Will building three warships be worth Australia's $27 billion? - ABC News & Headlines – Australian Broadcasting Corporation

A BAE impression of what the new Hunter-class frigate will look like. The first ship is under construction. (Supplied)

Budget documents reveal that close to $27 billion has been allocated to building the first three Hunter-class frigate warships.

The ships are designed to replace the aging Anzac-class ships, but have faced delays and cost blowouts.

The first of the Hunter frigates is due in 2032, and advocates argue it will be one of the most capable warships of its kind.

In a massive shed at Adelaide's Osborne shipyards, a ceremonial coin is placed under the keel of the first Hunter-class frigate — continuing an ancient shipbuilding ritual that will hopefully bring the new ship good luck.

After a troubled journey so far, the Hunter frigate warship might well need it.

The first of six new Hunter-class frigates recently hit a major construction milestone — with two separate 'blocks' joined together — and is due for delivery in 2032.

In the years since the Turnbull government began searching for a 'future frigate' to replace the aging Anzac-class frigate, the Hunter has become a pin-up for all that can go wrong in defence procurement.

But its advocates argue that when it does arrive, it will be one of the world's most capable warships of its kind, and in a contested Indo-Pacific, well worth the delays and cost blowouts it suffered early on.

The federal government has found itself making both arguments at once.

In a speech to the national press club in July, Defence Industry Minister Pat Conroy pointed to the Hunter frigates as a perfect example of a project launched with the right ambition, but plagued by poor decision-making.

"A project with the right intent and capability at the time, but let down by a system that prioritised gold-plated requirements without considering cost and schedule impacts," he said in the speech.

Budget documents show that close to $27 billion has been allocated to building the first three ships.

That figure includes both the cost of the ship's construction and the cost of building the shipyards at Osborne in South Australia.

The Hunter frigates are under construction in South Australia. (ABC News: Tom Lowrey)

Billions more — though much less than $27 billion — will be needed for the final three ships.

In an interview with the ABC, Mr Conroy said despite his own highlighting of the project's hurdles, the price tag would be justified.

"I believe it is because we are getting the most advanced submarine-hunting warship in the world," he said.

"Ninety-eight per cent of our trade is through maritime sea lanes.

When the Turnbull government announced in 2018 its intention to build the Hunter-class frigate, based on BAE Systems' Type 26 Global Combat Ship, it described the future warship as "one of the world's most advanced anti-submarine warfare frigates".

Early warning signs suggested the path ahead would be troubled.

Early planning for a future frigate to replace the aging Anzac-class frigates was for an "off-the-shelf" design — that is, an established warship that would require minimal changes and could be built in Adelaide.

An Australian National Audit Office (ANAO) report in 2023 found that of three options shortlisted in early 2016, two other options — one from Italian shipbuilder Fincantieri and one from Spain's Navantia — were considered the "most viable designs".

The BAE Type 26 was included as a third option, and the ANAO noted that there were no records explaining why it was picked as the third, over another French option.

Defence records also noted that while the clear preference had been for an off-the-shelf option, the Type 26 was not yet a "ship in water".

It was eventually selected, and the 2018 announcement suggested that Australia would build nine ships for $35 billion, with the first to enter service in the late 2020s.

By the time Defence released its 2020 Force Structure Plan, the nine frigates were to cost $45 billion.

And within a few years, questions were swirling about whether the frigates would be built at all, as the Albanese government questioned what sort of surface fleet the navy would need to best complement nuclear-powered submarines.

The Hunter program survived the surface fleet review, but the total number of ships was cut from nine to six.

Contracts have been signed with BAE to build the first three ships, all due to enter service in the 2030s, and another 'batch two' contract will be needed for the final three.

The initial idea for the frigates to replace the Anzac class was a warship with "a strong emphasis on submarine detection and response operations", according to the 2009 Defence white paper that first signalled the plans.

But the ship now being built does much more than that.

