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Taxpayers slugged for submarine deal exit

Taxpayers have already been slugged more than $2.5 billion for Australia pulling out of a submarine deal early with the French government, with the figure likely to rise even higher.

Defence officials told a Senate estimates hearing $2.56 billion was spent to the end of February as part of the negotiation of termination costs with Naval Group and Lockheed Martin.

The French submarine deal was controversially scrapped last year in favour of acquiring nuclear-powered submarines as part of the AUKUS security pact.

The officials said they expected to deal with the remaining termination costs through its existing allocation of funds, which is just under $5 billion.

A settlement with Lockheed Martin is expected to be finalised in a few weeks, while officials would not reveal the figure of what Naval Group expected from negotiations.

However, the federal government has denied the large taxpayer bill was an embarrassment.

Finance Minister Simon Birmingham told reporters in Canberra on Friday it would have been irresponsible for Australia to continue with the previous submarine deal with France.

“It’s a situation where it would have been reckless to proceed with building submarines, when we had a better, technologically superior, option that could be pursued,” he said.

“You could wish that we had more information and the availability of nuclear-powered submarines at an earlier time – we didn’t have that technology available to us.”

Labor’s defence spokesman Brendan O’Connor said the government did not make proper provisions in the federal budget for what the termination costs would be.

“Defence expects some termination costs will be settled in April, and yet the Morrison government won’t reveal this waste before the federal election,” he said.

“It is incumbent on the government to disclose what will be cut and what does defence have to go without to pay for submarines that will never arrive.”

Australia’s decision to pull out of the previous submarine deal caused diplomatic tensions with President Emmanuel Macron, who accused Prime Minister Scott Morrison of misleading the French government.

Senator Birmingham said it had been a difficult, but necessary decision to scrap the French deal.

“We knew there were serious consequences from changing course from the diesel-powered submarines to the nuclear-powered submarines,” he said.

“But we were willing to make those difficult decisions, not because they were easy this year or next year, but because they are necessary for the decades to come.”

Australia is set to finalise a location for a new nuclear submarine base along the east coast in a matter of months, with the decision to be made after the federal election.

It is expected Australia’s nuclear submarines will be operational by 2040.

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