We wanted to check in, one year after the optimal pathway was announced. How are we progressing? Was the pathway realistic? And what are the barriers would be most likely to derail this plan?
United States Studies Centre (USSC) Director of Foreign Policy and Defence Prof. Peter Dean and Research Associate Alice Nason joined Director of Engagement and Impact Mari Koeck to discuss.
Read more:
AUKUS inflection point: Building the ecosystem for workforce development by Peter Dean, Alice Nason, Sophie Mayo and Samuel Garrett
AUKUS has become a case study in generational politics by Peter Dean and Alice Nason
Are Biden and Congress playing chicken with AUKUS? by Tom Corben and Alice Nason
The university sector’s value proposition for AUKUS: Times Higher Education Summit outcomes report by Peter Dean, Sophie Mayo and Alex Favier
The social licence for AUKUS has not yet been earned by Sophie Mayo, Peter Lee and Alice Nason
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Produced by: Elliott Brennan
Transcript
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Peter Dean: The numbers are an eye-watering amount of money, but it's not as eye-watering as it sometimes seems. And there is a quantum leap in capability that the Australian government is providing us to provide for our deterrence and our defence compared to a conventional class submarine.
Mari Koeck: You're listening to the USSC Briefing Room, a podcast from the United States Studies Centre at the University of Sydney, where we give you a seat at the table for a USSC briefing on the latest developments in US news and foreign policy. We'll cover what you need to know and what's beneath the surface of the news. Hello, I'm Mari Koeck, director of engagement and impact at the USSA. Thanks for joining us on the USSC Briefing Room today. Before we begin, I'd like to acknowledge the traditional owners of the land we're recording on today. The University of Sydney is located on the land of the Gadigal people of the Eora nation. And I pay my respects to their elders past, present and future. One year ago, Anthony Albanese, Rishi Sunak and Joe Biden gathered at Naval Base Point Loma in San Diego to share the optimal pathway for Australia to acquire nuclear-powered submarines under the AUKUS agreement. This critical step laid out the timeline, the type of submarines that would be acquired and the price tag of $268 to $368 billion for AUKUS Pillar I. USSC published extensive analysis on this announcement, and I'd encourage you to check out the show notes for our recommended reading. But we wanted to check in one year after the optimal pathway was announced. How are we progressing? Was the pathway realistic, and what are the barriers that would be most likely to derail this plan? To discuss this, I'm joined by USC Director of Foreign Policy and Defence Professor Peter Dean and research associate Alice Nixon. Peter was a principal author on last year's Defence Strategic Review, and they have both published extensive analysis on AUKUS, particularly in relation to workforce and social licence. Peter and Alice, thanks so much for joining me today.
Peter Dean: My pleasure to be here.
Mari Koeck: Thanks for having us. And just before we dive in, are you good to go on your by-the-numbers stat that we'll have at the end?
Alice Nason: Absolutely.
Mari Koeck: Great. Looking forward to it. So one year ago, the leaders of all three AUKUS countries announced this quote-unquote optimal pathway for Australia to acquire nuclear-powered submarines under AUKUS. What has changed in the years since then?
Peter Dean: Well, Mari, I might kick off, if that's okay with you. And I'm actually going to start with recent history. I suppose I'm going to start with what happened in December of last year? And that was probably one of the biggest barriers or hurdles to the AUKUS enterprise being overcome. And that was the passage of the US 2024 National Defense Authorization Act. And that's really significant in the AUKUS piece for a couple of reasons. First of all, the NDAA authorized the transfer of three Virginia class, conventionally armed nuclear-powered submarines to Australia. That is, two boats that are currently in service with the US Navy, and one boat that would come off the new production line in the United States. The same NDA also authorised the maintenance of US submarines by Australians in Australia. Now that's the Submarine Rotational Force West concept. So that's an HMAS Stirling where the US will forward deploy its SSNs. And that allows, legally allows Australians to do maintenance on that. And that's really critical. he key driver and rationale for Surf West is actually the maintenance piece, and it's about improving skills of Australian workers and Australian military personnel to be able to do that. And it's slated to actually begin in the second half of this year. So that's not very far off, but that will start to occur. Um, the same act also allowed Australian contractors to do training in US shipyards that allowed for us to accept funds from Australia to help support the US defence industrial base. So this is the first time ever that a foreign country has given money to the United States. I had to figure out a way to actually accept money from a foreign country directly to support the US industrial base, to build that submarine for Australia that I mentioned earlier on, and it expanded decisions, um, on expedited, sorry, decisions related to foreign military sales to Australia.
