Senator the Hon. Simon Birmingham
Minister for Finance
Leader of the Government in the Senate
Senator for South Australia
Date: Thursday, 16 September 2021
David Bevan: Simon Birmingham is the Senator for South Australia, the Federal Finance Minister, the most senior South Australian liberal, and he joins us now. Good morning, Simon Birmingham.
Simon Birmingham: Good morning, David. Thanks for the opportunity.
David Bevan: What are we actually going to buy?
Simon Birmingham: What we are doing is entering into a partnership announced by President Biden, Prime Minister Johnson and Prime Minister Morrison this morning, a partnership that extends right across the national security field in terms of collaboration and sharing of information science, technology skills and capabilities. The first major project to be undertaken under that is to develop a plan for Australia to be able to build here in Adelaide. Nuclear powered submarines now, of course, many will say why nuclear powered? Why this change that relates to the fact that nuclear powered submarines have greater stealth, greater endurance, greater capability to operate across our region. What we've seen over the last five years is greater contestability in our region, greater defence deployment elsewhere in our region. Also changes in technology, both in terms of the way in which conventionally powered submarines would be able to be detected and monitored and therefore limiting their operations, but also changes in technology around nuclear powered submarines that mean a country like Australia, in partnership with allies like the United States and the United Kingdom, is able to be able to get the technologies to build a nuclear powered submarine without needing to establish our own nuclear processing industry in Australia to do so.
David Bevan: But are we going to buy an existing US or British submarine and make them here in Adelaide? Or are we going to design a brand new submarine never seen before, but which will be nuclear powered?
Simon Birmingham: David, every build has its own unique attributes to it. But what we are doing is over the next 12 to 18 months, putting in place a process between Australia, the US and the UK to ascertain how we can most efficiently, safely and expeditiously build nuclear powered submarines in Australia. That will no doubt draw upon the designs of the United Kingdom and the United States in terms of their submarine fleets. It will involve the transfer of contained reactor capabilities to Australia for installation in those. But essentially we are buying, if you like that design transfer to Australia, that enables us to move swiftly into a production phase as quickly as possible.
David Bevan: So it's not clear whether we're getting an Ohio class submarine, a Virginia class sea wolf, a Columbia, the Benjamin Franklin class sub, or whether we'll get a Scott Morrison submarine. We don't know yet what exactly we're signing up for.
Simon Birmingham: It's not determined yet which of the various platform designs we would be operating off of, that's what this 12 to 18 month process is now going to do to assess which of those is going to be best suited to an Australian context in terms of the capability and operations of the submarine, but also the capability for Australia to most efficiently and expeditiously build those submarines here in Adelaide to quickly skill up the workforce required to undertake that construction and to quickly skill up the naval workforce required to operate those new platforms.
David Bevan: Why didn't we, and a number of our listeners are asking this? Why didn't we just say to the French, You know how you were modifying a nuclear powered submarine for conventional power here in in Australia? And that was costing you a lot of time and effort? Well, scrap that. We'll just use the nuclear powered version. Why didn't we just stick with the French and buy their nuclear powered submarines?
Simon Birmingham: It's a fair question, and it goes to a couple of different points. Most particularly, perhaps the ability to acquire submarines that don't require us to establish any type of nuclear processing industry or civil nuclear industry here in Australia. We're not looking for this to be a step for Australia into the breadth of nuclear industries. Not at all. This is a very narrow focused decision. The new generation of nuclear powered submarines coming through the US and UK technological platforms are ones that enable a reactor to be installed that can fuel the submarine for its lifetime for 30 plus years. And that means that you don't need to enrich uranium, you don't need to refuel them, you don't need to undertake any of those things. And that's a technological change that enables this decision now. And one of the reasons why it could not have been made some years ago. It's a technological change as to why we see opportunities there with the UK and US. Also in terms of the ongoing stewardship skills technology transfer necessary to this, we have the greatest degree of confidence in the enduring nature of that alliance with the UK and US to be able to ensure that delivers. The French have been a very good partner through this process and certainly the attack class, had it been built, would have been the best conventionally powered submarines in the world at the time. However, there were those limitations in terms of the operational abilities of conventionally powered submarines into the 2040's and beyond. That, we believe, necessitated this change in terms of Australia's national security interest.
David Bevan: A number of people have asked as the morning has progressed. What about the work that's been done so far down at Osborne summed up by this text Simon Birmingham. I'm working down at Osborne to build the infrastructure for the French subs. What's going to happen to all that infrastructure and will the work continue on the bill? Apparently, we've got a half built shipyard down at Osborne for the French submarines that were no longer going to build.
Simon Birmingham: That's right. David, there is there is construction underway at Osborne to enable the build of the attack class. There'll need to be a pause put to elements of that while we work out the specifications for building these new submarines that we will pursue. We'll make that pause as short as possible. But during this 12 to 18 month period, clearly a key requirement of the work will be to ascertain what the specific infrastructure requirements are to enable them to be built here in Adelaide and then for us to be able to resume the work down there. Not all of the work that has been undertaken will be lost, not by any means. Some of it will be able to continue for a little while. Two different points of completion. But other parts of it will be put on pause to avoid any further construction in directions that may not underpin the needs of the future.
