Defence Minister Kevin Andrews says the price premium for building naval ships in Australia when compared with international benchmarks is currently too high and that the shipbuilding industry would need to be restructured to a allow continuous shipbuilding program.
“Australian taxpayers currently pay a price premium of at least 30-40 per cent greater than US benchmarks to build naval ships in Australia, and even greater against some other naval shipbuilding nations,” Andrews told ASPI’s Future Surface Fleet Conference in Canberra on Tuesday.
“That price premium is simply too high to make good economic sense. As it currently stands, it is too high to enable a continuous build strategy to be adopted.”
Andrews also highlighted that the opportunity cost of building ships in Australia “is “too great for any responsible government [not] to consider”, but nonetheless said the government “recognises the significant value to our nation of having a skilled naval shipbuilding industry. We cannot afford to see this industry disappear.”
The Minister said in his speech that the “feasibility” of a continuous shipbuilding program is under consideration as part of planning for the SEA 5000 Future Frigate program, but warned that defence industry needs to “step up” to the challenge of improving efficiency.
“The only way Australia can continue to have a naval shipbuilding industry is if the industry is properly structured to drive efficiencies and improve productivity,” MINDEF said.
“This will require hard decisions, and a commitment to a productivity-based culture from all parties – including unions.”
A continuous shipbuilding plan would also “require Defence to carefully manage its acquisition processes and keep the future frigates operational for relatively less time than has been the norm to date,” the Minister noted.
Andrews said further announcements on the government’s shipbuilding plans would be detailed in the Naval Shipbuilding Plan, due to be released alongside the forthcoming 2015 Defence White Paper.
“This will include more detail on the commencement of ship construction, the rate the warships will be constructed, and the structure of the naval shipbuilding industry that will be required to support this program.”