Australia Questions AUKUS Commitments as US Pushes Higher Defence Spending and Taiwan Clause

Australia Questions AUKUS Commitments as US Pushes Higher Defence Spending and Taiwan Clause

Published:

July 21, 2025

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Updated:

July 21, 2025

Asia-Pacific

Priya Shah

U.S. Air Force photo by Staff Sgt. Ryan Gomez

Australia’s plan to get nuclear-powered submarines with help from the U.S. and U.K. is on pause for now. U.S. defense officials say the Pentagon will get an internal report on July 29 that could change the cost, schedule, and rules for the AUKUS program. Australia will need to either accept the updated deal or push back before those changes become final.

Sources indicate that the review started after the U.S. Navy warned Congress that giving Australia three Virginia-class subs could slow down its own fleet updates. Shipbuilders Huntington Ingalls and General Dynamics told lawmakers on July 17 that labor shortages are already causing six-month delays per sub. If things get worse, Australia might not get its first submarine until at least 2034. A two-year delay would also impact training, infrastructure, and contracts already in place with small and medium businesses.

Back home, new budget leaks on Sunday revealed defense spending could rise from 2% to about 3.3% of GDP over the next decade – costing an extra A$400 billion. Acting Finance Minister Katy Gallagher said these were still early drafts, but politicians from both sides of Parliament demanded clearer numbers. Liberal Senator Jane Hume called the increase “astonishing,” and Labor MP Alicia Payne asked the government to release a full breakdown before signing any submarine deals.

Tensions grew after reports came out that Washington wants written promises from Australia to help in a Taiwan conflict. Opposition Foreign Affairs spokesperson Simon Birmingham said that would be a “very serious sovereignty test.” Greens Senator David Shoebridge called the idea “unacceptable.” Acting Defence Minister Pat Conroy said no current minister can commit future governments to hypothetical wars. The conversation is now shifting from shipyard delays to bigger constitutional questions about who gets to send troops to war.

Public support for AUKUS is also slipping. A snap poll from the Australia Institute found that fewer than half of voters now think the deal will improve security – down from 61% in April. Among those under 30, support dropped to just 29%. Pollsters say the dip has more to do with concerns about costs and nuclear waste than with the alliance itself.

Meanwhile, nearly 35,000 troops from 19 countries have arrived for the Talisman Sabre exercise, including two U.S. carriers, the UK’s HMS Prince of Wales, and a Japanese frigate. On Saturday, Chinese ships showed up near the Coral Sea training zone and started broadcasting warnings on public channels. The Australian Navy responded with standard freedom-of-navigation messages. The encounter highlights why Australia wants long-range subs – but also shows that allies are already filling that gap.

Visiting for the drills, Dutch Defence Chief General Onno Eichelsheim pointed out that the Netherlands spends 5% of its GDP on defense following Russia’s war in Ukraine. He urged Australia to match its ambitions with solid financial planning, warning against the kind of late rearmament Europe regrets.

The current review still has a lot of unanswered questions:

Can U.S. shipyards prioritize Australia without slowing down their own needs?

What rules will apply if Australian subs operate in conflict zones like the Taiwan Strait?

Will export laws block Australian-made reactor parts?

Who’s responsible for running the A$12 billion nuclear-skills program?

How will deep maintenance be split between Pearl Harbor and HMAS Stirling?
Admiral David Johnston, Chief of the Defence Force, said Defence must first fix long-standing inefficiencies to handle a project this big. He pointed to past issues with frigates and aircraft to show how much improvement is needed and promised more oversight and penalties for delays.

The submarine yard at Osborne South is already at a critical point. Without a new contract by September 1, design work could stall. Industry sources say just one idle week costs A$60 million in wages and rent. Some suppliers have paused new orders while banks wait for the U.S. review. Recruiters worry that if the limbo continues, they won’t hit apprentice targets for 2026.