David Bevan: Is it possible, though, that somebody is going to have to go down with a spanner and a jackhammer and rip up work that's already been done?
Simon Birmingham: It may not all be suitable or applicable to those future needs, but clearly in going through the infrastructure requirements necessary, we'll be looking to make sure that we use as much as is possible of what's been built down there. I think it is important to recognise that the skills, the capabilities and some of the infrastructure that have been delivered over the last five years better position us to be able to embark on this venture than perhaps we were positioned, you know, five or six years ago when coming from a little bit more of a standing start at that stage.
David Bevan: What's the cost of getting out of the French contract?
Simon Birmingham: That's something that will be subject to commercial negotiations, so I can't put a figure on that. At present, David, there are commercial considerations there with Naval Group Australia and with other suppliers that we will have to work through and will do that in good faith with them as quickly as possible. Importantly, there are obviously workforce issues there and this is a challenging day for individuals employed by Naval Group. I want to stress the government is committed to finding a role within our shipbuilding activities for each and every skilled shipbuilding worker impacted by this announcement. We will be working with them, be they designers, engineers, other skilled ship builders, to make sure they have pathways to transition onto the increased work that will be required for Collins class submarines as we now commit to the full cycle docking staying in Adelaide. Commit to the life of type extension of those Collins class being undertaken in Adelaide. Commit also to the air warfare destroyers having a capability upgrade of their weapon systems, which will also be undertaken in Adelaide. There's an addition to the work that is scaling up very significantly around the future frigates, the Hunter class frigates being built by BAE here in Adelaide. And so we'll be making sure we support that transition for the workforce into all of those different streams of work.
In addition to the new opportunities that will be created to underpin the work with the UK and the US over the next eighteen months and beyond.
David Bevan: Alright, well, this was Mary when she rang in earlier today and we promised to give her a voice directly with the federal finance minister. This is what Mary had to say.
Mary: What happens to all those engineers that are actually deployed in France at the moment, actually that have given up permanent jobs in Australia, have uprooted their families and are working for Naval Group in France for the so-called submarines for Australia? What happens to them now and were they even told about it? You know, my son, he uprooted his family has gone to live in France and working on this fantastic programme, learning a lot about submarines and hope, and with the thought of coming back to Australia and working with the company and building these submarines. But like, I don't even know that they know that it's been cancelled.
David Bevan: Simon Birmingham.
Simon Birmingham: So as I said, this is a difficult transition for some, there are on the whole many more job opportunities being created in Adelaide. And so there is a very positive story here for job opportunities in Adelaide over the short, medium and well and truly long term out of the combination of announcements being made today. But for individuals working in naval group at present, there's a transition and that's why we're giving that commitment, that guarantee to find a role for individuals like Mary's son in other aspects of the shipbuilding programme. In this next submarine programme, we'll be working individual by individual to make sure that that guarantee is delivered upon for them because we need their skills to deliver all of these programmes into the future. So there's no doubt there that we want to keep those skills that we will place them and that we will deploy them effectively, whether it be on extending the Collins class, on the new submarines, on the air warfare destroyers or on the future frigates, all of which are happening in Adelaide. It's important as well to appreciate that that if we had simply ignored the advice that the challenges in our region, the capability requirements around conventionally powered versus nuclear powered submarines and simply charged on ahead through the next stage of the Naval Group contract, well, then we would have been committing Australia to spend far, far more in terms of time, resources, the hours of work of individuals on something that on all the advice we've received would be a lesser capability than Australia ideally needs in the decades to come.
David Bevan: So the 350 people who are currently employed by the naval group here in Adelaide, and maybe some of them are over in France right now doing their work, but they're all on the payroll. What do they do today? They just turn up and think, Well, I'll just close down the computer and wait to find out when my last pay cheque is coming.
Simon Birmingham: So Department of Defence is and will continue to be engaging with Naval Group Australia to talk them through these transitions for the workers into other parts of our shipbuilding programmes. The Australian Submarine Corp ASC an important, of course, part of South Australia and they will now be tasked with delivering the life of type extension to the Collins class, as well as the full cycle docking, all of it happening here in Adelaide and creating those extra jobs. They will be opening up channels for people to register interest in terms of moving to work with them, and they will also be providing important advice in relation to the taskforce that's working with the US and the UK, giving ASIC opportunities at the ground floor to participate in that programme, and they will need extra staff and will be taking on extra staff to be able to do that. Other companies BAE, Saab, Raytheon have all been advised and all are in the midst of different hiring activities to meet additional workforce needs as part of the defence expansion in Australia. And so again, we will be cooperating to help all of those individuals in naval group affected and with relevant skills to transfer into ASC or one of the many other companies.
