Submarine building as corporate welfare
28 Nov 2012|

HMAS Dechaineux sails into Sydney Harbour heading for Garden Island.

I read Katherine Ziesing’s recent piece on The Strategist, with interest. Unfortunately, as a[n economic] ‘dry’ approaching Thatcher-esque levels, I must disagree with some of her points.

My big concerns with the Future Submarine project stem from the backward decision-making process. Rather than objectively examining the evidence and making a decision, the process seems to be designed to reach a particular, pre-determined conclusion—that building a largely bespoke submarine in Adelaide is the only viable solution.

On what evidence did the government base its decision to build 12 diesel submarines in Adelaide given that there seems to be nothing more than a vague outline of the submarine’s required capabilities and expected missions? And why exclude even a basic consideration of nuclear submarines when the 2009 White Paper describes a submarine that is, as Katherine explains, ‘a nuclear one in capability respects’?

While she notes that the nuclear option has been conclusively rejected (which might be debatable), from the disparate and conflicting responses to my report on nuclear submarines, it seems clear that no true consensus exists on why nuclear submarines should be rejected.

Ziesing further notes that some experts (let’s ignore for now the obvious conflict of interest of many of those in the discussion) agree a nuclear submarine option is too risky. On the contrary, that argument drastically understates the enormous challenge of designing and building a new class of submarines (which, as Andrew Davies points out, is often—if inaccurately—being described as a ‘nation building’ project), especially given Australia’s paucity of experienced engineers and designers. This is a far more risky proposition than the proven Virginia Class nuclear submarine.

Nation building through industry assistance should not be the central consideration in a $40 billion defence acquisition. The issue with such corporate welfare is not whether an Australian built submarine would generate local jobs—of course it would; the issue is whether taxpayers should be saddled with a (much) higher bill in order to generate a few thousand highly specialised jobs in Adelaide.

A demonstrable defence need might be a valid reason to make this decision. A political imperative to support manufacturing jobs in Adelaide is not. While I’d be interested in the outcome of ASPI’s suggested Productivity Commission inquiry; there’s no economic basis that would justify spending potentially tens of billions of dollars propping up a government-run submarine building industry.

But the case against this is even clearer if we leave defence for a moment and consider the problems involved in funding the Gonski education review and the National Disability Insurance Scheme. Is corporate welfare more important than those programs? Or do we simply keep raising taxes to pay for grandiose defence schemes?

I wholeheartedly endorse Ziesing’s call for debating and settling the numbers behind the business case and the need for the Australian Defence Force to convince the public of the merits of the Future Submarine. The first step must be to put aside the political motivations for building the submarines in Adelaide and examining all options (including an overseas-built diesel submarine and a nuclear option). Put all the costs, risks and sacred cows on the table and let the public comment.

Australia deserves the best submarine it can get for the money the government is willing to spend, and that won’t happen if we keep paying homage to an economically bankrupt model of industry protectionism.

Simon Cowan is a research fellow at The Centre for Independent Studies and author of The Future Submarine Project Should Raise Periscope for Another Look, which was released on 24 October. Image courtesy of Flickr user Royal Australian Navy.