Peter Dean: So and this is what's really important about this is not just about the submarines or even Pillar II of AUKUS events capabilities. Australia in the UK under this act were given broad-based exemptions across the whole defence industrial enterprise because Australia was added to the US Title Three US Defense Production Act. So these are really significant moves. This is, you know, what people refer to is fundamental changes to ITAR, the International Traffic in Arms Regulations in the United States. And this provides a blanket exemption for Australia under those rules. And they're the biggest rules that were providing an impingement to the transfer of intellectual property. And about the creation of what would what sounds like and starts to look like now as a bit of a free trade, on defence exports and industry and development between the three AUKUS countries. And this is a really significant move. The US Congress could have just put a little wrapper around AUKUS Pillar I and AUKUS Pillar II and said, you can only have these regulations any related to those projects. But they didn't. They gave a broad-based exemption. And that's the first really big piece. So that's I think, the biggest step forward. Australia's having to respond to that with our Defence Control Regulation Act reforms that are being proposed at the moment. And then below that has been a series of other things that have happened that's starting to show progress, and they've started to really ramp up since about, April last year after the announcement.
Peter Dean: So we've had Australians, sailors, posted to a US submarine tender. There's about 37 of those, we've had officers graduating from the US Nuclear Power Power Training Unit in Charleston in South Carolina. There's been a couple of classes of those. Now, the government has actually entered a contract with an Australian manufacturer to buy the steel for our SSN AUKUS boats that we're going to build here in Australia. So we've already, we bought the steel that will form the hull for that vessel. The government's committed and already started flowing money into $2 billion worth of infrastructure in South Australia. And that's off the back of a land deal that the South Australian government cut with the Commonwealth government to provide the land for the submarine construction base in South Australia. The government also announced 4000 Commonwealth-supported places at universities. This is additional and new university places. That's over the next four years. That's $128 million investment. And we've seen 70 young South Australians and Western Australians being given a, what's called an early career AUKUS training scheme put in place for apprentices and for tradespeople to start it off. So there's been a range of things happening since the optimal pathway. And on top of this you've got the establishment of the Australian Submarine Agency, um, headed by Vice Admiral Jonathan Mead, which has taken control of that and is basically driving through this whole production side of things as well as driving through key areas, um, in relation to governance and nuclear as well.
Mari Koeck: So that's massive. That is a lot that has happened since then. Is it all good news?
Alice Nason: Yeah, I'll jump in here. And thanks, Pete, for that great summary. There is still a lot to be ironed out in the details, and we've seen initial cleavages be run into in that first year. So while the story around the NDAA is mostly a good one, it still awaits appropriation and is tied up in protracted congressional funding disputes. And this also applies to things like the US National Security Supplemental, another major piece of legislation that includes a 3.3 billion USD investment into the submarine industrial base, making those improvements that can congresspeople have deemed necessary for them to be willing to hand over the keys to Australia. So this is something to keep an eye on going forward, especially with the presidential financial year 2025 budget request, rumoured to halve its request for the Virginia class program. So not all good news, but certainly a huge amount of momentum. And that's what's important at this stage. One thing I'd add to Pete's remarks is that we've seen, interesting, important changes around governance that will underwrite the progression of AUKUS Pillar I going forward. So at the bureaucratic level, that's the creation of the Australian Submarine Agency in Australia, a new position in defence to steward advanced capabilities, and in the UK, the creation of a director general AUKUS role, but also at the political level, all three countries have made political groups to engage on this on a trilateral level going forward, be that the AUKUS caucus in US Congress, the all-party parliamentary group, in the UK, and the parliamentary friends of AUKUS in Australia. So certainly a huge amount of energy and amount of engagement, but big structural barriers that we've already seen start to show their face this year.
Mari Koeck: Okay. That's great. So it's good to know the kind of tangible steps that are taking place, and how they're progressing. Obviously, a big factor facing it is both political will and public sentiment towards AUKUS. Both Labor and Liberal parties have continued to reinforce their support for AUKUS. But USSC and other polling shows that public support for AUKUS has fallen below a majority, even if it is still a plurality. Why do you think this is?
Alice Nason: Absolutely. So yeah, polling is showing a softening rather than a firming since the announcement. And this is especially true among young Australians with the drop to 33% in 2023, compared to 43% at the same time last year. So this isn't an insignificant fall in support, and it's concerning that it's not lying above majority. While most defence programs don't depend on full city support, or because it's unique in its scale, its quality and the amount of involvement it expects from the national community. I'd attribute a number of factors to that. First of all, it's the lack of an easily understood strategic rationale, the China centrality that has really come through in US messaging on purpose doesn't work the same way in the Australian case, nor in the UK case. Even if Australians pole is generally understanding of China's status as a strategic competitor in many regards. I think also the elevated concern among Australians about the likelihood of a Trump presidency and uncertainty about what that would mean for the US role in the region. Its view on the partnership is something that's increasingly entering into debates and amplifying a sense of uncertainty that was probably already there. Lastly, I'd attribute this to a reliance on the jobs message at a time when unemployment is near record lows. This being at the crux of senior official messaging that we've seen to date has limited how persuasive that messaging is going to be. It's not that the single thing that's going to drive a lot of public support around it, especially when workers are seeking certainty and a lot of components of AUKUS cooperation seem long-term and as yet a little bit hypothetical.
