What else we could do with the money: AUKUS Plan Bs from a CSBA exercise

By Toshi Yoshihara, Casey Nicastro

Sceptics of AUKUS Pillar 1, the nuclear-submarine element of the Australian-UK-US defence technology partnership, have called on the Australian government to go for a Plan B. Proposed alternatives have included buying nuclear submarines of French design instead or shifting resources for submarine procurement to critical technology development under AUKUS Pillar 2.

These sceptics raise a basic question: if Canberra were not to go ahead with AUKUS Pillar 1, what else could it spend its money on? What if it cancelled just its second phase, SSN-AUKUS, the class of submarines of British design intended for delivery to Australia beginning in the 2040s?

A series of exercises held in 2024 found that cancelling the SSN-AUKUS generated savings to invest in other critical missions such as maritime interdiction and air and missile defences. But the savings were not enough to buy alternative power projection platforms, such as B-21 bombers, as a hedge against uncertainty. Conversely, staying the course with SSN-AUKUS imposed a significant constraint on the Australian military’s other modernisation efforts.

Our organisation, the Center for Strategic and Budgetary Assessments (CSBA) conducted those force-rebalancing exercises as thought experiments. We convened leading thinkers and practitioners in both allied capitals to consider how the Australian Defence Force might rebalance its force structure over the next decade.

Six teams, three in Washington and three in Canberra, were tasked with working within a fixed budget to the mid-2030s, matching additional acquisitions for the ADF with divestments. The six teams each had six to eight members, who were assured of anonymity so they could discuss matters frankly. They wrestled with the AUKUS program, one among hundreds of capabilities they had to consider, as a resource trade-off question.

These exercises were not meant to predict, render verdicts on government policy, or advocate for specific outcomes. Rather, they were designed to stimulate open-ended debates about Australia’s policy, strategy, operational concepts and force structure that could inform policymakers’ choices.

Among the six teams, four cancelled the SSN-AUKUS. Notably, all three groups in Canberra chose to drop the program. All four arrived at the decision after much agonising, but they shared many of the misgivings that the AUKUS sceptics have expressed.

They had concerns about British industrial capacity, the daunting complexities of the program, the delivery timetable and the difficulty of operating the class in addition to Collins- and Virginia-class submarines. The Collinses are in service; at least three Virginias are scheduled to precede SSN-AUKUS submarines into Australian service, arriving in the 2030s.

All six teams remained committed to fielding SSNs, however. For the four that cancelled the SSN-AUKUS, Plan B was buying one additional Virginia-class sub and placing advance orders for more boats of the Virginia Block VII version as substitutes for the submarines of British design that would arrive in the 2040s. Australia has definite plans to buy only one submarine of the Block VII design, due for delivery in 2038.

Although the teams acknowledged hazards associated with buying more Virginias, including shipbuilding bottlenecks in the United States and possibly waning competitiveness of the long-established US design, they deemed such risks more acceptable than those associated with SSN-AUKUS. They also reasoned that this alternative pathway might allow the Royal Australian Navy to replace Collins-class submarines sooner and more cheaply.

Cancelling SSN-AUKUS freed up resources that allowed the four teams to pay for other priority capabilities. According to CSBA’s estimates, abandoning SSN-AUKUS generated a one-time saving of nearly A$11 billion. Some of the money paid for the additional early Virginia. The rest augmented air and missile defence and maritime defence along Australia’s northern approaches.

The two teams that stuck with SSN-AUKUS were more constrained in their choices. They could buy fewer capability enhancements than they wanted. For example, they had to do without expansion of munitions stockpiles. They also had to accept more risk in Australia’s ability to intercept incoming air and missile threats. The opportunity costs of fielding SSN-AUKUS submarines were obvious.

The exercises took place before the US presidential election in November 2024. If we ran the exercises now, the teams might make different choices. Nevertheless, their calculations about the risks and rewards between competing resource choices remain valid.

The inescapabilty of risk was a theme in the exercises. The teams that cancelled SSN-AUKUS accepted the risk that they may not receive the Virginias at the right times and in adequate numbers. A smaller Virginia-class SSN fleet would invariably reduce its operational availability. Moreover, the windfall from the SSN-AUKUS cancellation, although large, was not enough to field anything that might serve as a hedge against those risks, such as B-21 bombers.

Short of a significant increase in defence resources, such are the trade-offs facing Australia’s policymakers.