May 5, 2015

Any decision to build Australian subs overseas unlikely until late 2016

The likely mild nature of Australia's next Tuesday May 12, 2015 Federal Budget will prove an indicator that the Abbott Government wishes to avoid decisions that might alienate voters. Abbott's idea to "Build submarines overseas" will  increasingly become a decision to be delayed.

The Abbott Government originally planned to make a decision in early 2016  on who (Japan, France or Germany) would build Australia's future submarine and where (mainly in Australia or mainly overseas). Early 2016 was the earliest period after the stages of the Competitive Evaluation Process (and see) were completed and also after part publications of the 2015 Defence White Paper and associated Force Structure Review.

It is likely that the Abbott Government will only make a decision AFTER the next Federal Election (likely in late 2016) that the submarines will be built overseas. 

Considerations are:

- The May 12, 2015 Federal Budget [watch this space] is already shaping up to be mild, risk averse and sensitive not to alienate too many of Australia's 16 million voters. This is because the Coalition Government's austere May 2014 Budget made the Government rapidly unpopular with  average voters. If Abbott were to declare a submarine policy that effectively meant that $20 Billion of Australia's declining revenue would be sent to Japan to buy Soryus this would be very unpopular. 

- The next Election by law must be held on or before January 14, 2017. However Governments rarely call elections in December or January as this causes voter resentment (too close to the major holiday period in Australia). An election in the southern hemisphere Spring ie. September, October or November 2016, is more likely.

- South Australian voters will become increasingly sensitive about shipbuilding job losses (or lack of growth) prior car factory job losses fully impacting. South Australian car factories have closed in the last few years including 1,000 job losses from the Mitsubishi factory closure in 2008 and General Motors Holden in South Australia is due to close by late 2017 with 1,600 job losses. 

Abbott would be mindful that a decision to build the submarines overseas might just lose him the 2016 Federal Election. Not only the Navy, workers and unions but many business leaders in Australia’s manufacturing sector prefer “Build in Australia”. Meanwhile, the submarine issue may influence votes definitly in South Australia but also in Victoria and NSW (both are also involved in submarine builds). The Labor Party Opposition's “Build Submarines in Australia” may prove increasingly attractive.

Hence, only after a September 2016 or October 2016 Election, is a definite Federal Government decision on any overseas build likely.


Pete

4 comments:

Anonymous said...

Hi Pete

Nearly two years ago, Mitsubishi Heavy Industries LTD, Kobe Shipyard & Machinery Works (one of the two manufacturers of Soryu subs) announced withdrawal from merchant ship building, and stakeholders including workers, subcontractors and sub-subcontractors are very worried about their jobs and local economy. The hybrid construction scheme of Soryu will alleviate this situation.

Regards
S

Peter Coates said...

Thanks S

Your information provides a whole new aspect to the pending Soryu sale to Australia.

Australians (including Abbott) have been led to believe that sale of the Soryu is a privilege of Australia's growing alliance with Japan. That Australians should feel grateful to Japan.

But behind the diplomatic aura there are additional and more mundane motivations - that is Japanese industry, including MHI, need the money.

Regards

Pete

Anonymous said...

Hi Pete

Today(May 6, 2015 - Updated 15:06 UTC+9), NHK(Japan Broadcasting Corporation) reported that Australian Minister for Defence, Kevin Andrews and the Japanese counterpart, Gen Nakatani had discussed Australia's plan to jointly develop a submarine with another country.
http://www3.nhk.or.jp/nhkworld/english/news/20150506_17.html

Regards
S

Peter Coates said...

Hi S

Thankyou for alerting me to http://www3.nhk.or.jp/nhkworld/english/news/20150506_17.html .

I have written my next article, of May 7, 2015, around it.

Regards

Pete