The AUKUS program—sweeping in the intimacy and level of its proposed cooperation—has enjoyed a high level of bipartisan support among the Australian political elite. First agreed by the Coalition government in September 2021, it was reaffirmed by the Australian Labor Party—then in opposition—within 24 hours, subject to a small number of caveats. The Labor government under Anthony Albanese has taken more fulsome ownership of the program since its election in May 2022. The prime minister was in Washington last week, meeting with President Joe Biden and making the case for AUKUS with some recalcitrant members of the US Congress.

That bipartisanship is unsurprising, given the golden chalice that AUKUS holds out to Australia: namely, assistance in the acquisition of eight nuclear-powered submarines (Pillar 1), a capability exercised by few countries worldwide, and a seat at the top table in exploring the potential of a range of cutting-edge technologies (Pillar 2).

But it would be wrong to imagine that AUKUS is above political debate. Indeed, quite the opposite. The program has provoked the revival of some old areas of contention in Australian strategic policy and encouraged a few new ones. I intend to explore five: three that relate directly to AUKUS and two others that reflect older, wider divisions.

The two broader debates are about:

• the near versus the far in Australian strategic policy priority-setting
• the relative balance between Asia and the Anglosphere in Australian strategic linkages.

The three that touch directly on AUKUS are about whether the program will:

• deliver the hoped-for blend of purchased US submarines and home-built Australian ones
• have a distortionary effect on other defence and social spending (what we might call the ‘elephant on the waterbed’ effect)
• provide the right outcomes—a debate spurred in part by a sotto voce concern about whether the advanced technologies of Pillar 2 will, in fact, help provide the means of tracking and sinking the submarines so expensively procured under Pillar 1.

Let’s start with the near–far debate. It’s an old debate in Australia that’s always close to the surface. It pits those who believe Australia should concentrate on fighting off existential threats close to home—‘border wars’— against those who would be prepared to fight for grander goals in more distant theatres—‘order wars’. The classic criticism that the border school throws at the order school is that they get sucked into ‘other people’s wars’. And the classic response of the order school is that order wars help prevent the emergence of border wars.

The nuclear-powered submarines are, unmistakably, vessels that would fit better as a contribution to order wars—the far rather than the near—and so stir once more that old polarisation.

Sam Roggeveen’s recent book, The echidna strategy, shows that we’re witnessing a revival of this debate. For Roggeveen, who is the director of the Lowy Institute’s international security program, Australia’s geographical location is a prized strategic asset—because distance complicates an aggressor’s calculations about use of force.

In normal years, Australians don’t think of their country as a spiky, indigestible monotreme. Echidnas spend most of their lives with their noses in the dirt. Their strategic horizon is low and short. By contrast, Australia is a strategic extrovert—not just because its closest strategic partners live far away, but because the global, regional and even neighbourhood order is set by the force balances along the Eurasian rimlands. When Albanese spoke in Washington of the AUKUS submarines as Australia’s contribution to ‘strategic equilibrium in the Indo-Pacific’, he was echoing that thought.

Existential threats to Australia aren’t merely those that unfold close to our borders, although the emphasis placed on deterrence by denial in the recent defence strategic review unhelpfully misleads on that point. Coercion can happen over longer ranges. And our strategic fate is entangled with the fates of our allies and partners: there is no world in which Australia bravely soldiers on as the last bastion of democracy when all others have fallen.

The second debate concerns the relative weighting of Asia and the Anglosphere in Australian policy settings. Some of the fiercest criticism of AUKUS has come from those who—in earlier years—invested heavily in Australia’s supposed ‘reorientation’ to Asia. Unsurprisingly, this debate is coloured by a wide range of factors that have almost nothing to do with submarines—such as the rise and fall of Asian-language tuition in Australian schools and universities, and the correlation between Anglophilia and being at the right of the Australian political spectrum.

In his National Press Club speech in March, former prime minister Paul Keating charged that ‘a contemporary Labor government [was] shunning security in Asia for security in and within the Anglosphere’. AUKUS tied Australia to the old, declining Anglospheric powers. In his book Engagement, published in 2000, Keating wrote of the US as ‘the big dog’ on the Asia–Pacific block. Clearly, he thinks that time has passed; he argues for the US to be a balancing power in the region, but believes that any attempt by Washington to cling to primacy would not have a happy ending.

This debate turns directly on the impact—real or imagined—of the AUKUS program on Australia’s relations with Asian countries. The opinions of the Southeast Asian states seem to be of particular concern, with Indonesian statements meriting exegetical analysis. Northeast Asian countries, such as Japan and South Korea—fellow US allies—are generally supportive.