Mari Koeck: And I guess so then for government to address this. Pete, do you have thoughts on what government can actually do to shift the needle on this?
Peter Dean: Yeah, absolutely. Look, I totally agree with what Alice says, and I think that you can divide this into two key areas. First of all, is the strategic vacuum that Alice mentioned. I think this is by far the biggest problem that the government has put out a project with, you know, a very hefty price tag and most, research in this area will tell you that when a government makes a really major foreign policy or international policy decision at the beginning, generally because it's such a specialised area of public policy, the community generally supports what the government does. And we saw that with the AUKUS announcement, you know, it was one of the best-kept secrets in Australian defence history. It sort of dropped on everyone and surprised everyone. It seemed like a great idea, despite the very heavy price tag, or early on, we didn't even know what the price tag was, so we had quite strong community support. But the same research on this will show that over time, unless the government can establish a social licence for this, that initial burst of support and enthusiasm from the public will erode over time, and the government just hasn't delivered on that strategic messaging. So we've had the Defence Strategic Review, which I was involved, in, which AUKUS is only a small part. But that strategy laid out clearly why AUKUS was important in relation to the strategy that the nation was developing and where, from a capability point of view, it sat, particularly in developing asymmetric capability edges in our region. But the government's put out no definitive plan for AUKUS around the strategy side. So if you go back and look at the optimal pathway, which we're talking about 12 months on, I was in the media lock up when it happened.
Peter Dean: We were given these nice. Packages and handouts, and in them was a flashy little booklet all about the optimal pathway. And I opened it up. And being the person I am and who I am, I went straight to the strategy section about strategic rationale, and it was like one page, a couple of paragraphs and very, very broad. And then the next 27 pages were about the build, the construction, the jobs, you know, all of that type of stuff. So the government's been really light on the strategic rationale. And that's done a couple of things. It's allowed that vacuum to be filled with other voices, particularly by people who are not so supportive of AUKUS. And of course, given the hefty price tag and the significant move that we're making, the contestability of ideas is really important and AUKUS has to be held to account. We have to hold the government, the project and everything. This is, you know, 368 potentially billion Australian taxpayer dollars or between 250 and 368, but by the government, not really laying out the case. Strategic, fully, operationally and tactically and being very clear about that and the message being diffuse. So you've heard our Chief of Navy talk about this. You've heard Vice-Admiral Meade, the head of the ASA, talk about this. You've heard various different people talk in various different forums. But you haven't we don't have a definitive document from Defence that really lays out the case for this. And the Prime Minister's largely spoken about it at these big announcements. And when he's done media on this, he will answer the question about why we need these submarines in about five seconds and then spend the next five minutes talking about the job opportunities, which is the second part of this, which I mentioned.
Peter Dean: There's two parts. So the strategic vacuum is the first part. The second part is the retail politics of this and the retail politics from our Labor Party and a Labor government. It's about jobs, jobs, jobs, jobs, jobs, jobs, jobs. And you see them talking about jobs endlessly, and you see them talking about training programs, university places and trade schools and all of that type of stuff, because that's the base retail politics. But if you look, for instance, at the UK example and the US examples of this, the retail politics only gets you so far. You need to build community engagement on this. You need to build broader community support from this. And if you break down those polling numbers that Alice was talking about, and look, for instance, at the great state of Western Australia and the great state of South Australia, you'll find there's not a great difference in the polling numbers than there is nationally. So if the retail politics are about jobs really works, it should be really hitting home in South Australia and Western Australia because that's where the majority of the jobs are going to be, although we'll get to a reason why they can't always be all the jobs in those two states, but they're well within the margin of error. There's only a slight, you know, bump up for those two states so that retail messaging around jobs is just not cutting through.
Alice Nason: I just want to jump back in to underline one thing that Pete said that I think is critically important is that contestability is really important to the success of AUKUS, and it's not bad. We can't be afraid of the public debate in this. It's something that the government can't shy away from. Certainly, we're worried about our communicating certainty to our AUKUS partners, but Australia is different in this partnership. Ctlgroup polling found that Australia is the only country of the orchestrations where a majority of people are even aware of it. It's less than a quarter in the UK and in the US and that public debate, the answering of these concerns is what's going to underwrite support throughout a multi-generational partnership. So yeah, it looks big and unwieldy and messy, but there is a need to engage with these issues, even if some of them are pre-emptive, like conversations about nuclear that may not, you know, really see tangible outcomes for a decade. They're things that we have to resolve and litigate in the public domain. So it's something that the government can't shy away from.
