Senate Foreign Affairs, Defence and Trade Legislation Committee [Part 2], , 1:26:26 to 1:39:55
The committee scrutinizes the $3 billion Australian contribution to the US submarine industrial base and financial oversight mechanisms.
Topics: Government spending, Procurement
Speakers: Senator David Shoebridge, Michaela James, Senator Fatima Payman, Alexandra Kelton, Tim Mulholland, Speaker 1
I did go back and review your answer, but I had trouble um, um, um, comprehending exactly um, why you appeared to disagree with that. Um, so I might just read to you directly from that act which sets up the account into which um, uh, uh, Australia's AUKUS contributions are are are paid. It says, "In general, there is established in the Treasury of the United States a special account to be known as the Submarine Security Activities Account. And two, credit to the account contributions of money accepted by the President under subsection A shall be credited to the Submarine Security Activities Account." That's the provision. Do you accept that the President has control over the money that's going into Treasury account from Australia under AUKUS?
>> Um, can I hand over to Ms. Michaela James who will be able to be able to provide a response?
>> Uh, Senator, that account as you uh, noted was set up through the National Defense Authorization Act in 2024 and that is where our contributions are being uh, paid into.
>> And those contributions um, uh, are subject to presidential acceptance and presidential control, aren't they? Cuz they're a an account in
>> I would have to take that on notice, Senator.
All right. Well, when you take that on notice, um and I think it's fairly unambiguous that the president is in charge of the executive, and an and an account in the US Treasury is therefore subject to presidential control. But by all means, take that on notice. In the in a further reply that was given um to the um to my question on notice, and it's um portfolio question reference number 139, and the question was asked on the 16th of June 2026. Um the reply stated in part, "Australia has appropriate mechanisms in place to ensure that we have transparency over and assurance about US expenditure of our contribution." Um what are those mechanisms?
>> Uh Senator, those mechanisms are part of our negotiations with the US uh over the contribution, and we have in place those mechanisms to ensure that we understand where our funding uh is going, um and appropriate reporting in place.
>> Yeah, but I'm I'm sorry, Ms. James. Just repeating that there are mechanisms, and those mechanisms have been negotiated, doesn't explain the mechanisms. What are the mechanisms?
>> The The US provides us visibility of uh the expenditure.
So, they tell you where they're spending
>> Yes, Senator.
>> But the the um the answer said Australia has appropriate mechanisms in place to ensure we have transparency over and assurance about US expenditure of our contributions. You've just simply mentioned transparency. Does Australia have any say over where the money will be spent?
>> Senator, I may have to take that on notice as well, but we have mechanisms in place to provide us visibility of where the funding is going and assurance around how that money is being spent.
>> Well, so what's the difference between transparency over where it's going and assurance over how it's spent? What what what are you intending? What's the
>> Senator Alex Calton, Deputy Director-General Strategy. Um through the negotiations of the industrial uplift, we obviously um negotiated with the US that that money would be spent on AUKUS-related activities. That's set out in the NDAA. Those industrial uplift activities that Ms. James refers to are then reported through to us. So, if there were activities on that that were not part of the agreed um industrial uplift base, then that would be um obviously then subject to further discussions between us and the United States through the mechanisms in the arrangement set out.
>> All right. So, the as I understand it, the appropriate mechanisms are reporting. The US reports upon where the money is expended. Um and that's the that's the mechanism. Can you explain it how that reporting happens? Is it quarterly? Is it monthly? Is it ad hoc? And who provides the
>> The reporting happens um with the organization that we work with. Um AUKUS I and A.
>> We're struggling with the acronym. Sorry, Senator.
>> Why don't you describe >> We'll take it on notice. >> Why don't you describe the describe the entity to me? Is it a US Navy entity? Is it a or is it a separate um a government agency? What is the What What is the entity that you you're engaging with?
>> Oh, they're set up inside um inside the Office of War, so inside the Pentagon. And they are um AUKUS uh integration acquisition I think is what it stands for. And essentially they provide us with, you know, a regular uh report as to where those funds are being spent.
>> Would you um please provide um those reports um to the extent that that that they've been provided to you? Could you please provide them to the committee?
>> Yeah, we'll take that on notice, Senator.
>> And and um it's important to say that we have a Australians embedded in that organiza- organization.
>> Um
>> the August August signee.
>> Yep. >> When I asked last on the 30th of June, when I asked last, I was told that as at the I'm going to just start again on this. Um as at the 30th of June, I understand 2.2 US billion had been provided to the US under um this August arrangement, and I assume to that submarine security activities account. Um is that right as at the 30th of June? US 2.2 billion had been provided.
>> Uh Good evening, Senator. Tim Mulholland, Chief Financial Officer. That's correct.
>> And and how much has Do Do we know what that equated to in Australian dollars?
