Submarines set to be built in Australia under Turnbull government

David Wroe and Mark Kenny, The Sydney Morning Herald
17 September 2015
Defence Minister Kevin Andrews has strongly endorsed a pitch by shipbuilders to construct Australia's next fleet of submarines largely in Australia, signalling a major shift since Malcolm Turnbull became Prime Minister towards a local build that would deliver thousands of manufacturing jobs.
In what amounts to a significant change by the Coalition, Mr Andrews talked up a pitch by French submarine builder DCNS under which about three-quarters of the building work – which will cost at least $20 billion – would be done in South Australia.
His enthusiasm corresponds with a widely held view in Coalition circles, including among previously nervous South Australian Liberal MPs, that Mr Turnbull is far more inclined than his predecessor Tony Abbott to build the replacement fleet for the Collins Class submarines onshore.
"I see that one of the bidders has said that they can build a significant part of a submarine here in Australia - some 70 to 80 per cent," Mr Andrews told Parliament. "That means that we're going to have more jobs, a significant part of that build, perhaps 70 to 80 per cent of submarines, built here in Australia."
Previously the Coalition government had avoided indicating any preference for building locally, instead preferring to say that more jobs would be created for Adelaide in any case because the long-term upkeep of the fleet and also the installation of sensors and systems would be done there.
But building the submarines locally would deliver thousands of high-skilled jobs, mostly to South Australia but with some work possibly going to Victoria, NSW and Western Australia.
Mr Andrews is struggling to save his ministerial career and is regarded as likely at least to be moved from the defence post if not entirely out of the cabinet. There is speculation he will be replaced by Education Minister Christopher Pyne or Treasurer Joe Hockey.
If Mr Pyne is given the defence job it would firmly cement the Turnbull government's intention to send much of the submarine construction work to South Australia, given Mr Pyne is the senior Liberal from the state.
As the key architect and chief salesman of the Abbott government's economic policy, Mr Hockey has been blamed for the government's woes and had been expected to be sent to the backbench. But Mr Turnbull could move him to another senior post.
Liberals believe they could lose four seats over the submarine question, which is why the appointment of Mr Pyne and or a strong commitment to their construction in the state is seen as so crucial to the fortunes of the government.
Mr Andrews was speaking after French shipbuilder DCNS said that by building the first boat and part of the second in France before shifting construction to Adelaide would create the same number of Australian jobs as building everything locally.
This so-called "hybrid" option would be cheaper and faster than building the whole fleet in Australia, said DCNS Australia chief executive Sean Costello.
German bidder ThyssenKrupp Marine Systems, meanwhile, has talked favourably of building all of the submarines locally.
"We're of the view that the best value for money for Australia will be to build all subs in Australia," John White, the firm's Australia chairman, said.
Both the French and the German bidders stressed they could meet whatever requirements the government has. The Defence Department is running a "competitive evaluation program" in which Germany, France and Japan are providing options to build entirely overseas, entirely in Australia, or through a "hybrid" program with some boats offshore and some locally.
Opposition assistant spokesman for defence David Feeney said: "Kevin Andrews today has finally admitted what Labor, defence and naval experts have been saying for months and years. And that is that it makes economic as well as military sense for Australia to continue to be the builder as well as the operator of its own submarine force."
South Australian independent Senator Nick Xenophon moved a motion in Parliament on Thursday calling on the government to ditch the offshore and hybrid build options entirely and set a benchmark for at least 70 per cent local Australian content by value.

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