(Bloomberg) — Australia will build a new fleet of navy ships locally, safeguarding thousands of jobs and ensuring the future viability of the industry, Prime Minister Tony Abbott said Tuesday.
The Future Frigates program, which will replace aging ANZAC Class ships, will mean about 2,500 jobs in South Australia are safe, Abbott said in a statement. Along with a warship-building program, the government will spend about A$40 billion ($29.2 billion) on the frigates, he said.
The program is a vote of confidence in the military shipbuilding industry, after Defense Minister Kevin Andrews said in March it needs to cut costs and become more productive to win contracts. With the government seeking to buy 40 ships and submarines over the next two decades, it wants to reduce the inefficiencies that mean Australia pays about 40 percent more for domestic-built vessels over U.S. benchmarks.
“This critical investment will generate significant economic growth and sustain several thousand Australian jobs over decades,” Abbott said. “This strategy will transform Australia’s naval shipbuilding industry and put it onto a sustainable long-term path, giving the workforce certainty into the future.”
Valley of Death
Australia wants to implement a so-called continuous build program to help it avoid what Andrews calls a “valley of death” scenario, when domestic shipbuilding becomes temporarily moribund due to a lack of orders.
To mitigate the “valley’s” affects, the government will bring forward the starting date for its Air Warfare Destroyer build by three years to 2018 and for the frigates by two years to 2020, Abbott said. The government has also commissioned a strategic review of the state-owned shipbuilder ASC Corp., he said.
The government said in a 2009 report it would need to build about eight frigates to replace its ANZAC Class vessels.
Abbott is also aware his government needs to appease South Australian voters worried the manufacturing industry in the state — which has the nation’s highest unemployment rate — is worsening.
The government, which is buying 72 F-35 Joint Strike Fighters, has pledged to increase defense spending to 2 percent of gross domestic product. It will invest more than A$89 billion in ships and submarines over the next 20 years, Abbott said Tuesday.
In February, it invited Japan, Germany and France to bid to helm a submarine construction program that may cost A$50 billion in Australia’s largest ever defense procurement plan.
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