Peter Dean: Yeah. And just to add to this, this is going to have to be now a multi-track conversation because the opposition under Peter Dutton has dropped nuclear power on the policy table like a dead cat. And now everyone's going to have to engage with that. And this is where it could get really cloudy, right? We have to have a conversation about conventionally armed, nuclear-powered submarines, of which we're not going to build the reactor for. And then a national conversation that's happening from the federal opposition around there, wanting to solve the energy crisis and climate change through the investment of commercial, large-scale industrial nuclear reactors. Now, if we're not very careful, those two conversations will become very blurred and very intermixed. That's that's added an extra layer since we started this conversation a year ago into that. But to circle back a little bit, Mari, to what you asked, what can the government do about this? Well, Pat Conroy gave a really good speech at the Press Club late last year, and I think Pat Conroy is doing a great job as defence industry minister. But with all respect to Pat, he's not even a member of Cabinet. I think his position should be, to be honest. And it's not come from the deputy Prime Minister who's also the defence minister.
Peter Dean: And most importantly, it hasn't come from the Prime Minister they need. To make, in my view, a significant push on this. I've, you know, it's almost like the government feels that they've announced the optimal pathway. The Prime Minister stood up there with the British prime minister and the US president. So they've mission accomplished ticking that box. Well. If that's the view, that's basically doing it by press release and press announcement. You don't build social license by doing that. They need to to deliver a strategic document that outlines the rationale for this makes it really clear about the tactical and operational benefits of these submarines, link it back to the strategy. They need to really get out there and drive this home because I don't think that falling opinion polls will ever undermine the politics and political support for AUKUS. But what it does, it harms the ability of the community to be involved, and it harms their ability to recruit workers and recruit people to the Navy and do the industrial base in the community and recruit people to the CSP, places like that's that. This is where social licence is absolutely critical.
Alice Nason: And just to frame Pete and I's remarks there, we're really focusing on that national-level conversation to give some credit to the Australian Submarine Agency, which has been in its start-up phase. I think since it's been established, its first-order priority has been local community engagement and MP engagement. And it seems in those areas it's doing fairly well, especially in coordination with its state-level counterparts. We haven't seen any real opposition from the vast, vast majority of sitting politicians. Was only one Labour MP who came out, as, you know, staunch sceptic, so that at that level the social licence conversation is progressing, but it is really that national public piece that is missing and that stands to be harmful to the progression. Progression of AUKUS.
Mari Koeck: Yeah. And I want to dig in a little bit, to one aspect of the demographics. And that would be, I guess, the age difference and younger Australians in particular, Alice, you and Pete recently published a piece on the generational divide regarding support for AUKUS. Only one-third of Gen Z and millennial voters think it's a good idea for Australia to have nuclear-powered submarines, compared to two-thirds of those aged 65 and over. Why do you think there is such a, you know, significant generational divide? Or what aspect of the rationale for AUKUS just isn't resonating with the younger voters?
Alice Nason: Sure. So in many ways, a lack of enthusiasm for defence policy among young people isn't surprising. That's a tale as old as time, but never has a defence procurement been so dependent on young people for success. So it's definitely something worth canvassing in detail. And for young Australians, who are living in a cost of living crisis, a housing crisis, the thought of footing the bill for a submarine acquisition of this size seems anathema to their near-tum priorities, especially when the biggest security threat that they identify is climate change. It's not competing with China. So, it's a strategic rationale that doesn't resonate. And it's, the reality that they are the ones who are going to be footing the bill for this tremendously expensive project over the coming decades. And in the absence of a better value for money argument, there isn't a clear reason for them to support it.
Mari Koeck: Yeah, and we'll pick you up on the value for money. Pete, I wanted to get your take on, you know, the fact that there's a $368 billion price tag for AUKUS Pillar I, which you mentioned already, but it's a significant point of discussion online. And the purchase of nuclear-powered submarines is sometimes considered or discussed as an impulse buy. It certainly is expensive, but will it deliver value for money? And is it a nice to have or a need to have for Australia's defence strategy?