And then there’s China itself, of course. What does AUKUS mean for Australia’s relations with China? Despite AUKUS, the bilateral relationship has stabilised. Former head of intelligence Peter Varghese says it’s not in Australia’s interest to thwart the rise of China. But that depends on what kind of China rises, doesn’t it?

Let’s move to the three debates over AUKUS itself. The debate over capacity has two foci—because AUKUS has both a purchase component and a build one. The purchase part of the program is scheduled to unfold during a time when America’s submarine-construction capacity has no spare headroom—US submarine yards are struggling to satisfy US domestic demand. There are questions too about the build component. Australia has never built a nuclear-powered submarine, or indeed anything of such complexity. And while the US has experience in different shipyards each producing parts of a submarine, the final assembly is usually done by the shipyard with the responsibility for installing the reactor unit.

These two difficulties are directly related: if we minimise the number of submarines purchased from the US, we increase our reliance on domestic production. Conversely, if we minimise the vessels built locally, we increase the disruptive effects on the US shipyards.

The fourth debate centres on the potential distortionary effect of AUKUS on other defence programs and on broader social spending. That concern is about more than simple opportunity costs. The sheer size of AUKUS means the program may prove to be a gravity well, sucking talented personnel and funding from other areas both within and beyond the defence portfolio. The defence budget will have to increase substantially for the country to be able to afford both the AUKUS submarine program and a viable surface fleet, air force and army. Former ministers differ on the degree of distortion. Kim Beazley still supports the program, arguing that the subs will be worth the wait and the cost. Alexander Downer supports getting nuclear-powered submarines but buying them all off the shelf.

Finally, the fifth debate touches on outcomes. Even the full eight submarines won’t be deployable simultaneously, so, really, we’d be looking at one or two at sea at any one time. That could still be a significant capability—provided submarines remain largely invisible and invulnerable during their deployments.

But there’s the rub: might the potency of the AUKUS submarines be compromised by the very technologies being explored in Pillar 2? Back in 2019, the US Defense Science Board observed that quantum sensing applications were ‘currently poised for mission use’. Such improvements, married to more capable artificial intelligence, might render the seas less opaque than they are now. There would be a degree of irony if the technologies of Pillar 2 ended up substantially negating the very submarines so expensively procured under Pillar 1.

Together, those five debates suggest the AUKUS program will be the subject of continuing controversy. Today’s bipartisanship is deceptive.

Source : ASPI The Strategist

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Released by Australian Treasurer Jim Chalmers, the review proposed 51 recommendations to deliver “an RBA that is fit for the future.” One of the major changes recommended by the Review Panel is to constitute a monetary policy board with greater economic expertise.

According to the review, the board should be responsible for monetary policy decisions and oversight of the RBA’s contribution to financial system stability (except payments system policy), but not broader corporate governance.

Speaking at a media conference here on Thursday, RBA Governor Philip Lowe welcomed conclusions of the review, saying that the review has been timely, with the bank facing an increasingly complex world and operating environment.

“From a number of perspectives, current oversight arrangements fall short of contemporary standards. The proposed changes would address this and help the governor manage the bank and its many functions,” said Lowe.

The governor noted that the recommended changes could also strengthen the monetary policy process, by having a board whose sole focus is monetary policy.

“I very much welcome the conclusion that this board should include people with diverse perspectives and knowledge and who have experience in decision-making under uncertainty. It is also pleasing to see that the panel recommended that the Treasury Secretary remain on the Board,” he said.

As the establishment of these two boards will require changes to Australia’s Reserve Bank Act 1959, Lowe added that the bank will work constructively with the government and parliament to ensure that any changes to legislation are effective in achieving their objectives.

According to the Reserve Bank Act, the RBA currently has two boards, namely the Reserve Bank Board and the Payments System Board.

The Reserve Bank Board has the power to determine the policy of the bank in relation to any matter, other than its payments system policy.

It comprises nine members, namely three ex-officio members, namely the governor, the deputy governor, and the secretary to the Treasury, and six non-executive members, who are appointed by the Treasurer.

An opinion from Australian Financial Review flagged the dilution of the governor’s powers on interest rates and the bank’s governance as a major upshot of the first independent review of the RBA.

“More experts setting interest rates, board members speaking publicly and signing off jointly with the governor on RBA statements, and the disclosure of how members vote each meeting, albeit unattributed, will herald a new power-sharing era,” the opinion wrote.

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