How Australia Forged a New Security Alliance with the United States and the United Kingdom and Why It May Cost $300 Billion

Expert Comment — Pacific Programme

2026 07 03

TThe AUKUS partnership, announced in September 2021, represents the most significant shift in Australia’s defence posture since the ANZUS alliance was formed in 1951. The centrepiece of the agreement is Australia’s acquisition of nuclear powered submarines, a capability that only six other nations possess. The total cost over thirty years is estimated at over $300 billion. The strategic logic is compelling: in an era of Chinese naval expansion and Indo Pacific strategic competition, Australia requires submarines that can operate for extended periods at great distances from home ports. The question is whether Australia can deliver this capability on time and within budget.

The most formidable challenge facing the AUKUS programme is not technological but demographic. Australia does not have enough skilled workers to build, operate, and maintain nuclear powered submarines. The programme requires a workforce of 5,000 to 7,000 nuclear qualified personnel. Australia’s nuclear industry currently employs fewer than 100 people with relevant expertise. The country has no undergraduate nuclear engineering degree programmes and no experience in nuclear submarine construction. The workforce that is essential to the programme does not exist and will take years to create. Training a nuclear engineer takes five years. Building a nuclear submarine takes a decade. Australia is attempting to compress a generational project into a few years.

Australia’s defence industrial base has atrophied after decades of reliance on imported equipment. The Osborne Naval Shipyard in South Australia, where the submarines will be constructed, requires major infrastructure upgrades. The supply chain for submarine components must be established from scratch. The industrial challenge of building nuclear powered submarines in Australia is as great as the technical challenge. The government has committed to maximising Australian industry involvement, but this will increase costs and extend timelines.

The history of major defence procurement programmes is a history of cost overruns. The US Virginia class submarine programme experienced cost growth of over 30 per cent. The UK Dreadnought programme has faced similar challenges. Australia’s own Hunter class frigate programme, initially budgeted at $35 billion, has faced cost increases and schedule delays. The AUKUS submarine programme combines technological complexity with an underdeveloped industrial base and a workforce that does not yet exist. The risk of cost escalation is substantial. The Congressional Budget Office has documented consistent cost overruns in US submarine programmes. Australia’s programme is likely to experience similar overruns that could add tens of billions of dollars to the total cost.

The strategic logic of AUKUS rests on assumptions about China’s future military trajectory. If China’s military expansion continues at its current pace, the submarines will be essential for Australia’s defence. If China’s growth slows or its strategic priorities change, the $300 billion investment may prove unnecessary. The debate about AUKUS is ultimately a debate about the future strategic environment. The assumptions underlying the programme deserve rigorous scrutiny. Australia is committing to a programme that will shape its defence posture for the next half century, at a time when the strategic environment is more uncertain than at any point since the end of the Cold War.

The AUKUS programme is not only a defence procurement but also an industrial policy. The government has committed to maximising Australian industry involvement, creating jobs, building industrial capabilities, and supporting economic development. The industrial policy objectives of the programme are important but may conflict with the defence objectives. Maximising Australian industry involvement could increase costs and extend timelines. The government must balance the industrial and defence objectives of the programme. The history of defence industrial policy demonstrates that the pursuit of domestic industrial development often comes at the expense of cost efficiency and delivery schedules. The Australian government must learn from these lessons and manage the tensions between industrial and defence objectives.

AUKUS requires Australia to manage relationships with two nuclear powers that have different strategic cultures, procurement systems, and national interests. The United States has strict technology transfer restrictions that limit the sharing of sensitive nuclear technology even with close allies. The United Kingdom has its own submarine modernisation programme that competes for resources and attention. Australia must coordinate with both partners while ensuring that its own requirements are met. The alliance management dimension of AUKUS is as important as the technical dimension and requires sustained diplomatic attention. The success of AUKUS will depend not only on the delivery of submarines but on the quality of the trilateral partnership that supports their development and operation.

AUKUS has generated significant reactions across the Indo Pacific region. Indonesia and Malaysia expressed concerns about an arms race in the region. China denounced the partnership as a threat to regional stability. The reactions have complicated Australia’s diplomatic relationships and required a sustained effort to explain the partnership and allay concerns. Australia has sought to frame AUKUS as a contribution to regional stability rather than a provocative act. But the perception of the partnership varies across the region. Australia’s diplomatic efforts will need to be sustained over the life of the programme. The management of regional reactions to AUKUS is an ongoing diplomatic challenge that will shape Australia’s relationships in the Indo Pacific for decades.

The technology transfer arrangements under AUKUS are unprecedented in their ambition and complexity. The United States has agreed to share sensitive nuclear propulsion technology that it has not shared with any other country, including the United Kingdom. The transfer requires amendments to US export control legislation, the establishment of new security frameworks, and the negotiation of technology protection agreements. The complexity of the technology transfer arrangements creates risks of delay, misunderstanding, and dispute. The history of major technology transfer programmes demonstrates that they consistently take longer and cost more than anticipated. The technology transfer dimension of AUKUS is as challenging as the dimensions of workforce development and industrial base expansion. The three partners must work together to manage these risks and ensure that the technology transfer proceeds smoothly.

Nuclear submarines require responsible stewardship throughout their lifecycle. Australia must develop the regulatory framework, safety culture, and waste management capabilities that nuclear propulsion requires. The country has no nuclear regulator with experience in naval nuclear propulsion. The safety culture required for nuclear operations is different from conventional naval safety. The waste management challenge includes the disposal of spent nuclear fuel and decommissioned reactor components. Australia must develop nuclear stewardship capabilities that will persist for decades beyond the life of the submarines. The nuclear stewardship dimension of AUKUS is often overlooked in public debate but is essential for the programme’s long term sustainability. Australia must build not only submarines but also the institutions and capabilities to manage nuclear materials responsibly for generations.

Every year of delay in the AUKUS programme increases the risk that Australia will face a capability gap in its submarine force. The current Collins class submarines are being retired in the 2030s, and the first AUKUS submarine will not enter service until the early 2040s at the earliest. The gap between the retirement of the Collins class and the introduction of the AUKUS submarine represents a significant strategic risk. Australia has sought to mitigate this risk through the purchase of Virginia class submarines from the United States and the rotation of US and UK submarines through Australian bases. But these measures are temporary and do not provide a permanent solution to the capability gap. The management of the transition from the Collins class to the AUKUS submarine is one of the most important challenges facing the programme. The cost of delay is measured not only in dollars but in strategic vulnerability.

The experience of other countries that have undertaken major submarine building programmes offers important lessons for Australia. The United Kingdom’s Astute class programme experienced significant cost overruns and schedule delays. The United States’ Virginia class programme, while more successful, has faced its own challenges. The common factors in successful submarine programmes include stable funding, experienced workforce, proven design, and effective programme management. Australia lacks most of these factors. The government must learn from international experience and implement the management practices that have contributed to successful programmes elsewhere. The AUKUS programme is too important and too expensive to rely on trial and error. The lessons from international experience must be applied systematically.