Peter Dean: Yeah. Look, the impulse buy one was a, was a pretty funny comment. So that comes from the annual Australia Day lamb ad. The Lamb Council puts out this ad that's just culturally resonates in our country every year. It's almost one of the things you look forward to around that Australia Day period. And the fact that AUKUS gets a mention in The Lamb. It actually goes to show you how much it's permeated into Australian national consciousness. And so in a way, that's a really positive reflection of how much Australians, you know, no one understands, at least on a surface level, about AUKUS. The funny thing is, about the ad is, Alice and I point out in our article we had in The Australian, was the fact that, you know, it's the sort of older generation, the baby boomers who say, sorry about that. We're in fact, they're not responsible for that. So it's actually my generation, generation X, who were the political leaders. So Scott Morrison sits in my generation. And so it's the Generation X leaders who are currently running the country. We tend to be the people who are in charge at state and commonwealth parliamentary levels, overwhelmingly at the moment. But the basis of support for that Gen X decision maker is, as she said, the sort of baby boomers generation, the older generation, the people that are over 65. So that's a really interesting observation. As you said, one of the things, though, that does really resonate, that does has really cut through is the big price tag.
Peter Dean: And the government's had an interesting run. There's one way to say it about money. So I wrote a piece the other day about the Defence Strategic Review, where they came out and said they would provide no new funding in the forward estimates when they announced the Defence Strategic Review. And in my view, they really shot themselves in the foot, politically speaking, doing that, because that then became the story that there was this big strategic risk, but no new money on the other side of the fence. When they announced AUKUS, they dropped a whopping number on the table. Now, no one ever talks about the fact that it's a range. It's $250 billion, and with all the contingencies, it's up to 268 billion. But of course, no journalist has ever written about the $250 billion number. But I do just want to put some numbers on the table to make it seem it a bit of a comparison. So before the SSN and SSN AUKUS in this optimal pathway plan under AUKUS, we were going to buy. In collaboration with the French government, we are developing what was called the attack class conventional submarine. We were going to build 12 of those submarines in 2020. The program was costed at 100 billion outturn dollars for Australia for the build of those submarines. And that generally is the figure we get a comparison of $100 billion for conventional submarines, $368 billion.
Peter Dean: We're going to get 12 of the conventional ones, only 8 to 9 of the nuclear-powered ones. But what most people don't realize, and the government, I don't think, has sold this message as well as they could. And of course, I don't think they got this across in the first announcement. And that's what really has been stuck them in a groove. It's hard to get out of. But that $100 billion of outturn money in conventional submarines didn't include the additional 145 to $150 billion in sustainment costs for the life of that program. So that means it gets to 245 to $250 billion for those 12 French attack class submarines, which, funnily enough, is the bottom end number that they gave for the AUKUS boats, which of course, when they announced the 250 to 368, that was not just to build the submarines, that was not just to set up the Australian Submarine Agency, but that was actually for through life sustainment and maintenance of those submarines, for all the weapons and the weapons systems to go on them. That was like a total cost, because if you just said, oh, I'm going to buy myself a car for $20,000, right? That's one level of cost. What the government said is, well, the car is going to cost you $20,000, but the insurance for the next 20 years, your maintenance repairs, your tyres, your running costs of fuel, you know.
Peter Dean: Oh, and by the way, the air conditioning, the radio, this didn't come fitted with the car, you know. You know, you got the car with the motor, but none of the electronics and none of the things, you know, that, that you really want, you know, you didn't get your powered seats. They all have to be added in. What's the full cost of owning that car over the next 20 or 30 or 40 or 50 years? You know, in this case. So I think it's a complicated message to sell at times. But that $368 billion is the high-end number. It includes everything you can ever imagine over a 50, 50-odd-year period for these submarines. So the numbers are an eye-watering amount of money, but it's not as eye-watering as it sometimes seems. And there is a quantum leap in capability that the Australian government is providing us to, to provide for our deterrence and our defence compared to a conventional class submarine. So generally speaking, it doesn't matter which side of the debate you sit on in Australia, whether you're very supportive of AUKUS like myself or very anti-AUKUS, for instance, like my friend and colleague Hugh White, we all agree that we need submarines, right? No, no one is denying the submarine question. It's how many and what type and at what cost is the real debate?
Alice Nason: I'll just jump in briefly there because, not only is it an argument you need to make for the value for capability with different programs, but inevitably the public conversation and the thinking that will go behind Australians’ view of the partnership is its value relative to other government spending priorities. And obviously, these aren't all interchangeable, but I'm the argument that you have to make is that this the best use of $368 billion. And that argument becomes very complicated when people come out with costings of the energy transition or the leader of the opposition, Peter Dutton, comes out shortly after the optimal pathway and says, oh, well, we'll be happy to make cuts to the NDIS to help fund AUKUS. So that funding of a it's a very expensive program. It's no way around it making that argument relative to other priorities and being insistent that we are capable of walking and chewing gum, doing these different things at once is going to be the real challenge for a Labor government with a very cost-intensive, portfolio of domestic priorities as well.
