Axed French sub deal to cost Australia up to $5.5bn

Sydney: Australia will be forced to pay up to Aus$5.5 billion (US$4.1 billion) to exit a submarine deal with France in favour of acquiring nuclear-powered US or British models, officials admitted on Friday.

Last year Australian Prime Minister Scott Morrison tore up a submarine deal with France’s Naval Group, instead opting for nuclear-powered alternatives as part of a landmark security agreement with Washington and London.

On Friday, under questioning from an opposition senator, defence officials revealed the scuppered French deal came with a hefty price tag. "So taxpayers will be up for $5.5 billion in submarines that don’t exist?" senator Penny Wong asked at a hearing in Canberra.

"The final negotiated settlement will be within that price," Defence Department deputy secretary Tony Dalton replied. Dalton said the exact amount was still unclear as negotiations with Naval Group were ongoing.

Finance Minister Simon Birmingham defended the decision to ditch the French deal as "necessary for decades to come". "There’s no shying away from the fact that we knew there were serious consequences," Birmingham said. "The changed strategic environment in the region meant that the option that had previously been chosen was not going to meet the best needs for Australia in the future."