Australian government approves landmark shipbuilding deal with Austal

The Australian Government has approved a Strategic Shipbuilding Agreement with Austal that will establish the company as the Commonwealth's strategic shipbuilder for Tier 2 surface combatants at Henderson, Western Australia, according to an announcement on Monday.

Under the agreement, Austal Defence Shipbuilding Australia, a newly created subsidiary, will become prime contractor for the LAND8710 programs including 18 Landing Craft Medium vessels and eight Landing Craft Heavy vessels over the next decade.

Austal chief executive Paddy Gregg said the approval represents a defining moment for the company. “It will establish Austal Defence Australia as the Commonwealth of Australia's strategic shipbuilder for Tier 2 vessels in Western Australia,” Gregg said on Monday.

The first Landing Craft Medium program is expected to be worth $1-1.3 billion over eight years, with contracts finalised in the first quarter of financial year 2026. The final vessel is scheduled for delivery in 2032.

The 15-year agreement includes unique governance arrangements where the Commonwealth will hold a single “Sovereign Share” in Austal Defence Australia, providing oversight rights whilst Austal retains day-to-day management control. The Commonwealth can exercise a call option to acquire the company under certain circumstances, including potential foreign takeovers.

The deal aligns with Australia's continuous naval shipbuilding policy and efforts to build sovereign defence manufacturing capability in an increasingly complex strategic environment.

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