Overseas subs to cost economy $29bn: report
Australia’s economy will take a $29 billion hit if the next generation of submarines is built overseas, a new report says.
Conversely, the report estimates a $20 billion direct expenditure boost to the national economy if the subs are built in Australia.
The report, by the National Institute of Economics and Industry’s executive director Peter Brain, compares the relative economic merits of buying locally built or imported submarines to replace the Navy’s Collins Class vessels.
Brain presented his findings to the Senate Economics References Committee into naval shipbuilding in Melbourne today.
It compares two scenarios:
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- Scenario 1: Build all 12 submarines overseas, with Australia retaining only the light maintenance.
- Scenario 2: Build all 12 submarines in Australia with both heavy and light maintenance being undertaken locally over the 40 year life of the project.
The report was commissioned by South Australia’s Economic Development Board (EDB) as the State builds its case for retention of naval shipbuilding.
“Initial indications are that importing Australia’s next generation submarines would be an economic mistake,” EDB chair Raymond Spencer said today.
“Not just for South Australia but for Australia as a whole.
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“And I emphasise that we have taken a very conservative view of the relative costs and benefits.”
Key results for scenario 1: Build overseas
- It is estimated there would be a $29 billion negative impact on Australian GDP over the 40-year life of the project ($730 million annually).
- Government debt would have to increase by at least $20bn to pay for the overseas submarines with minimal return to the local economy. These funds could otherwise have been used for domestic projects.
- Adding to job losses in the auto industry, importing submarines is likely to result in 260,000 man years lost to Australian workers over the 40 year project.
Key results for scenario 2: Build overseas design locally
- It is estimated that building locally will still have a negative impact on the Australian economy because the direct import content of the submarines is about one third of the total cost, compared to negligible imports for current government expenditure.
- However, the size of that negative impact is estimated at $8.2 billion on Australian GDP over the 40 year life of the project ($200 million annually).
Brain says the overwhelming conclusion is that it will cost no more to build locally.
This is partly because Australia has a unique set of operating environments and requirements – there is no off-the-shelf solution available, and partly
because there are only four potential international partners to build the submarines – Germany, France, Japan and Sweden – and they are all high cost countries.
