Wednesday, 9 December 2020
Joint Committee of Public Accounts and Audit; Report
I rise to take note of these reports, Report 483, Inquiry into the 2018-19 Defence Major projects report and the Future Submarine project—transition to design: (Auditor-General's reports 19 and 22 (2019-20)), incorporating additional comments, and Report 484, The administration of government grants: inquiry into Auditor-General's reports 5, 12 and 23 (2019-20), incorporating additional comments. I'd like to speak about the government's delays and cost blowouts when it comes to the critical Future Submarine Project, the most expensive defence acquisition in our history. The Future Submarine Project will cost around $80 billion to acquire and $145 billion to sustain, but the construction continues to be pushed further and further back. The strategic risks of the government's mishandling of the future submarines are highlighted by the fact that a delay of more than three years will create a gap in our critical submarine capability. That capability is absolutely essential to Australia's credibility and influence as a military power. The careful and considered management of this national asset should be one of the government's highest priorities, but you wouldn't know it. For a government that likes to talk itself up when it comes to national security credentials, they have completely dropped the ball on the future submarines. The government has mismanaged this program, and, all the while, the clock is ticking, the risks are increasing, and our national security is suffering. It is that serious.
All of the key measures of this program—time of delivery, cost of the project, amount of Australian content—are going the wrong way. The government initially said the future submarines were needed in the mid-2020s. That's not too far away from now. But the future submarines will not be operational until about 2035, a decade later than we were first told. Despite the government's own assessments about the deterioration in our strategic circumstances, its acquisition strategy is flawed. And, as tough as our strategic circumstances are right now, they will likely only be tougher in 15 years when the first future submarine is operational, and tougher yet by 2054 when all 12 subs will be operational. These time lines are so long they render pointless any reasonable assessment as to whether our future submarines will be superior in our region, the Indo-Pacific region. Most credible security analysts, particularly those that look at the Indo-Pacific region, say that we haven't got the 10 years lead time to conflict that we once thought we might have; those notions are now thought to be to be very, very conservative, and it's thought that, in fact, we're going to have much less time than that.
When you look at how the government are implementing these acquisitions, once again, they're letting the Australian people down when it comes to ensuring that the Australian defence industry—so important to members in this place—gets its share of local work on the project. Honourable members will remember that, before the 2016 election, those opposite liked to repeat claims that 90 per cent of the build would occur locally. But, once that election was over, they sprinted away from that promise as quickly as they possibly could. We were then told that 60 per cent represented a local build. There need to be clear and enforceable local-content requirements built into these major materiel procurements at the start—not retrofitted as an afterthought because the government has a political program.
In his budget reply speech, Anthony Albanese, the member for Grayndler and the Labor leader, committed to a future Labor government negotiating appropriate and enforceable commitments into contracts for all major defence materiel procurements and local defence contracts. Labor will ensure transparent, public disclosure of Australian industry content commitments to give confidence to both industry and the public. We will ensure those commitments are regularly reviewed by an independent body, with appropriate contract measures built in so that we can audit through the supply chain and deal with any breaches. The Labor leader made this commitment because we believe that supporting the Australian defence industry and building reliable sovereign supply chains is a priority, not an afterthought—and because, when we are spending $270 billion of taxpayers' money over the next decade or two, we should maximise the national return on that investment. Included in that national return are some of the young apprentices, like the metalworkers that I met this morning. We want to ensure that the next generation of Australian tradies are going to work on these machines to defend our national interests and defend our sovereignty, and that those young men and women have that work into the future. Labor is committed to ensuring that occurs and to having that built in. The public needs to have confidence that these vast sums of money are being spent wisely in the national interest, that there are jobs for our kids into the future, and that Australian industry is part of the set-up and part of the maintenance of these national security capabilities.
When it comes to future submarines, what we have learnt in recent weeks is that the government hid cost blowouts for years. Not being up-front at all and not being honest at all with the Australian public about how their money is being spent is not an option. We hear the Prime Minister in question time after question time talk about how it's the Australian people's money and that we are forming legislation around the use of that money. We need to ensure that all governments are being up-front and honest about how money is being spent and what capabilities our taxpayer funds are being put to, and, if there's a problem, they need to be up-front about it. We're not seeing that. Hiding massive cost increases from taxpayers is unacceptable. Labor wants to see the future submarine program succeed as it will benefit us all, particularly in these challenging times. But the coalition government is a government that likes to make much of its national security credentials, yet, on every measure since coming to office, has failed to live up to its own hype. This government has failed and continues to fail this country when it comes to national security. We must deliver this critical capability on time, on budget and built in Australia. It's central to our national interests, for our capability, for our industry development, for jobs and for our kids into the future. Across the board, we need to get acquisitions right from the get-go, breaking the cycle of constantly retrofitting capabilities at great financial and strategic cost to Australians. We simply can no longer afford to deliver capabilities decades late and for the wrong war.
I was fortunate enough last year to go on an ADF parliamentary program to Western Australia and spent two days under the Indian Ocean on HMAS Sheean. HMAS Sheean, a Collins class submarine, was obviously named after Teddy Sheean VC. How great is it that we can say 'Teddy Sheean VC'. I congratulate the Sheean family and everyone else who was involved in the effort to get that remarkable Australian awarded. The Navy, because they had never had one of their own receive appropriate recognition, call their submarines after their heroes, and one of those was obviously Teddy Sheean. To the captain and crew of HMAS Sheean, thank you very much for your service to our nation. They were incredibly professional. It was great to see a small part of what that capability does for us right now. Collins class submarines are providing a level of deterrence for us right now. They are making sure that our sovereignty is defended and that our interests are defended. This submarine capability is an incredibly important part of defending our sovereignty, but, under the current coalition government, those Collins class submarines will need to continue operating as they are for decades. I don't want to overstate the point, but it's a pretty important point: the coalition government is mismanaging the Future Submarine project that will take over from the Collins class submarines. Australian industry content and jobs for our young people into the future must all be taken into account and they must fix the Future Submarine project. It is of critical importance to our nation.
