Australia Sees Defense Costs Blow Out, Long Delays in Projects

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(Bloomberg) — Dozens of major Australian military equipment acquisitions are running billions of dollars over budget and years behind schedule, the defense minister said, while warning the nation faces its “most challenging circumstances” since World War II.

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Richard Marles, who is also deputy prime minister, said 28 major projects are behind schedule, including Australia’s new Hunter Class frigates and P-8A Poseidon aircraft. There has also been a cost overrun of at least A$6.5 billion ($4.1 billion) in 18 projects, Marles told reporters in Canberra on Monday.

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As a result, Marles said he expected defense spending to rise to 2.2% of gross domestic product over the next decade, compared with 2% last fiscal year — and a higher proportion than other western nations including Canada, France and Italy.

“Given the current strategic circumstances we face, we need to be better focused on the quality of the spend within defense to ensure we are providing our Australian Defence Forces personnel with the best capability,” Marles said.

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Tensions between Canberra and Beijing have rapidly escalated in recent years, leading to military encounters between Australian and Chinese armed forces in the South China Sea and off Australia’s coastline. 

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The military has repeatedly run into difficulties over its plans to purchase and maintain hardware. Problems with a fleet of MRH90 Taipan helicopters led Australia to request 40 Black Hawk helicopters from the US government to replace them, at an estimated cost of $1.95 billion.

While the sale was approved by the State Department in August, Marles told Australian Broadcasting Corp. Monday that the government was still deciding whether to go ahead with the purchase.

Marles blamed the cost blowouts on the previous government and pledged more transparency over defense acquisitions, including monthly reports on delayed projects and creating an independent regulator inside the Defence Department.

Australia faced the “most challenging circumstances since the Second World War,” he said.

Australia’s defense spending is expected to swell even further, with the AUKUS nuclear submarine pact and an announced rapid expansion of military personnel yet to be factored into expenditure.