Opinion | Is Australia creating US$246 billion out of thin air to buy new Aukus submarines?
- Australia’s government will probably borrow money it has created through the Reserve Bank to buy three nuclear-powered submarines and build another eight
- There is no limit on how much Australia’s Commonwealth government can spend over and above what it earns, and it can keep borrowing forever
Those are the sort of examples used by former New South Wales treasury secretary Percy Allan on the Pearls and Irritations blog, “in case you can’t get your head around a billion dollars”.
Such multibillion megaprojects almost always go over budget.
For instance, when Prime Minister Malcolm Turnbull announced the Snowy Hydro 2.0 pumped hydroelectricity project in 2017, it was supposed to take four years and cost $2 billion (US$1.34 billion). The latest guess is it’ll actually take 10 years and cost $10 billion (US$6.68 billion).
So to pay for those two megaprojects alone, there’s an awful lot of money we will need to find from somewhere. Or will we?
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China warns Aukus against going down ‘dangerous road’ over nuclear-powered submarine pact
‘No simple budget constraint’
In the first year of the pandemic, Australians were given a glimpse of a truth so unnerving that economists and politicians normally keep to themselves.