I rise to talk to the tabled Joint Committee of Public Accounts and Audit inquiry into the major projects report, which I had the privilege of serving on the committee for the duration of. The government likes to talk about their commitment. In fact, they brag about it. Normally, at the end of question time they throw a bone to the Minister for Home Affairs, Peter Dutton, and they let him talk for defence for three minutes as a way of reminding suppose he's supposedly still relevant. His entire dixer can be reduced to one sentence: 'We're going to spend more than two per cent of GDP on defence; therefore, we're strong on defence.' That is literally the entire dixer. 'We're spending two per cent of GDP on defence; therefore, you can trust us on defence.' They hold up this two per cent commitment as a some sort of magical talisman to hide the fact that their performance on defence is woeful.
It has always been woeful. They have a history of hopeless performance on defence, from Prime Minister Menzies advocating for appeasement 10 days after Hitler invaded Poland—not a couple of years beforehand; 10 days after Hitler invaded Poland, Menzies was advocating for appeasement. Or there is the fact that they took us into Vietnam based on a lie—a lie that cost 500 Australians their lives. Or there is the fact that they took us into the second Iraq war based on another lie. The coalition cannot be trusted on defence. I'm sad to say that this report goes to this as well, because this report is all about the failures of this government to manage the defence acquisition portfolio.
They talk about spending, but the fact is that since 2016 this government has spent $6.7 billion less than they promised they would on the acquisition of new defence capital. Let me repeat that: the defence capital budget has been underspent by $6.7 billion since 2016 under this government. They literally cannot spend the money effectively or appropriately. That means that our troops, the ADF, are not getting the equipment they've been promised—in fact, the equipment they've been budgeted for. What's the inverse of this? It means we're running our existing equipment longer and harder than we need to or that we planned to. We've seen a $4.2 billion blowout in the defence sustainment budget during the same period.
At the time as we're spending an extra $4.2 billion more than we're budgeted for, we're actually getting significant underperformance in the availability of our platforms. For example, Naval fleet vessels are available for 14 per cent fewer days than are planned for, RAAF aircraft are available for 21 per cent fewer hours than budgeted for and helicopters across the entire ADF are available for 26 per cent fewer hours than budgeted for. So this government has managed the quinella: they're spending $4.2 billion more on sustainment, but they're delivering a lot less availability than our ADF needs.
When you come to individual acquisition projects that they canvassed in the major projects report, the quarterly performance review and every other effective oversight that this parliament has, this government's performance is woeful. On submarines, for example, we've got a $39.7 billion blowout in the cost of the submarines. Then Prime Minister Abbott—we've had a couple since him—got up in the middle of 2015 and committed to 12 new regionally superior submarines for an out-turn cost of $50 billion in then dollars of expenditure, not constant dollars. Now what is the cost of those 12 regionally superior submarines? It is $89.7 billion, a blowout of $39.7 billion.
And what about the timing of this? Prime Minister Abbott said that these submarines will be available in the mid-2020s. They're now at best going to begin to be available in the mid-2030s. So there is a $37.9 billion blowout and a 10-year blowout in the schedule. The flow-on from this is that now, as the member for Solomon so eloquently talked about, we're going to have to extend the life of the Collins class submarines. They are great submarines, but we're running them for a lot longer than we planned. Therefore, this government is now planning a life-of-type extension for those submarines, and that will cost at least $3½ billion.
What's the second largest defence acquisition this government is managing? It is the future frigates, the Hunter class. They're in in their early stages, but we've already seen a $15 billion blowout in them. They were promised to be acquired for $30 billion. Now they have slipped in a price update to $45 billion, increasing in the cost of these submarines by $15 billion, 50 per cent of the project cost, and they've haven't even begun cutting steel yet. This is all in the design phase. We're seeing major problems with that. We're seeing challenges around weight issues, the fact that these frigates are blowing out in their weight, which will affect their performance and cost.
What's another large project this government has mismanaged? The air warfare destroyers, which were delivered 40 months late. The project was supposed to be reasonably off the shelf. They chose the Navantia F100 model, compared to a cut-down Arleigh Burke, because it was off the shelf: We were going to copy what the Spanish had done. They still managed to deliver it 40 months late, and they've delivered it with final operational capability without a key capability. They've delivered and declared full service but the AWDs won't have radar or electronic attack, which is a key capability that the navy needs.
I have a range of favourites, but my particular favourite is the C27 Spartans, the battlefield aircraft that replaced the mighty Caribou. This is a $1.5 billion project which, as we found out through these hearings, can't fly into battlefields. Let me repeat that. We're spending $1.5 billion on a battlefield airlift aircraft that cannot be flown into battlefields. One would submit that that's a tiny problem. They're being delivered without this key capability, at least three years late.
This is a government that is hopeless on defence. The Joint Strike Fighter is another case where the government slipped in—through these hearings we established the truth—they tried to hide a $1½ billion cost blowout. Through these hearings the committee established that we are spending $16½ billion on these aircraft, but we're only getting $15 billion worth of capability, because two critical capabilities, maritime strike and beyond-line-of-sight communications, aren't there properly. They're just not there. We sign up to a contract that says you're going to get all these capabilities for $16½ billion, but now we're only going to get $15 billion worth of aircraft.
Some of these are clearly contenders for poster child, but the poster child for defence mismanagement under this government has to be helicopters. They can't find a helicopter they can't stuff up. There is a huge litany. The classic one is the Seasprite helicopter, where this government's predecessor, the Howard government, tried to—