Not-quite-shipshape Economics
The Sun Herald
Saturday July 10, 1993
DOWNSIZING might be all the fashion among business and most areas of the Public Service but it is yet to affect the Australian Navy.
The Navy has just pulled off a budgetary coup in Canberra by getting the nod to replace its existing patrol boats with ships which are more than five times as large.
The new ships will have a displacement of 1,200 tonnes compared to only 220 tonnes for the existing Fremantle-class patrol boats.
The current proposal, which Defence Minister Senator Robert Ray discussed in Kuala Lumpur last month, is that the ships be built in conjunction with the Malaysian Navy.
The Malaysians plan to get between 12 and 27 new ships, each capable of carrying its own helicopter.
Australia is to get 12 at a cost the Navy puts at about $1 billion - an estimate that appears to be on the low side for ships of this size and capability.
Final tenders are still to be decided but the Navy appears to have won the battle to introduce this entirely new class of vessel to its fleet.
The proposed acquisition of the new offshore patrol vessels coincides with the announcement that the Navy is to get six new mine hunters.
Although the financial details have not been released, the six offshore mine hunters are expected to cost about $1 billion.
Although they will have more advanced electronic equipment than the offshore patrol vessels they will be smaller - about 500 tonnes compared to 1,200 tonnes.
Given that we will be getting only six mine hunters for $1 billion there must be serious doubts over whether we can get a dozen of the bigger offshore patrol vessels for the same total price.
Previous Navy efforts to build six new inshore mine hunters have been criticised by the Federal Opposition as costing $126 million before being abandoned without a serviceable ship being produced.
The Navy has now settled for equipping two 170-tonne prototypes of this craft with a different, more practical sonar, and concentrate on building the bigger offshore mine hunters.
Ironically, a proposal in the 1986 Dibb report on Australia's future military requirements in favour of a helicopter-equipped 1,200-tonne offshore patrol vessel was rejected by the Navy on the ground that it was too small.
Instead, the Navy won government approval for a new frigate known as the Anzac class which was three times as big.
EIGHT of the 3,600-tonne frigates are now being built for the Navy at a cost of $5 billion with another two being built for the New Zealand Navy.
Now the Navy has accepted it can find a role for a new 1,200-tonne ship after all, provided it is seen as replacing the existing 220-tonne Fremantle-class patrol boats which, in turn, had replaced the 149-tonne Attack-class boat.
The last of the Fremantle class, HMAS Bunbury, only came into service in 1984 while the first of a total order of 15 was launched in 1979.
The Navy had planned to start overhauling the boats in 1996 to extend their life by an extra eight to 10 years at an overall cost estimated at $89 million.
But a Navy spokesman told The Sun-Herald last week that this "life-of-type extension" would not go ahead if the $1 billion order was placed for the new 1,200-tonne vessels.
Once the Fremantle class are scrapped, it is difficult to believe that it won't be long before the Navy starts saying it needs a new boat of around 300-400 tonnes to complement the 1,200 vessel.
The duties of the new ships will mostly entail taking over the routine fisheries and immigration patrols currently performed by the Fremantle-class boats.
Yet no one in the Government so far has explained why it makes financial sense to replace a 220-tonne with a 1,200-tonne ship, especially at a time when other areas of public spending are under severe pressure.
The proposed co-production deal with Malaysia for the offshore patrol vessels is being pushed by the Transfield/Amecon group which is building the Anzac frigates at its Williamstown shipyards in Victoria.
The Australian Submarine Corporation, which has a $4 billion contract to build six Collins-class boats for the Australian Navy at its Adelaide shipyard, is also lobbying hard to sell a cut-down version to several South-East Asian navies.
The push to sell more Australian military equipment to our neighbours has been criticised as only helping to fuel an arms race we can't realistically hope to win in the longer term.
A more immediate budgetary puzzle is why Australia continues to provide aid to countries that obviously feel wealthy enough to go on a military buying spree.
During the 1992-93 financial year, Australia budgeted to give more than $20 million in military aid to members of the ASEAN group of countries.
Almost $9 million of this went to Malaysia, which has just announced plans to buy MIG 29 fighters from Russia and F-18 fighters from the US in addition to the new offshore patrol vessels.
It is also in the market for new submarines - raising the question of why it needs $9 million in aid from Australia if it has all this spare money to splash around.
Total Australian budgetary outlays on defence of just under $10 billion for the past financial year amounted to almost $400 million more than the equivalent increase in the Consumer Price Index.
© 1993 The Sun Herald