Peter Dean: Yeah, and to add to that, I think that's a really important point that Alice makes, because early on, when that decision was announced and the money was announced, you had a lot of people, particularly in the social services sector, going on television and telling you, well, for $368 billion, we could get X number of hospitals, or we could build X number of social houses, we could do X number of other, you know, areas in social policy. And it's a false analogy. Like we don't say, well, if we don't spend this money on infrastructure, we could spend it instead on that. Like what public policy has to happen in, in Australia is the totality of public policy. You're not going to, you know, build a house, for instance, and decide not to build a lounge room or to build a house and not put electricity in it. So it's like saying, well, we can have a bigger backyard if we wanted to, I'd have an extra bedroom. But the offset of that is we just don't have electricity or we don't have plumbing and water. I mean, the analogy just doesn't work. I think a better analogy is what is the opportunity cost within the defence portfolio. What else? We could have spent this money on to make Australia safe and secure? Because when you build a house, you're going to put a front and back door on it and you're going to put windows or locks on it to make sure it's secure.
Peter Dean: That's just a requirement. So the question is, how big is your door? Is it steel-reinforced? Is it, you know, are you gonna put bars on the windows and not put bars on the windows? I mean, these, yeah. We need to have a more mature conversation around this. It's not a one or the other. It is, as Alice said, what is the totality of the spending of our public policy program? And then, particularly for the AUKUS, the program is what is the opportunity cost if we didn't spend $368 billion on this part of defence, what else could we get for that? Because we're going to have to spend money on defence. And pretty much everybody agrees, including the Australian public. When you look at public opinion polling of the international strategic environment for Australia has deteriorated significantly over the last decade or so, and we face risks that we haven't had to face since the period around the, you know, the 1920s and the 1930s. Um, so it is a much-heightened risk environment. The question is the contestability about the use of public money in this area, not a one or the other. You know, we don't trade off, you know, electricity grids for hospitals. We don't trade off hospitals for building social housing. It's how do we do all of that in the way that we best can for our community?
Mari Koeck: And I want to turn to workforce quickly before we wrap up, but I want to, just highlight the report that you both published last year with other authors called AUKUS inflection point, which is on our website and also in op-eds, you've written about the tremendous workforce challenges facing AUKUS, and in particular, the dearth of manufacturing capability in Australia has on its own. So what is the solution here? Or is this problem around workforce even solvable.
Alice Nason: I'm happy to start here. So certainly our government is convinced that it's solvable. There's simply no other option for the success of AUKUS, and they're not shying away from trying to institute those measures that represent, if not the solution, you know, steps in the right direction, like those initiatives that Pete flagged at the start of the podcast around the CSPs, the Skills Academy. Most recently, it seems that South Australia will begin penalising apprenticeship programs with poor completion rates because, as it stands, completion rates of below 50% in the state. So it's something that we're facing head-on as a country, but where I'm less certain about the potential for a solution at the speed of urgency around these major structural problems. The lowest manufacturing self-sufficiency in the OECD, the loss of knowledge of too many manufacturers moved their production offshore in recent decades. So there are solutions here. Something that Pete and I have discussed at length is the ability to learn from our AUKUS partners. That's the benefit of working so closely in this type of arrangement. And though it's not a like-for-like comparison, Australia has to do a lot more with a lot smaller workforce. For one thing, but there is room to, through trilateral programs gain a lot of experience and then at the national level, make significant investments to build that sovereign workforce.
Peter Dean: Yeah. These are, these are really significant national issues. So the Prime Minister has talked about the AUKUS program being not just a Defence program, but actually, sort of a national level scaling diva, like we talked about the Snowy Hydro scheme or we spoke about some of these other big investments into the future of Australia. But the more and more you drill down into this, what orchestra really is and the building a particular Pillar I, the conventionally armed nuclear-powered submarines is a microcosm of the things we face as a nation in relation to training, education and workforce in this country. If you look at the government's Jason Clare, the education minister, released a really significant report only recently into the future of the university sector in Australia, where they were talking of doubling the number of Australians who have university qualifications from around 40% to around 80%. And the significant investment that would be needed in that. One of the things that the report highlighted was the constant stress and strain on people that had to do large-scale practicums as part of their degree, and they're costing position on young people and their willingness or ability to stay in some of those programs. So we're talking about teaching here. And nursing are two clear examples where people were struggling to finish nursing degrees because they couldn't do the extensive on-the-job workplace integrated learning or placements that were required to do and not get paid for it because they're voluntary and they're free at the same time. Only a few weeks before that report came out the government announced that they're going to do a review into apprenticeships in Australia because, as Alice said, less than 50% of people who start an apprenticeship finish an apprenticeship.