David Bevan: You would have a budget set aside to pay out the French. Now, I don't expect you to tell us what that is because you're going to try and cut a deal and get out of it as best as possible. And you don't want to show a hand, but it is fair to say you've already put some money aside. Yes?
Simon Birmingham: Well, we already have a budget for the attack class programme.
David Bevan: Yeah, but I mean, to get out of the contract?
Simon Birmingham: Sure that budget will enable us to deal with the contract settlement terms with Naval Group and other partners.
David Bevan: But that budget was to build submarines. It wasn't to start to build them. And then before we've even started building, we haven't even finished the plant. It wasn't to build half a plant and then get out of it. That was to build a submarine.
Simon Birmingham: Certainly, David, but in terms of the immediate years of budgeting, we'll be able to work through those settlement details with Naval Group and the other partners. You know, we will do that using those allocated budgets while we now redeploy parts of those budgets into the new programme with the US and the UK, that will give us the capability our country truly needs in the decades to come and will create the many jobs here in Australia. As the prime minister has indicated, the costs of doing the nuclear powered submarine programme will be even more. We will have to invest even more in defence. These are larger, more technologically sophisticated vessels than even the ones we were building and the ones we were planning to build were larger and more technologically sophisticated than the Collins class. So this will require very significant workforce, very significant investment. And it's why we're working now so closely with the UK and US with that commitment coming right from President Biden and Prime Minister Johnson to help us deliver that.
David Bevan: So we're going to be spending a lot more money on submarines than we were under the naval contract.
Simon Birmingham: It will come at an additional cost part of the 12 to 18 month process will be to firmly scope that out against the different types of platforms. You listed off many of them before. And so it's about doing it as efficiently but as expeditiously as possible to get the capability that best meets Australia's future naval and shipbuilding needs. That is compatible with our partners across this region and enables us to have a defence posture that that keeps the balance across the region.
David Bevan: The naval group contract for the next generation of submarines that was worth about, what, 90 billion.
Simon Birmingham: That's right, David. In current dollars.
David Bevan: And this deal for a submarine, and we don't know what it will look like, but it'll be nuclear powered. That's going to be much more than $90 billion. Yes.
Simon Birmingham: Look, it will be more we acknowledge that we expect it to be more.
David Bevan: David Axe, we spoke to him. He's a US defence commentator, researcher based with the Forbes Group. This is what he said to us earlier this morning.
David Axe: Whatever the government decides is the projected cost of this programme, I think it's safe to double it. In reality, it's going to cost far more than any projection. Established powers have a hard time building nuclear powered submarines on schedule and on budget. The United States has been building them for 50 years, 60 years and still struggles to keep them on budget and on time. And that's it's the same with the Royal Navy, the Chinese Navy, the Russian Navy. If Australia is willing to foot that bill, it stands to gain the kind of naval power that only a few countries possess. The United States, China, France, India, Russia, the U.K. But the question is, are you going to pay for it?
David Bevan: Yeah. So Simon Birmingham, would you agree with David Axe? Whatever they're telling you, double it.
Simon Birmingham: No, I don't agree with that. I mean, we are doing this alongside established powers. That's part of the reason for doing so because we are leveraging the capability of the UK and the US. They haven't entered into this any more likely than we have in terms of in terms of the technology transfer and the elements of importance there. But it is important that Australia has some of the most advanced naval capabilities in the world. We are the 13th largest economy in the world. We are a country sitting in some of the most strategically competitive part of the world at present. We're a country that has the Indian Ocean to our west, the Pacific to our east, the Southern Ocean and Antarctic Ocean to our south. And of course, all of the various sea ways to our north. And that requires us to have the best capabilities in the world. We are acknowledging that we have to invest in this as a government. We've already increased defence expenditure as we promised back to above two per cent of GDP from what had been some of the lowest levels since before the World War Two when we came to office. And it's that increase in expenditure that underpins the type of investments we're now able to make that create the jobs and opportunities here in South Australia, but give the give the Navy the capability that we need for the future, which they're already enjoying the benefits of. I think it's important to underscore that the Collins class are in the water more often more frequently, more reliably now than used to be the case because we've managed to turn around that capability through great skills. Down at Osborne, the air warfare destroyers that have been built here provide excellent capability, and we're enhancing that in the decisions and the frigate build that's underway in addition to the offshore patrol vessels and other things that we've been able to do as a result of those increased investments.
David Bevan: These boats, they'll be in the water at what in 10 year’s time?
Simon Birmingham: Roughly, David, probably a little over that expectation is to see actual build of the new submarines commence this decade and the first of them in the water next decade.
David Bevan: Okay. Simon Birmingham. We appreciate your time. We know that you're a very busy man today and I'm sure there'll be more questions to come. But we must let you get on with your day. Simon Birmingham Federal Finance Minister. Thanks for your time.
Simon Birmingham: Thank you. David, thanks again for the opportunity.