Australian Treasurer Jim Chalmers has announced a significant increase in defence spending in the 2026 federal budget, with funding for the Australian Submarine Agency (ASA) set to jump to $512 million in the next financial year. This marks a substantial rise from the previously allocated $385 million, reflecting the escalating costs of the Aukus nuclear submarine program.
Massive Budget Increase for Submarine Agency
The ASA's total resourcing for the next financial year will increase by a third, reaching $512 million. Staffing levels are also set to rise dramatically, from approximately 883 positions to 1,209—a 37% increase. The 2025-26 budget papers had forecast the agency's total resourcing at $1.7 billion for the four years to 2028-29. However, the current budget has expanded that forecast to over $2.13 billion for the same period, representing an additional $431 million.
In the previous budget, the ASA's annual budget peaked at $529 million in 2026-27. It will now peak at $641 million, occurring two years later in 2028-29.
Aukus: A Prudent Response to Strategic Challenges
The Aukus agreement, a trilateral deal signed by the Morrison government with the United States and the United Kingdom, aims to deliver Australia its own fleet of conventionally armed nuclear-powered submarines under Pillar One. The budget papers describe the partnership as a "prudent response to deteriorating strategic circumstances", emphasizing a shared commitment to promoting a free and open Indo-Pacific and deterring aggression.
"For a maritime nation such as Australia, a submarine capability is critical for the nation's defence and for working with our partners," the budget states, adding that "the stealth, range, speed and endurance of these submarines is unmatched, and will ensure we have a potent submarine capability for decades to come."
Nuclear Waste Management: A Lingering Issue
The 2026-27 budget also addresses the unresolved issue of nuclear waste management. Australia has yet to identify a permanent storage site for the radioactive waste generated by its nuclear-powered submarine fleet, including high-level waste from reactor cores and spent fuel, which remains toxic for thousands of years.
Successive federal governments have spent three decades attempting to establish a nuclear waste site. In 2023, Defence Minister Richard Marles committed to publicly outlining a process for identifying a waste site within 12 months, but no plan or site has been identified. Marles has indicated that a site will be located on defence land, either current or future.
The budget allocates $11.9 million over two years to the Australian Radioactive Waste Agency to assist in developing advice for future radioactive waste management and disposal pathways.
Concerns Over Submarine Delivery
Industry experts and defence analysts have raised concerns that Australia's sovereign submarine fleet may never materialize. The government's "optimal pathway" for Aukus involves the US selling Australia three Virginia-class submarines—two secondhand and one new—beginning in the early 2030s. However, due to persistently slow submarine construction rates in the US, the Congressional Research Service has suggested that the US might rotate its own vessels through Australian ports instead of selling any.
Over the past 15 years, US shipyards have built submarines at a rate of 1.1 to 1.2 boats annually. The US fleet currently possesses only three-quarters of the submarines it needs, and doubling the build rate would be necessary to supply any boats to Australia.
The backbone of Australia's proposed fleet depends on the UK designing and delivering the first SSN Aukus, a new class of conventionally armed nuclear-powered submarine. The Royal Navy's first Aukus submarine is slated for completion in the "late 2030s". Australia will build its first Aukus submarine in Adelaide, based on the UK design, with a target launch date in the early 2040s. However, the UK's shipbuilding industry has been hollowed out by decades of underinvestment.
At the outbreak of the current US-Israel conflict with Iran, the UK had only one of its six attack submarines at sea. The HMS Anson, visiting Australia, was hurriedly recalled to the northern hemisphere. The UK must also prioritize building one more Astute-class attack submarine and four Dreadnought-class nuclear ballistic submarines before constructing the first Aukus.
Into the 2050s, Aukus is estimated to cost Australia $368 billion, including approximately $4.6 billion each to the UK and US to boost their submarine-building rates.