From the outset, Defence planned two major modifications to BAE's Type 26 model — adding the extremely powerful Australian-made CEA phased array radar, and an Aegis combat system.

The CEA radar is already a feature of Australia's Anzac frigates, and is widely regarded as one of the world's best military radar systems.

The Aegis combat management system is an American product used by the US Navy, and aims to add as much interoperability with the United States as possible.

Both additions add enormous cost and complexity to the build, but both were included in the Hunter project from the 2018 announcement of BAE as the successful bidder.

Pat Conroy speaking at National Press Club in July 2026. (ABC News: Adam Kennedy)

Mr Conroy said the former Coalition government "mis-characterised" the project from the outset.

"They presented it as acquiring an off-the-shelf design, an existing platform that the UK was building for themselves," he said.

"But what they actually decided to do was take the hull from a Type 26 frigate and then put in a very different combat system, the Aegis combat system, put in a very advanced radar that we developed, as well as an Australian combat system in addition to Aegis.

"So it was a developmental project, but they didn't tell the Australian public it was developmental, and they weren't honest about the risks and possible delays that developmental projects cause."

But he said those additions would also make it an extremely capable warship.

"[The ships] will be the most advanced anti-submarine warship in the world," he said.

"And they will also be equipped with one of the most advanced radars in the world and the most advanced combat system in the world, which means that they will be very good at both hunting submarines, but also defending both themselves and ships that are escorting against air attack.

"So they'll be a very effective ship. But that doesn't mean that the project ran perfectly from its origin."

Marcus Hellyer, the head of research at Strategic Analysis Australia, is a strong critic of the Hunter frigates and argued it was simply trying to do too much.

He pointed to the ship having 32 vertical missile-launch cells, compared to 96 on many US Navy destroyers, as one example of its limitations.

"We picked an anti-submarine warfare frigate, but then kind of wrapped an air warfare destroyer radar and combat system around it," he said.

"So it's sort of trying to do everything — trying to do anti-submarine warfare, it's trying to do air warfare, it's trying to do surface warfare in terms of maritime strike and land strike.

A massive hurdle in the construction of the Hunter frigate has been reconstructing Adelaide's shipbuilding industry, and trying to make it a permanent feature of Australia's industrial landscape.

Adelaide's shipyards entered what became known as the "valley of death" in 2016, as years of work building three Hobart-class air warfare destroyers wound down.

With no major shipbuilding project to move onto, skilled workers in the Osborne shipyards had to turn elsewhere for work, like major road projects in Adelaide or other opportunities interstate.

By 2016, the problem was well-known, and establishing continuous naval shipbuilding became a stated aim of the Hunter project.

But even the ambitious early deadlines attached to the project only saw construction of the ships starting in Adelaide from 2020, and in the end, steel would not be cut on the first ship until 2024.

The hope is that the shipyards will eventually produce a new Hunter frigate every 18 months to two years.

The first three ships are expected to cost $27 billion.  (Supplied: BAE Systems Australia)

Andy Coxall from BAE Systems Australia is tasked with steering the frigates' construction, having previously worked in BAE's UK shipyards.

He said the Osborne shipyards suffered enormously from lost momentum as the build of the Hobart destroyers wound down, and workers were left with nowhere to go.

"They were just hitting their straps, and just got through all the difficult bits, then suddenly there's no more work," he said.

"People have got to feed their families. Even if they want to do shipbuilding, they'll say 'I'm off to do road construction'.

"And then once you reset like that, it's very difficult to get them back."

He said the early years of construction were hit with rolling challenges beyond rebuilding the industry, including the COVID-19 pandemic, which prevented specialists from BAE's UK shipyards from moving to Australia.

And he pushed back on some of the criticism of the ship — arguing that while the changes have undoubtedly added complexity, it would be a better warship for it.

"Anyone that's working on [the ship] understands why the Commonwealth is doing it. They're doing it for what we believe are the right reasons," he said.

