Why Is Australia Buying Used American Nuclear Submarines?

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Much of the commentary this week has suggested Australia has lost additional missile capacity because the submarines we're receiving won't have the“Virginia Payload Module” – a new hull section that allows the submarines to carry more missiles.

But that commentary is incorrect. The submarine Australia was expected to receive in 2038 was never intended to have that capability.

In conflict, Australia would predominantly use these submarines in an anti-submarine and anti-ship role. Land strike missiles are not used for this and so the extra capacity isn't essential. It's also capability the US has said it is not willing to provide.

The main difference is the third submarine will have fewer years of life remaining than a new boat. A Virginia class submarine off the production line would normally have a 33-year life.

At Senate estimates this week, the Australian Submarine Agency said each boat will have more than 20 years of life remaining when we receive them.

Claims these submarines would only have eight years of life do not withstand scrutiny. The kind of submarines Australia will receive only started entering service in 2020.

Is Australia paying AU$368 billion for three used submarines?

The figure most often quoted for AUKUS is AU$368 billion (US$255.3 billion). While technically correct, this figure covers costs through to 2055, including infrastructure, workforce and maintenance costs over 31 years, plus the purchase of Virginia-class submarines to Australia and building our own submarines.

Of the total, about AU$244 billion is the projected cost, while the remaining AU$122.9 billion is a 50% contingency on top. This is money set aside to cover risks, cost growth and unforeseen problems. Most defense projects carry 5-10% contingency.

The Department of Defence's 2026 Integrated Investment Program states nuclear-powered submarines will cost between AU$71 billion and AU$96 billion over the next decade.

Against projected defense funding of about AU$887 billion over the same period, this equates to around 8-11% of defense spending.

Can the US build enough submarines for Australia?

This is one of the most legitimate points of debate in the discussion. The US reduced its production rate of submarines after the Cold War. Since 2011, it has set a goal of increasing its build rate to two submarines a year. From 2016–19, it averaged 1.9 boats a year.

According to the US Congressional Research report on Virginia-class submarines, this build rate dropped off due to workforce issues during Covid and challenges associated with moving to the build of the new Block V submarine, which is 2,000 tonnes larger than the Block IV Virginia.

The US is investing billions of dollars into its submarine industrial base to address this issue.

In May, Chief of Naval Operations Admiral Daryl Caudle told Congress he expects Virginia-class production to reach two boats per year in around 2032. He previously said the US will need to get to a 2.3 production rate to get to its 2054 goal, including the sale of three Virginias to Australia. The US is presently building 1.3 a year.

The US submarine industrial base challenges are real, and will take significant effort to address. Has the US said it will not sell submarines to Australia if it doesn't get there? No.

Is AUKUS risky?

Yes. AUKUS is the most complex defense project in Australian history. There are risks in the US and UK industrial bases, workforce growth, infrastructure and funding. Anyone claiming otherwise is not engaging with reality.

But much has been achieved in less than five years. Australia has established a submarine base near Perth, embedded personnel in US and UK submarine programs, commenced major infrastructure works, trained hundreds of personnel, and secured US congressional approval for the submarine transfers.

At the recent AUKUS Defence Ministers' Meeting, all three countries stated the program remained on track. Based on the evidence available today, I agree.