The BGA Australia Team, led by Managing Director Michael “Mick” McNeill, wrote an update for clients on the recent announcement about the AUKUS nuclear submarine deal.

Context

  • From the early 2030s, Australia will buy three (with the possible option of a further two) Virginia-class submarines from the United States to fill the capability gap caused by the retirement of Australia’s existing Collins-class submarines.
  • The newly proposed SSN-AUKUS submarine design will be the future attack submarine for both Australia and the United Kingdom. It will combine U.K. submarine design and advanced U.S. technology and has been dubbed a “Frankenstein” deal given the technical, technological and human involvement from all three members. The United Kingdom intends to deliver its first SSN-AUKUS to the U.K. Royal Navy in the late 2030s. Australia plans to deliver the first Australian-built SSN-AUKUS to the Royal Australian Navy in 2042.

Significance

  • The submarine initiative will almost double the previously forecasted demand for personnel in Australia’s submarine shipyard and will be supported by significant investment in the country’s domestic industrial capacity and infrastructure. Prime Minister Anthony Albanese has called the scale, complexity and economic impact of the AUKUS investment “akin to the creation of Australia’s automotive industry.”
  • While the sharing of nuclear submarine technology appears on track, there is still work to do to drive technology sharing across AUKUS initiatives. BowerGroupAsia Senior Adviser James Carouso and other former heads of mission in Australia have called for reform of the U.S. International Trade and Arms Regulations system to drive sharing and co-developing of critical and emerging technologies.

Implications

  • The announcement signals a two-decade pipeline of work for Australian, U.S. and U.K. companies as the Asia-Pacific faces its most challenging strategic environment since World War II. Australia will send hundreds of workers to shipyards and technical facilities in the United States and United Kingdom for specialized skills training and to gain the experience required to build and sustain nuclear-powered submarines.
  • The announcement will impact Australia’s relations with its most important trading partner, China. Ironically, Australia’s capacity to afford the projected cost of AUD368 billion (US$245 billion) will partly depend on continued iron ore exports to China.

BGA will continue to keep you updated on developments in Australia as they occur. If you have any comments or questions, please contact BGA Australia Managing Director Mick McNeill at mmcneill@bowergroupasia.com.

A small ginko leaf

BowerGroupAsia