Australia in talks with France over troubled submarine contract

French President Emmanuel Macron and Australian Prime Minister Scott Morrison in Paris on June 15, 2021.
French President Emmanuel Macron and Australian Prime Minister Scott Morrison in Paris on June 15, 2021.PHOTO: AFP

PARIS (BLOOMBERG) - Australian Prime Minister Scott Morrison has had "candid" discussions with President Emmanuel Macron over delays and cost overruns in his government's deal with France's Naval Group SA to build a new fleet of submarines.

Mr Macron has had a direct role "in ensuring that we've seen a much-improved position come forward from Naval over the last six months," Mr Morrison told reporters in Paris.

"We are coming up to important gates in that contract and there have been issues that we have had to address," he said, adding that the master schedule and total costs of the project were some of the next steps to be determined.

While Australia's deal with Naval in 2016 to build 12 Attack-class submarines was initially estimated to be worth A$50 billion (S$50.95 billion), Sydney-based think tank Lowy Institute said in November the cost to the government is now at least A$89 billion.

With the first of the new submarines not expected to be delivered until about 2035, and the last in 2050, there's concern among defence strategists there will be a years-long dearth in Australia's naval capability at a time when tensions in the Indo-Pacific region are expected to increase.

Australia's Defence Minister Peter Dutton said last week that more than half of the world's 470 in-service submarines were already operating in Indo-Pacific waters, while allies including the US have flagged concerns over China's role in the region.

Australia's ties with China have already soured dramatically and the tensions have spilled over into trade reprisals.

In an attempt to prolong capability of Australia's current fleet, Mr Dutton has ordered the nation's aging six Collins Class submarines to undergo "life-of-type" extensions that will cost at least A$6 billion.

Mr Morrison, who was meeting Mr Macron in Paris after attending the Group of Seven leaders' summit in the UK, also said Australia and France, which has had its own tensions with China, "have a shared interest in the strategic security of the Indo-Pacific," and they had discussed "the south-west Pacific in some detail."