Then there’s the issue of nuclear waste. Right now, no Australian law covers how to deal with spent reactor cores. The government was supposed to release draft legislation by Christmas, but it might now slip to 2026. Environmental groups say this proves Australia hasn’t figured out the full picture. Ministers say solutions exist and are on the way, but there’s still no site picked for waste storage.

Parliament returns next week, and crossbench MPs plan to push for public hearings. Greens MPs will try to send AUKUS to the foreign affairs and defense committee. Labor can block it, but some backbenchers might support a smaller audit. Government leaders want to avoid a full inquiry that could drag on into the next election.

A few key groups are shaping the debate:

Trade unions want firm commitments to local jobs before expanding apprenticeships.

State premiers want federal money for port upgrades tied to the subs.

Universities need clear safety guidelines before launching nuclear engineering programs.

Pacific nations are watching closely to see if Australia stays within nuclear-free treaty rules.

Business groups worry delays will hurt broader investment confidence.
Experts are divided on strategy. Professor Andrew O’Neil thinks the focus on submarines may come at the cost of other important tools like missiles and drones. But former navy officer Jennifer Parker says nuclear subs are the only thing that can patrol far-off waters for months. It’s a choice between diversity and speed or stealth and endurance.

Treasury warns that every extra 1% of defense spending costs A$25 billion per year. Health and education unions wonder if the public will accept those trade-offs. Government advisers hope trust in the alliance will hold, but polling suggests people are having second thoughts.

China is still Australia’s top trading partner for iron ore, coal, and barley. Beijing has eased some trade restrictions recently. Business leaders now worry that linking submarines to Taiwan could bring those barriers back. They’re urging the government to stay careful with its wording.

Aside from continuing as planned, analysts see two other options:

Stretch and diversify: Delay the sub delivery to 2036 and spend more now on missiles, drones, and northern defenses.

Reset: Pause the sub purchase altogether and invest in home defense, while exploring other ways to work with the U.S. that don’t involve nuclear tech.
Neither option has full political backing, but both are getting more attention the longer this review continues.

Upcoming decisions include:

July 25: Cabinet meets to set talking points for U.S. talks

July 31: Draft reactor safety rules go public

August 12: Industry roundtable on workforce planning

September 18: Treasury updates 10-year defense costs

October 30: Defence reports on capability risks in Parliament
U.S. politics could also change the timeline. Senate Armed Services Chair Jack Reed plans a hearing in September on export waivers. Some presidential candidates oppose subsidizing foreign militaries, adding more uncertainty. Australia is preparing briefing materials to show it’s sharing the burden through higher spending and tech investment.

Meanwhile, local communities in the Northern Territory are preparing for public meetings about nuclear waste sites. Residents want assurances that new facilities won’t hurt fishing or tourism. Officials hope to build trust by offering clear timelines and compensation plans.

Rising prices for submarine-grade steel – up 14% this past year – are adding pressure too. Treasury says more price hikes could impact funding for rail and hospital projects. States are refusing to delay those efforts, setting up a possible fight over budgets if costs keep rising.

REFERENCE SOURCES

https://www.theguardian.com/australia-news/2025/jul/13/australia-wont-commit-in-advance-to-joining-hypothetical-us-china-conflict-pat-conroy-says

https://www.reuters.com/business/aerospace-defense/australia-confident-issues-raised-us-review-submarine-project-will-be-resolved-2025-07-18/

https://www.abc.net.au/news/2025-07-19/defence-chief-says-must-get-better-big-projects/105546632

https://www.news.com.au/national/politics/netherlands-urges-australia-to-take-china-threat-seriously-amid-wargames/news-story/2f03635e78722f11128415df712fc8c0

https://www.navy.mil/Press-Office/News-Stories/display-news/Article/4244039/talisman-sabre-2025-begins-with-record-participation-and-enduring-purpose/

https://breakingdefense.com/2025/07/criticism-questions-mount-about-aukus-us-relations-in-australia/

https://www.defence.gov.au/defence-activities/exercises/talisman-sabre

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