It was February 2015 when prime minister Tony Abbott faced the first test of his party numbers, triumphing over an empty chair 61-39. His disastrous prime ministership would limp on another seven months in increasing chaos and ever-growing numbers of flags before Malcolm Turnbull brought the farce to a close.
But Abbott’s weakness continues to resonate through politics six years later in the form of the biggest national security debacle since the Iraq war: the failure of the government’s submarine contract with Naval Group.
Abbott wanted the new subs built in Japan and committed to then Japanese PM Shinzo Abe that his country would get the contract. But with his leadership on the line and desperate for every vote, Abbott caved in to protectionist South Australian Liberals and agreed to a competitive tender process that would “give Australian suppliers a fair go”.
Abbott’s instinct to build offshore was right (as was his refusal to keep paying bribes to keep multinational carmakers running plants here). After the completion of the tender process and the success of the French sub design, the cost of the submarine project, most of which was to be constructed in Australia, ballooned dramatically.
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It was once standard to refer to the “$20 billion future submarine project”. When Naval Group won, it was a $35.5 billion project. Now it’s the $80 billion project — though Defence insists there’s been no cost increase. With maintenance, the cost of the submarines will run into the multi-hundred billions.
A RAND Corporation study prepared for Defence had earlier shown there was a 30-40% cost premium for building submarines locally — though this could be reduced to 15-20%. All for just 2800 jobs, championed by South Australian Liberals terrified of losing their seats.
The reversal didn’t save Abbott’s job. And ever since the Naval Group contract was signed, there’s been a big question mark over those 2800 jobs as well.
Now the entire project is at risk because Naval Group is baulking at Australian demands for 60% of the project to be local. Defence officials have been sent scurrying to identify possible replacement options and work out how the current Collins class boats can be extended still further, given the new subs won’t be in the water until the 2030s. Tearing up the Naval Group contract would cost six years, not to mention the break fees involved.
All to save Tony Abbott’s job, and those of a few South Australian Liberals, all of whom have now left politics.
So much for the Liberals being trustworthy on national security. The debacle will leave Australia with a major gap in its naval resources and a key strategic weakness at a time when China is increasingly aggressive and hostile to Australia. You can only imagine the outraged headlines from News Corp if it had happened under Labor.
The debacle overshadows another spectacular defence policy failure: Abbott’s decision to acquire the F-35 fighter. The US Air Force may well now abandon the wildly over-budget, endlessly delayed plane after just a few hundred have been produced, in favour of a new, lower-cost and lighter plane of the kind that the F-35 was originally supposed to be. The only winner from that farce is Lockheed Martin — market capitalisation around US$100 billion.
Despite being defence industry minister before becoming defence minister, Linda Reynolds does not bear the blame for the mishandling of the submarine decision, and certainly not the acquisition of the F-35. But after the last two weeks, no one in Canberra thinks she has what it takes to start fixing the mess she’s inherited. Her credibility has been wrecked over her mishandling of Brittany Higgins’ alleged sexual assault and her attempts to explain it, including changing key elements of her story and giving the PM wrong advice about her actions. Many other ministers would have been sacked or fallen on their swords already for such a performance.
The problem is, in a government that is light on for talent, who would replace her? Peter Dutton has been mentioned as going to Defence for years now, but Scott Morrison would be aware of the long litany of scandals, disasters and bungles Dutton and his secretary Mike Pezzullo have presided over at Home Affairs. Giving Dutton an even larger portfolio where the scope for errors comes with two extra zeroes attached would be tempting fate. If Mathias Cormann were still around, he would be ideal, but he’s sensibly decamped from this sleazy, incompetent government.
In truth, however, the problems lie beyond the capacity of any minister. The government committed to waste tens of billions of dollars to employ less than 3000 people building these things, and the decision has circled around like a dud torpedo and is heading straight for them.
That’s the funny thing about protectionism — it always ends up hurting you no matter how clever you think you’re being.