CBO: U.S. industrial base could see Australian investments in 2025 under AUKUS implementation legislation

By Nick Wilson  / November 3, 2023

The U.S. industrial base could receive a $2 billion investment as soon as 2025 if lawmakers pass pending AUKUS implementation legislation before the end of the calendar year, according to a Congressional Budget Office cost estimate.

The legislation in question, the AUKUS Submarine Transfer Authorization Act, would allow the United States to accept the $3 billion pledged by Australia to bolster the U.S. industrial base, establishing a “Submarine Security Activities account” to receive the contributions.

The Defense Department would then be free to use these funds to support shipbuilding infrastructure upgrades, workforce development initiatives and material procurement, according to the Nov. 3 CBO report, that assumes the bill will be passed before the end of the calendar year.

After the initial $2 billion contribution in 2025, CBO estimates the U.S. would receive an additional $100 million each year from 2026 to 2033 and the remaining $200 million in 2034 and 2035. These funds would have no net effect on budget authority because the contributions and the authority to spend them would “offset” one another, the report states.

“Because of significant uncertainty on how amounts credited to the Submarine Security Activities account would be allocated, CBO estimates that those contributions would be spent at a rate of 10% in each year beginning in 2025,” the report continues. “Thus, CBO estimates that $2.2 billion would be spent over the 2024-2033 period, and the remaining $0.8 billion would be spent after 2033.”

The resulting impact of this provision on the Pentagon’s budget would be a $600 million reduction in direct spending between 2024 and 2033, CBO adds.

The legislation would also authorize the sale of up to two Virginia-class submarines to Australia within 15 years of the legislation’s enactment, with Australia covering all costs associated with the transfer.

Before executing the sale, the legislation would require the U.S. to confirm it can meet its own submarine requirements without the transferred vessels and certify that Australia has the capabilities needed to operate them.

These sales, CBO says, are likely to occur in 2030 and 2033, resulting in an estimated payment of $3 billion per vessel provided shortly before each transfer occurs. The funds would be credited to Defense Department appropriation accounts and be available for use.

“Because the payments would immediately be available for obligation, an offsetting increase in budget authority would be recorded in that same year,” the report states. “CBO expects that DOD would spend the payments over many years; thus, outlays would decrease in the year payments are made and increase in subsequent years.”

CBO anticipates these funds would be used primarily to purchase additional Virginia submarines to replace those sold to Australia and estimates $2 billion of this funding would be spent between 2024 and 2033. As a result, CBO predicts the sale of the two submarines would reduce net direct spending by almost $4 billion over the same period, with remaining funds spent after 2033.

Together, the two provisions -- allowing the acceptance of Australian industrial base support and the sale of two submarines -- would decrease net direct spending by approximately $4.5 billion from 2024 to 2033, according to CBO. Much of the funding provided by Australia during the period would be spent after 2033, the report adds.

To oversee the implementation of this legislation and satisfy the reporting and certification requirements of the proposal, Congress would need to appropriate roughly $2 million between 2024 and 2033, the cost estimate concludes.