>> Uh Senator, that is equivalent to 3.377 billion Australian dollars.
>> And that's I assume the amounts didn't all happen at once. That's taking into account the currency fluctuations as the payments happened. Is that right?
>> That takes into account the spot rate at
the spot >> at the time the transfers happened. >> 3.377 billion Australian. Um have any payments been made since the 30th of June 2026?
>> No, Senator.
>> Are any payments expected to be made this financial year?
>> Currently, Senator, there are no planned payments in the current 26-27 financial year. However, I will uh reiterate the previous evidence that the exact timing of those payments at the mutual agreement of both Australia and the US.
>> And can you remind me again what the envelope the total envelope um that's been agreed for Australia to provide to the US is
3 billion US dollars.
>> All right. >> And is there a deadline? Is there a Is there an end period over which that has to be provided?
>> Uh Senator, there is a further 800 million US dollars adjusted for inflation that is scheduled to be transferred within 10 years from 2026 2026.
>> Okay, so that's the 3 billion plus the 800 million. Is that right?
>> No, that is the total. So, 2.2 billion US has been paid. A remaining 800 million >> US >> paid. >> US dollars.
>> to be paid. >> All right. >> Um is any of that money going to the new Virginia builds, the VPN builds that have the potential to be nuclear armed? Is any of the money going to the Virginia VPN?
>> So, they're going into the Virginia class uh submarine industrial base, um workforce, uh a range of upgrades to the infrastructure, that's where we want the money to go to increase the production.
and I I know that the um we've we've had a discussion previously, but given these same shipyards are also building the Columbia class um ICBM um fleet, uh how much of the Australian support is also going to building the Columbia class? Do you have a an analysis of the proportionality in in the in the shipyards?
>> So, we've been given confirmation from Director of Naval Reactors that um none of that is being directed to Columbia.
>> Well, you see, I find that some somewhat hard to understand in practice given the same shipyards, the same workforce, the same dry [clears throat] docks, the same cutting sheds are being used for the Columbia class as are also being used for the Virginia class. How could it possibly be the case that the Australian contributions are not going towards the Columbia class ICBM?
>> So, supply chain would be different. Workforce would be very specialized. The Virginia workforce would be specialized in the Virginias. The Columbia workforce would special- specialize on Columbias. you know
>> But the well They are the same shipyards. They are the same dry docks. They are the same shipyards. They are the same dry docks. They are the same uh same workers to do the Columbia. They don't say, "Okay, everybody leave who's been building the Columbias cuz we're now going to do something on Virginias." It's the same workforce. It's the same infrastructure. How could that possibly be that you get an assurance that our contributions are not going towards the Columbia? It just defies common sense, doesn't it, Admiral Mead?
>> Uh it doesn't defy common sense.
>> Senator, um in the uh US, the US government is not able to accept financial contributions from foreign partners unless it is provided for uh providing a defense service or article or if there is an authority established to accept funds for a specific purpose. Uh as you've pointed out, the NDAA in 2024 authorizes the president to accept Australian financial contributions to the US submarine industrial base via the submarine securities activities account. That account is explicitly established to accept contributions from Australia for non-nuclear aspects of submarine security activities. The NDAA does not provide the authority to accept contributions for nuclear weapons programs or for the contributions to be used to fund the US nuclear weapons program.
>> No, but that does not prevent it from being used to fund the workforce that creates the Columbia class submarine. And indeed, given that the Virginia class submarines all have Virginia payload modules in them, the ones that have been built now, which are going to have um sea-launched cruise missiles, which are nuclear armed, that also creates a difficulty if if if your assertion is true, as James. If the money can't be used to build Columbia class submarines because they are nuclear armed, well, then the money can't be used to build Virginia class submarines with the Virginia payload model because they will also be nuclear armed with sea-launched cruise missiles, which have a nuclear warhead.
>> So, Senator, we won't be receiving the Virginia payload module. >> No. >> We will be receiving the block four uh Virginia class submarines, and I think
>> Yes, the the but but what's being built now
what the NDAA prohibited. >> and that was the nuclear activities.
>> Um and well, wait, the issue here isn't the second-hand submarines we're getting that have been built before now, because that's block four. The issue is how financial contributions going towards what's being built now, and I assume that's what they're going towards, what's being built now, and what's being built now is block five with the Virginia payload module, which will um from 2032 include nuclear armed sea-launched cruise missiles. And if what as James said was was true that our contributions couldn't go towards the Columbia class because they will be nuclear armed, does seem to put a difficulty in front of you towards contributing to the Virginia payload module um block five, given they will also be nuclear armed. But I might ask you to take that on notice given the time if that creates a difficulty under either US or Australian law.
>> All right, what I said was that we won't be receiving the block five, no, but I will take the question on notice.
>> All right, thank you. Um thanks, Chair.
>> All right. Uh Senator Payman.