Australian taxpayers face $4bn bill for scuttled French submarine deal

Canberra pulled out of the deal in September, choosing instead to acquire nuclear-powered submarines from the UK and the US

The UK nuclear-powered submarine HMS Astute in Perth. EPA

Australian taxpayers are facing a A$5.5 billion ($4.1bn) bill over the country's scuttled $37bn submarine deal with French company Naval Group, a Defence Department official told a Senate estimates hearing.

However, the exact amount will be finalised after negotiations with Naval Group, Tony Dalton, the department’s deputy secretary, said on Friday.

In a move that angered the French government, Canberra unexpectedly pulled out of the deal last September, choosing instead to acquire nuclear-powered submarines from the UK and the US in the landmark but controversial Aukus pact.

“Do we now have a situation where the taxpayer will pay up to A$5.5bn for non-existent submarines?" opposition Labour party senator and shadow minister of foreign affairs Penny Wong asked Mr Dalton during the hearing, AFP reported.

“The final settlement of the negotiations will be within that price,” he responded.

The development is the latest in the fallout of Australia's withdrawal from the French deal, which sparked a diplomatic row between the two countries that led to diplomats being recalled and prompted French President Emmanuel Macron to accuse Australian Prime Minister Scott Morrison of being a liar.

It also comes at a politically sensitive time for Mr Morrison and his Liberal National Party government, which is expected to this week call a federal election for mid-May.

With the cost of living rising and stagnant wages, the government is under scrutiny for wasting taxpayer dollars and ignoring calls for financial help for people badly affected by the recent floods on the east coast of the country, as well as its performance during the pandemic and the devastating fires in 2019, according to media reports.

In December, the Australian Strategic Policy Institute warned that the $80bn Aukus submarine plan was costly and would be the government's most challenging undertaking.

Meanwhile, Matt Yannopoulos, Australia's acting secretary of defence, said on Wednesday that the department is not committed to informing the opposition Labour party of major project decisions that Canberra could have secretly made before the election campaign is launched, The Guardian reported.

His statements to the senate followed an earlier announcement that the Aukus pact has been expanded to exploring hypersonic missile technologies to challenge Russia.