calculated to the year 2055 — and that it is likely to balloon.

“Everything doesn’t stop at the end of the 30 years. When we have a fleet of eight boats and a production line up and running on a presumably continuous basis [of building submarines], I think it’s going to be a figure greater than 0.15%,” Hellyer said. 

And as the same AFR article noted: “Treasury struggles to get its budget forecasts right from one year to the next — and no crystal ball has been invented that can accurately predict what inflation will be over the next 32 years.”

There are other budget uncertainties as well — as a recent report by the US Congressional Research Service noted, American officials have not been told the size of the proposed Australian contribution to the US submarine industrial base, referring to it only as “proportional” or “proportionate”.

Year-by-year AUKUS costs have been classified “secret” by the Department of Defence, the PBO noted. 

“No one knows the final figure — it’s not as if that’s been kept under wraps. I think that’s a genuine unknown,” Lowy Institute international security director Euan Graham told Crikey. 

“That’s not surprising, given that there are so many groundbreaking firsts involved in this technology development deal.”

University of Sydney international security studies director James Der Derian told Crikey: “The most probable known unknown is a blown-out Defence budget.”

When will Australia get the subs, and how many will it get? 

US President Joe Biden said in March, when Australian Prime Minister Anthony Albanese visited San Diego, that the US planned to sell Australia three to five Virginia-class nuclear-powered submarines. 

“With the support and approval of Congress, beginning in the early 2030s, the United States will sell three Virginia-class submarines to Australia with the potential to sell up to two more if needed, jumpstarting their undersea capability a decade earlier than many predicted,” Biden said. 

Earlier this month, a senior US naval officer said Australia will be sold second-hand submarines in 2032 and 2035. The first newly produced submarine will be sold in 2038, Vice Admiral Bill Houston told reporters in Washington, according to the US site Breaking Defence. 

However, as the article noted: “Both the White House and the [US] Defense Department broadly have emphasized that the transactions will not occur until Australia’s navy and industrial base is prepared.”

What that means is that US officials aren’t certain their production lines can handle the increase needed to meet those goals. 

The US aims to build two Virginia-class submarines per year, but has recently averaged between 1.2 and 1.3 boats per year.

Selling Australia submarines would mean the size of the US fleet would be reduced, a prospect that’s not universally popular in Washington. As the Congressional Research Service report noted, the US would be reducing its own fleet until at least 2040 if the sale of three subs went ahead as planned. 

“These estimated dates are dependent on the ability of the Navy and the US submarine construction industrial base to increase the Virginia-class production rate to 2.0 boats per year by 2028 and to 2.33 boats per year sometime after that. If the Virginia-class production rate falls short of these goals, then the reduction in the size of the [submarine] force could last longer,” the report said. 

Royal Australian Navy Vice Admiral Jonathan Mead told an Australian Senate committee in May the plan was to acquire three Virginia-class submarines. That would be supplemented by five AUKUS SSN-type subs — the new type of boat Australia plans to build in collaboration with the UK. 

“The government has indicated a fleet of eight nuclear-powered submarines. We’re working on, initially, the three Virginias to be transferred to Australia, and then commencing construction on SSN-AUKUS by the end of this decade and delivering them at the beginning of the 2040s,” Mead said.

“[Defence Minister] Marles has also said that a future government will take a decision about acquiring additional SSN-AUKUS.”

A report by a UK defence committee noted in October there was a “continuing lack of clarity about how many submarines will ultimately be built, the cost, and the availability of a skilled workforce”.

“The UK must … be realistic and cognisant of the significant hurdles for all AUKUS partners in constructing nuclear-powered submarines,” the report said.

What will the US Congress do? 

There is significant uncertainty about how the US Congress will deal with the AUKUS plan. US congressional approval is needed before Australia can buy Virginia-class subs. While there is broad bipartisan support for the project, many observers agree it’s far from certain how that will go. 

During a visit by Albanese to Washington last month, Biden was asked by a reporter: “Can you give a personal guarantee that you can get all the necessary legislation through Congress and lock in this deal?”

Biden responded: “Do you know anyone in elective office who can give a personal guarantee that it happens? I won’t… I’m going to try, and I believe it will get done.”

Australian National University strategic and defence studies centre lecturer Bianca Baggiarini told Crikey the state of US domestic politics was “the most crucial known unknown”.

“I think oftentimes in Australia, we take for granted this idea of the US being a bastion of democracy, stability, and a global leader in international rules-based norms. Quite frankly, another [Donald] Trump administration is likely to cause problems for AUKUS and the alliance more broadly,” she said.

“It’s as if Australia views the US as though it is stuck in a time capsule, forever reflecting a kind of wholesome, collaborative, globalist mentality of the post-WWII era.”