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Thursday, 30 April 1987
Page: 2280


Mr ALDRED —My question is directed to the Minister for Defence. Is it correct that at this very early stage in Australia's new submarine project the total project cost has already blown out from $2.6 billion to at least $4.5 billion? What is the present estimate of the cost of the submarine project? In view of the huge cost blow-out which has taken place and the disastrous economic consequences facing the Government, what guarantee can the Minister give that Australia will be able to afford this project?


Mr BEAZLEY —The figures the honourable gentleman gives are not correct. The correct figures will be given, of course, after Cabinet has given due consideration to the proposals that will come before it. The costs, after adjustments taking place for changes in the value of the Australian dollar over the period, will indicate that some quite good estimates were made. If one feeds off the misinformation that comes out in the Press in the latter stages of competition from all those who are allegedly in the know and makes that the basis of one's understanding of any policy, one will almost invariably be incorrect. The actual figures will be explained in due course after the Cabinet has had an opportunity to look at the matter.

The more general point is how we will be able to afford a new submarine which is a substantial and expensive project. Everybody, including me, must determine whether we will be able to afford the project over the next 12 years. I go back to remarks I made when I tabled the Defence White Paper. Some people have picked them up and others have not. As we produced the Defence White Paper we learned not to go down the course that we went down in 1976 when unrealistic gross figures were built into the program in a way that ensured that it could not be achieved. Any program based on a 5 to 7 per cent real growth figure over a five to 10-year period, or whatever, simply is not achievable and the program was not achievable then in far more favourable economic circumstances. It would not be achievable now.

As far as possible we have calculated our forward projections in the defence area on a situation in which we can expect little or no real growth and sometimes cuts. The changes that have taken place in the percentage of the budget for new capital equipment and facilities in the White Paper are considerably under those which could be anticipated. The honourable member has raised an important question. Let me detail it a little further. When the White Paper was brought down in 1976 approximately 12 to 13 per cent of the then defence Budget was going to new capital equipment and facilities. That figure is now at 33 per cent. If that figure were projected out over the first 15-year period of the life of this White Paper, it would come to somewhere around $40 billion in today's dollars. The costings of all the projects included in that Defence White Paper are between $20 billion and $25 billion for that period, the biggest items of which are the submarine program and the frigate program.

We have tried to plan the defence program so that, no matter which party is in-although it will be the Australian Labor Party for the entire period-no sensible defence Minister will operate on the assumption that he will be the repository of vast increases in the defence vote. Any Opposition member who suggests otherwise has a raft of comments from his side of the House against which he will have to test his views. There will be no more funds for defence other than those that are being budgeted at the moment. The Government plans on that basis and the submarine program is planned to fit in with it.

The Government, in its source selection, now operates a very disciplined process; it has no choice. Over the 12-year period in which the submarine will have to be paid for, that amount of money-which is considerably less than the $4.5 billion that the honourable member outlined-will be affordable. Further demonstration of its affordabililty is that even if the figure were $4.5 billion, which it is not, if one averaged it out over that period one would be looking at something like $300m a year. I draw the honourable member's attention to the fact that last year we managed, in these tight circumstances, to make some $800m available for the biggest defence project operating at the moment and that is the F18. We can have complete confidence that we will be able to pay for not only the submarines but also the frigates and the other matters with which we are dealing. Everything this Government does is sensibly planned for a projected anticipation of a very long life of Labor government.