Peter Dean: Now, I know another scale level of that. And that's PhDs, people doing doctorates, less than 50% of them finish. Now, that's something that requires nine years of tracking to sort of get there. We're talking about people coming out of school and going into apprenticeships and not being able to get there at the early part of their education, of their career, post-secondary school. These are really significant issues we face as a nation. And as we highlighted in the report, the other part about working in some of these AUKUS areas is they're highly classified areas. So you can't get people who are, for instance, brand new migrants into Australia who couldn't get a security clearance into these jobs. So what you need to do is attract high-quality migrants to our country to fill skills gaps in AUKUS adjacent industries, to then release the talent pipeline for people to go into jobs, into AUKUS priority areas. We need to get our education system fixed. The number of people coming out of high school now who don't have the ability to go into university because they don't have ATAR level subjects, particularly in STEM areas, but conversely, the number who are also there not having come out with some type of trade qualification like a cert three or a cert four is on the increase, which is going exactly the wrong direction to every economic indicator and industry imperative industry are screaming out for people to come with these qualifications and skills, so we need to change that.
Peter Dean: So we have some really significant national level issues around workforce, workforce training and stuff. And as Alice mentioned, those statistics coming out of South Australia are really alarming. That's a series of statistics that have come out around this, about the declining number of people going into apprenticeships and finishing them. Yet South Australia is the state that's apparently going to provide thousands of extra people to go into office jobs. And let's face it, South Australia is not one of the most populous states in Australia. So one of the other things we talked about in the report is, as Alice said, learning from our partners, which is actually sending out componentry, parts in this, in this AUKUS endeavour to be done in other states. So they really have to look at how can you mobilise the workforces in not just South Australia, where we have to do a better job of getting people into these apprenticeship skills, and Western Australia, but also in Queensland, New South Wales and Victoria. The more popular states. What can you do for manufacturing in those states to manufacture discrete items that can be then shipped off to South Australia and put in these submarines, or added to this construction line? And that's one of the things they've done, for instance, in the United States, to help overcome their own workforce shortages in building their own submarine industrial base.
Alice Nason: And so we're not all doom and gloom, I might add a slight bit of spin in that there is some benefit to starting this from the ground up. Australia has an opportunity to circumvent a lot of the things that have caused really long-term structural workforce challenges in the UK and US submarine industrial bases, including valleys of death and overreliance on young recruits. I think where alleged the challenges and provided that we're able to build social licence, we undertake this comprehensive workforce planning, do our due diligence at the outset. This is something that the ASA I think is it's well understood.
Mari Koeck: I think that segues really well into the last question I wanted to ask you before we go to the behind by the numbers. We've covered a lot of ground, including, you know, remarkable legislative reform in the US, opening doors. But some really big challenges that haven't been solved yet. So one year on, what grade would you give the AUKUS optimal pathway on a report card, about the progress that they've made toward achieving this? He wants to go first.
Peter Dean: That's, that's that's a hard one to reconcile. Look, because I think it's very variable, I think the government, from a setting up of the ASA having clear command authority and leadership through Vice Admiral Meade getting on with the infrastructure work in South Australia and do some of this. I think they get an A pass for that. And of course, working with Congress, they get you know, the US developing and delivering the NDIA is a pass for that. But in other areas, you have to say it's a bit of a B or a C or a C minus, then some of the other areas. And I think that reflects that microcosm. I'd, the thing I'll add to Alice's point that she was saying before, on the positive side, what the great opportunity for Australia is in the ASA. And I think they're very conscious. The people I speak to the ASA about this, we're doing a clean sheet production yard, for instance, for our boats in South Australia. We'll have the most advanced submarine nuclear-powered submarine construction yard in the world. When that facility is finished in Adelaide, there's levels of efficiency that we can grasp there. And if we grasp modern manufacturing techniques and AI and other digital, production processing, we will have the potential to produce our submarines with significantly less workforce at a significantly higher pace and hopefully the significantly reduced cost. That's one of the benefits we can learn from those other two, you know, the United Kingdom and the United States and the way they build things.
Peter Dean: And if you look, for instance, at the UK ship, that's a shipyard that's 100 years old, they've had to adapt over time and build on and expand. And the US shipyards are somewhere in the 50 to 60-year-old, area. So we have that great benefit to do that. So on the report card, it's mixed a pass in some areas. But as Alice said, you know, what we have is an A with a with an asterisk next to it because the Ndia has been passed, but the money and the budget hasn't been approved. And of course, as they say in their report that she's she's done with one of our colleagues, Tom, that, you know, they're playing chicken with AUKUS at the moment with domestic politics around the defence budget. So there's little asterisks, there's little asterisks about Donald Trump and what would happen there. Although I will say for the record, that the next president will not make the decision to transfer those submarines to Australia. It's actually the president afterwards, if you look at the timeline. So, yeah, it's a, it's a mixed report card, I have to say, on the social licence piece and the other things locally. Good. Probably a B in the local communities, a C minus to a D on what's happening nationally.
