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Australia has announced that it will spend $2.76 billion (AUD $3.9 billion) to begin building a major submarine construction yard to support its nuclear-powered fleet under the AUKUS pact with the United States and the United Kingdom, reinforcing Canberra’s long-term military modernization and alignment with Washington and London.

Prime Minister Anthony Albanese said the funding represents a “down payment” on the future submarine construction yard at Osborne, near Adelaide in South Australia. The facility is expected to become a central pillar of Australia’s effort to develop conventionally armed, nuclear-powered submarines as part of the trilateral defense agreement announced in 2021.

“Investing in the submarine construction yard at Osborne is critical to delivering Australia’s conventionally-armed, nuclear-powered submarines,” Albanese said in a statement, adding that the project will help secure the country’s future defense capabilities while supporting domestic industry and employment.

The Osborne facility is expected to require roughly $21.2 billion in long-term spending. Officials say the site will play a key role in enabling Australia to eventually build and sustain its own nuclear-powered submarine fleet domestically, a capability Canberra has never previously possessed.

This is where Australia’s future will be built.

We’ll construct our nuclear-powered submarines in Osborne, South Australia, to strengthen our defence force and build a future made in Australia.

Because AUKUS isn’t in the distant future, it’s right here, right now.

And it’s… pic.twitter.com/jY8HTHDNS3

— Anthony Albanese (@AlboMP) February 15, 2026

AUKUS Defense Strategy

The AUKUS pact is widely regarded as Australia’s largest ever defense investment and a cornerstone of its strategy to strengthen long-range strike capabilities and military deterrence in the Indo-Pacific.

The agreement will see the United States and the United Kingdom provide nuclear-powered submarines and advanced military technology to Australia over the coming decades.

Under current plans, U.S.-commanded Virginia-class submarines are set to begin rotating through Australia from 2027, with several boats expected to be sold to Canberra starting around the early 2030s.

The longer-term goal is for the United Kingdom and Australia to jointly design and build a new class of AUKUS submarines, while transferring the technology needed for Australia to construct its own vessels in the future.

The overall AUKUS submarine program is projected to cost up to $235 billion over the next 30 years, making it one of the most ambitious defense projects in Australia’s history. The agreement also includes cooperation in advanced military technologies beyond submarines, such as cyber, artificial intelligence, and undersea capabilities.

The initiative is widely seen as part of a broader effort by the United States and its allies to counter China’s growing influence and military presence in the Indo-Pacific region.

Australian officials have framed the investment as necessary to maintain stability and ensure long-term deterrence in an increasingly contested strategic environment.

The program replaced a previous multibillion-dollar submarine agreement with France that Canberra scrapped in 2021, triggering a diplomatic dispute with Paris. Since then, Australia has doubled down on the AUKUS framework as the centerpiece of its defense planning.

The pact briefly faced uncertainty last year when Washington launched a review into whether the program aligned with President Donald Trump’s “America First” agenda. The Pentagon later confirmed the project would proceed, saying it had been cleared to move forward at full speed.

Jobs and Industrial Expansion

Australian officials say the new submarine construction yard at Osborne will create significant economic benefits alongside its strategic value. The government estimates that nearly 10,000 jobs will be created in design and construction phases, with up to 1,000 apprentices trained annually at an on-site facility.

Defense Minister Richard Marles said the Osborne site would sit at the heart of Australia’s effort to build a sovereign submarine manufacturing capability. “The transformation underway at Osborne shows Australia is on track to deliver the sovereign capability to build our nuclear-powered submarines for decades to come,” Marles said.

The submarine yard investment forms part of a broader expansion of Australia’s naval infrastructure. In September, the government also announced an $8 billion plan to upgrade shipyard facilities in Perth, Western Australia, transforming them into a maintenance and support hub for the future submarine fleet.

Together, the projects are intended to build a long-term domestic industrial base capable of supporting the submarines throughout their operational life cycle.

Central Bank Losses

The defense spending push comes as Australia’s central bank continues to deal with the financial aftereffects of pandemic-era policies. The Reserve Bank of Australia reported its fourth consecutive year of losses, recording a loss of about $2.78 billion for the fiscal year ending June 30.

The losses stem largely from the gap between low returns on bonds purchased during the pandemic and the higher interest rates now paid to commercial banks on deposits. The bank’s cumulative losses since 2021 have eliminated its equity, leaving it with negative equity of about $13.5 billion.

Governor Michele Bullock said the negative equity position does not affect the central bank’s operations or ability to conduct monetary policy, but noted that rebuilding capital over time remains important. The government has indicated support for restoring the bank’s capital by allowing it to retain future profits.

While the central bank’s financial position reflects the lingering impact of pandemic-era interventions, Australia’s government continues to prioritize long-term defense investments, with the AUKUS submarine program standing out as the most significant strategic and industrial undertaking in decades.

The combination of major defense spending and ongoing economic adjustments highlights the scale of Australia’s effort to reshape its military capabilities and industrial base amid shifting global and regional dynamics.