So the new submarine contract has been awarded, and in a shocking surprise to absolutely no one, construction will be happening here in Australia, at an absurd extra cost to the taxpayer.

I’m no expert on matters of defence, and I’ve certainly no idea whether the contract should have gone to the French, Germans, or Japanese. That’s not what this is about.

What this is about is the fact that we’re paying 30% extra for each submarine for it to be ‘Australian Made’ with Australian steel, instead of being built by the winning bidder in their own local shipyard and then sailed here. The official line is that we’re creating an additional 2,800 jobs.

But I can use a calculator, and my calculator tells me that if we’re paying an additional 30% on a $20B construction contract (to say nothing of maintenance and future upgrades, pushing the costs tens of billions higher), to create 2,800 local jobs, then we’re paying near enough to $2M per job.

That’s a hell of a welfare cheque.

Corporate welfare is nothing new and takes many forms. The car manufacturing industry was subsidised heavily in the last few decades of its death. Farming is heavily subsidised, defence is heavily subsidised, ‘renewable energy’ [sic] is heavily subsidised… the list could go on for a very long time if you really want to drill down into all the little carve-outs here and there to protect a particular industry or area from the trauma of having to compete against the world.

And really that’s what it comes down to. A subsidy, or a tariff protection, or some other form of corporate welfare is essentially an admission that the company or sector can’t compete. We can’t do it as well, or as cost-effectively as someone else, so we need the taxpayer to compensate for our shortcomings so we don’t go out of business.

Except… that that’s a little unfair. It would be true… if Australian companies were uncompetitive because of their own inefficiencies, or failure to innovate, or some other failing of their own. But in actual fact, Australian companies aren’t actually competing on a level playing field against the rest of the world.

Australian companies have to overcome some deeply entrenched disadvantages and find higher levels of productivity than their international competitors just to get to the starting line, let alone to win.

Yes they have to overcome the issue that we’re an advanced nation with advanced-nation-expectations on salary and quality of life for employees, but that’s only scratching the surface. The deeper issue is that Australian companies have to comply with a dizzying array of rules and regulations spanning OHS, HR and ‘diversity’ requirements, all manner of taxes to pay (contrary to the popular belief that our companies don’t pay tax, actually they pay an extraordinary amount of tax through payroll, fuel excise, and countless other taxes which don’t rely on a reported ‘profit’), reporting requirements, and a myriad of other ways in which time and money are wasted. All this is just the ‘cost of doing business’ in Australia.

This is to say nothing of the burden of militant unions (at times rampant in docks and shipbuilding), industrial relations disputes, loss of efficiency due to inflexible EBA’s with absurd rostering rules and limitations, etc.

And even then we still haven’t touched on the lost innovation and agility thanks to the amount of paperwork and bureacratic burden involved in getting permits to do anything new in this country.

Put it all together and look where we are… unable to build a submarine as cost-effectively as some of the most expensive advanced economies in the world. When you can’t compete on a COST basis with Germany or Japan, you know you’ve got serious problems.

France is a different matter, unemployment is high and some costs are considerably lower than they are here, so it’s not so surprising that they’re cheaper than us. But that’s just the ‘ticket’ price… when dealing with France you also have to budget for the strikes and union unrest, renegotiation of contracts, and general dilly-dallying that seems to be part-and-parcel of doing business with the French. But even with all the ‘add ons’ we would still have gotten off cheaper buying direct from them, than we will building locally.

And speaking of strikes, here’s a prediction for you: Unions will have a field day on this project, just like they have done with every other major defence spend in history, just like they did with the Victorian Desalination Plant, just like they do whenever they think they have the upper hand (which means especially when something is a political hot-potato), and deadlines and budgets will be repeatedly shot to pieces as this project unravels and ends up costing taxpayers even more than the $20B construction cost we’ve budgeted.

You’re most welcome to save that prediction and hold me accountable to it if I’m proved wrong and the subs are delivered on time and on budget. In fact, lets be nice, I’ll allow a 10% blowout of both time and budget. How’s that? Is anyone willing to bet against me? Anyone?

So let’s sum up here.

1. We’re paying extra because the Australian Government wants the subs to be ‘Australian made’, largely for their own political gain.
2. The reason Australian’s can’t compete and build ‘Australian Made’ for the same price as French, German, or Japanese, is in large part because of the costs and burdens imposed by the government or parties protected by the government, such as unions.
3. The Government will still mismanage this project so badly that even the 30% premium we’re already paying for ‘Australian Made’ will still not be enough, and like the Collins Class before it, we’ll end up paying far more and getting far less, far later, than was planned.

Notice that the problem at all three levels is the same thing…

I can’t help but feel there’s a lesson in that somewhere. If only I could figure out what it is…

Meanwhile, there’s 2,800 lucky Australians who happened to be in a politically important electorate, and they’ve each just won a $2Million corporate welfare jackpot at the expense of the rest of us.

But don’t expect a thankyou. Far from it. Expect strikes, go-slows, industrial action of all sorts, and a sinking [no pun intended] feeling in your gut that you’re being taken for a ride yet again, for the benefit of politicians, unions, and corporations that find it more profitable to collude against the rest of us than they do to compete.

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