Mari Koeck: Okay.
Alice Nason: I'll echo Pete's assessment and probably give us a B overall because if AUKUS fails, it won't be for lack of trying. And that's been the real message for me of this past year. And when I look at the progress in legislation and in particular, something we haven't discussed, the way we're navigating this with the region and in terms of navigating our compliance with IAEA, I think we're doing things that are going to underwrite long-time success. And obviously, you can't expect perfection in the first year of this partnership. But the huge structural problems that we've canvassed throughout this podcast, including around social license, workforce value for money, communicating, certainty have got no real satisfying plan to implement yet. Though. Never say never. Yeah.
Mari Koeck: And now I'd love to get your, by-the-numbers stats on this topic. How about we start with you, Alice?
Alice Nason: Sure. So what I wanted to raise was something we've alluded to throughout, which is the huge role that the US plays and its domestic politics plays in determining the success of AUKUS along the pathway that we've discussed. And the big concern within US Congress right now is about the US submarine industrial base giving away 3 to 5, giving away selling to Australia, 3 to 5 submarines at a time of need is a complicated proposition, for the US in some ways. And what I want to raise as my bio number stat was that the number of US SSNs that nuclear-powered submarines, either in maintenance or idle, has actually increased from 11 boats in 2012, which was about 21% of their force, to 18 boats, now about 37% of their force as of May, as of May last year, and that was recently surfaced in a Congressional Research Service report. The Navy has repeatedly stated that the best practices is for no ships to be idle. So these real problems at the national level, structural problems aren't something unique to the Australian setting. There's something that both the UK and the US will need to do. They need to get their house in order for this to work, and that's something that we at the SEC will be monitoring very closely. As we see more key enabling legislation pass its way through Congress over the coming years.
Mari Koeck: That is a very staggering statistic. Thank you. Alice. How about you, Pete? What number have you got for us?
Peter Dean: Well, I've got a series of a couple of numbers. I hopefully confuse people too much. Look, as I said, there's a bit of a strategic vacuum out there, and various people are filling it with alternative options, and they're doing it by scrutinising AUKUS to the extreme. And I would say, you know, based on a lot of conjecture rather than hard evidence and then throwing out solutions that seem so simple and so easy that they are appealing. So I'll just give you some, some numbers. And one of the big things is that, well, for the costs, you know, of one of the ones most realistic for the cost of all, because you could build 40 conventionally powered submarines or and that the optimum number is actually 24 conventional boats rather than our 8 to 9 nuclear submarines. So I remind people of the numbers I used earlier to build the 12 attack class submarines that were proposed before. That was going to cost at least 245 to $250 billion. Now, if you then wanted to double that fleet as someone you know, as others have proposed, that's a figure somewhere around 350 to $450 billion when you allow for inflation but reduce unit cost over time. But to do that concurrently, this is the other thing. You can't just conjure up submarines out of nowhere. And one of the big things on workforce has been numbers. So if our conventional boats were going to take about 60 sailors and our nuclear boats take a lot more to get to 24 submarines, you're gonna have to have double the number of sailors.
Peter Dean: When we already have a workforce crisis in there. You're going to have to spend, more money than the AUKUS boats would cost. But most significantly, you're going to have to double the number of shipyards we have in Australia to build boats. So if you built them on one shipyard, by the time half your fleet is finished, it's so old, the first boat, you're going to start replacing them. So you could never get 24 boats concurrently. So I think there's some interesting stats floating around about stuff. But if you go for the most widely pushed alternative option that's been pushed by Hugh White, at the moment, for instance, there's been the main protagonist around this. You'd have to double the number of shipyards to build submarines. You'd have to double the number of people who got to crew these boats. You can have to double the number of people who are in the sustainment area. And, you know, think of all the doubling of costs that comes along with that as well. So if you've got, people are going to put alternative options out there, that's great. We should explore them and we should understand them and we really need to dig into that. But they have to be those ideas exposed to the same level of scrutiny, that the AUKUS program is under as well.
Mari Koeck: Yeah, that's some really helpful context. Thanks, Peter. I really appreciate those numbers. So just as we wrap up, I'd like to point out a couple of other podcasts that may be of interest to our audience. Our CEO, Doctor Michael Green, is co-host of the Asia Chessboard podcast with Jude Blanchette, the Freeman Chair for China Studies at the Center for Strategic and International Studies. I'd also recommend checking out the USSC Live podcast series that runs recordings from our major live events, including our recent 2024 election watch kick-off. You can find these on our website at usc.edu or wherever you get your podcasts. Peter and Alice, thank you so much for joining me today.
Alice Nason: Thanks, Mari.
Peter Dean: Thanks, Mari. It's been a pleasure.
