Australia's biggest defence projects blew out by $5.5 billion — just from exchange rate movements

ANAO's 2024-25 Major Projects Report (Auditor-General Report No. 16 of 2025-26) found $5,512.9 million in exchange-rate-driven budget variations across 21 major defence projects. Total expenditure on these 21 projects: $37.4 billion.

The F-35 Joint Strike Fighter alone accounts for $3.1 billion (57%) of the exchange-rate blowout. Australia signed fixed-price foreign-currency contracts without adequate currency hedging — effectively exposing billions of taxpayer dollars to foreign exchange risk with no protection.

The Hunter Class Frigate has a "real variation" (project scope change) of $19.7 billion — the project has changed so dramatically in scope that 3 fewer ships are now being built (originally 9, now contracted for 6). Exchange rate losses compound the scope variation.

Australian households: 10.8 million. Total exchange-rate losses of $5.5B = approximately $510 per household in additional defence spending that could have been avoided with standard hedging instruments.

This is not bad luck — it is a procurement governance failure. The Commonwealth Procurement Rules require value-for-money assessment. Signing billion-dollar foreign-currency contracts without FX risk management is a direct breach of that standard.

Sources:

- ANAO Major Projects Report 2024-25: https://www.anao.gov.au/work/major-projects-report/2024-25-major-projects-report

- ASPI Budget Brief 2025-26: https://www.aspi.org.au/report/the-cost-of-defence-aspi-defence-budget-brief-2025-2026/