"And as a consequence I actually think we're getting a much more capable ship than even its reference ship design."

He said they accepted there had to be a level of flexibility to make sure the warship was as capable as possible.

"What we're doing is talking about national defence, and in some cases life and death of Australian servicemen and women," he said.

"So if something occurs in Ukraine, or in the geopolitics of our region, which means we have to change the technology to keep capability, then OK, you've got to get on with it."

And he said there was a level of frustration with the discourse around the Hunter frigates — that they were too expensive, too complex and too slow to build.

"Our contract was never just about building ships. It was never just about that," he said.

"Yes, ships were a catalyst, and yes, the navy needs our capability, but that was never the contract.

"The contract was to build ships and re-establish a capability, you know. Build an industry."

Marcus Hellyer argued the world was becoming a more dangerous place to be operating warships, pointing to recent conflicts as evidence.

"The Ukrainians have hit numerous Russian warships in the Black Sea. Some Western navies were too scared to go into the Red Sea to take on the Houthis," he said.

"And we're also seeing that the US Navy won't actually run the Iranian blockade of the Persian Gulf. So all of that tells us that it's a very, very dangerous world for surface warships."

He said it raised questions about the place the Hunter frigates would hold — as large, crewed and complex warships — once they entered service in the 2030s.

And he said scrapping the project now — even if it meant forgoing the billions of dollars already spent — could still be the right call, if the remaining $20 billion or so was spent on additional Mogami frigates or autonomous systems.

But that argument is rejected by others like Alessio Patalano, a professor of war and strategy in East Asia at King's College London.

"In the age of missiles and drones, it turns out that the safest and most reliable place from where a competent professional organisation can project power is actually from the deck of a warship at sea," he said.

"How do we know this? Tell me, when was the last time that the Iranians, who worked the last 40 years to try to blow up an American warship, sunk, touched, or even scraped a large major surface combatant that is currently deployed?"

He said that while $27 billion was a lot of money, it was hard to see how they could have been built cheaper.

"No project is straightforward. No particularly complex project like an advanced warship is a straight line," he said.

"And frankly given the modifications, the changing requirements, the strategic conditions under which things were to be pursued, the availability of yards and manpower — I don't think there is any other cheaper solution to this."

The Osborne shipyards building the Hunter frigates sit amidst a massive, separate construction project — the enormous facilities that will eventually build Australia's first AUKUS-class submarine.

The Hunter shipyards sit beside what will eventually become the AUKUS shipyards, building at least five nuclear-powered submarines.

When the Hunter program was launched, Australia was still planning to build a fleet of diesel-electric Attack-class submarines with French shipbuilder the Naval Group.

But with those plans having now pivoted to the far more ambitious task of building an all-new AUKUS-class submarine, those working on the Hunter project hope they are laying the industrial foundations.

Andy Coxall said what they are working on pales in comparison to the scale and complexity of what is being attempted under AUKUS.

"Getting steelworkers used to delivering quality outputs to a very high level neatly dovetails into building the same level of output for submarines that are even higher, if you like, in terms of complexity," he said.

"So I think we're building a good position, certainly at Osborne, with that.

"But getting the nation's head around nuclear engineering and what that means is probably the challenge that Hunter isn't solving."

Defence Minister Richard Marles with his Japanese counterpart Koizumi Shinjiro, after signing a multi-billion-dollar agreement for Mogami frigates. (Supplied: Department of Defence)

Australia's naval fleet is undergoing its biggest transformation in decades.

Over the next two decades, aging fleets of Anzac-class frigates and Collins-class submarines will be replaced with new fleets of Hunter and Mogami frigates, along with Virginia-class and AUKUS-class submarines.

Mr Conroy said it was an undoubtedly expensive process, but worthwhile.

"We're more than doubling the surface fleet as well as acquiring the AUKUS submarines," he said.

"So they all go hand in hand, but this investment will be worth it."