How we dodged a bullet by sinking the French submarines deal

While the public discussion about Australia’s AUKUS pivot has been dominated by the geostrategic and technological angles, it’s mostly overlooked what I see as its biggest coup: good economics. Taking a French nuclear submarine and replacing the nuclear reactor with a diesel engine to avoid a domestic political dust-up over nuclear energy – while holding out the possibility of converting back to nuclear later – was a uniquely Australian solution to a simple problem.

Just like its Collins-class predecessor, the French-designed Shortfin Barracuda was compromised by the need to reconcile our geographic isolation with our rejection of a domestic nuclear capability.

That an Australian government has finally refused to throw likely hundreds of billions in good money after bad should be a great relief to us all. The opposition’s instinct was to call out the $2 billion or so “wasted” under the pivot. To the contrary, the decision is a triumph over what might otherwise have been the most expensive instance of “sunk-cost fallacy” in Australian history. This basic economic error – the tendency to follow through on something we’ve already invested in regardless of the costs and benefits of doing so – explains too many of our big public policy blunders.

That doesn’t mean the succession of governments that got us into this mess should escape blame. Both sides of politics had a hand in it: the Rudd-Gillard governments in dragging their feet, perhaps spooked by Labor’s Collins-class legacy; and the Abbott-Turnbull governments in overseeing the farcical “competitive evaluation process” that has now left two of our major allies in Japan and France bruised.

But we now have a fresh start. While it required initiative, the stars were aligned. Five years earlier or later, it wouldn’t have been possible. Nor under a Labor government whose left flank would never have countenanced a fleet of “floating Chernobyls”.

It needed a US president desperate to look as tough on China as his predecessor, and a British prime minister desperate to prove that his was still a relevant global power.

But capitalise on the situation we did. Prime Minister Scott Morrison is often framed as a stubborn person. But his determination not to be bound by past decisions, his willingness to pivot in changing circumstances, is probably his abiding strength. While his predecessors Tony Abbott and Malcolm Turnbull tied themselves in knots to buy subs powered by anything but nuclear, Morrison cut through it all to do what nobody else could.

What the government demonstrated with this decision is an uncommon willingness to take a short-term political risk for a long-term policy benefit. We can argue about the relative merits of diesel v nuclear propulsion and the virtues or otherwise of a greater alignment with the old Western powers. But for those who’ve lamented the timidity of our political leaders in the face of an ever more brittle political environment, this is a glass of ice water in hell.