Govt to pay $830m over scrapped subs deal

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Australia will pay French company Naval Group about $830 million to settle a scrapped defence contract that would have seen it build submarines in South Australia.

Australia's fleet of Collins submarines were going to be replaced by a conventional fleet constructed by Naval Group but that deal was abandoned by the Morrison government, which decided to instead pursue nuclear-powered submarines under the AUKUS partnership.

The decision in September 2021 to scrap the $90 billion contract enraged the French government, resulting in a diplomatic stoush that included the recall of its ambassadors from Canberra and Washington.

Prime Minister Anthony Albanese said his government had reached a fair and equitable settlement with Naval Group that would "rule a line" under the torn-up contracts.

As part of the arrangement, Australia will pay Naval Group $555 million euros or about $AU830 million.

"It follows, as well, discussions that I've had with President (Emmanuel) Macron and I thank him for those discussions and the cordial way in which we are re-establishing a better relationship between Australia and France," Mr Albanese told reporters in Sydney on Saturday.

It was initially thought the about-face on the French deal would cost taxpayers up to $5.5 billion but Mr Albanese says the total has come down to $3.4 billion, taking into account money already paid.

"It still represents an extraordinary waste from a government that was always big on announcement but not good on delivery," he said.

He said some of the details of the settlement would remain confidential because of their commercial nature.

The prime minister hoped the settlement meant Australia could move forward in mending its relationship with France, describing that country as a partner for Australia with deep historical ties, especially in the Indo-Pacific region.

"I'm looking forward to taking up president Macron's invitation to me, to visit Paris at the earliest opportunity," Mr Albanese said.

Foreign Minister Penny Wong recently completed a diplomacy blitz in the Pacific in a bid to counter growing Chinese influence after Beijing signed a security pact with Solomon Islands, sparking concern from Australia and its allies.

Also on Saturday, Mr Albanese hit out at opposition leader Peter Dutton, who this week wrote in The Australian newspaper that Defence was looking at buying two Virginia-class nuclear-powered submarines from the US by 2030.

The former defence minister also queried Labor's commitment to the AUKUS partnership to acquire eight nuclear submarines.

"My government intends to concentrate on delivering rather than the statements that Peter Dutton has made that contradict all of the statements that he made while he was defence minister," Mr Albanese said.

In a statement on Saturday, Naval Group said it and the government had reached a fair and equitable settlement to conclude the Future Submarine Program.

"Naval Group pays tribute to all individuals, teams, and its partners who have worked and delivered on this program for more than five years," it said.

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