The Australian navy wants to replace its submarine fleet but budget cuts may affect the plan.

The Australian navy operates a fleet of six diesel electric Collins class submarines, with the first entering service in 2000. Planning for the Collins class submarines, designed to replace the navy's Oberon class submarines, began in the late 1970s.

The Collins class vessels, Australia's first indigenous built submarines, were constructed by the state-owned Australian Submarine Corp. defense firm. The submarines are an enlarged version of Swedish shipbuilder Kockums' Vastergotland class.

The new submarines are to be built by ASC Pty. Ltd., formerly the Australian Submarine Corp, at Osborne in Adelaide, South Australia, The Australian Financial Review reported Wednesday.

The Australian navy had hoped to secure funding to construct 12 new boats, as its Collins class submarines are to begin decommissioning from 2025 onward.

The submarine acquisition project was projected to cost $36.8 billion, making it the largest weapons acquisition effort undertaken by the Australian military.

The navy's proposal called for concept work to begin in 2009, preliminary designs to be drawn up 2011-13, with detailed design lasting to 2016, when construction would begin.

The preliminary timeline would have seen the new boats being commissioned before the Collins submarines began phasing out but was delayed. The preliminary design phase didn't begin until May 2012, with the revised projected date for commissioning the first new submarine now set for 2030 at the earliest.

A draft of the government's forthcoming defense white paper was leaked to the media. In it the government of Labor Party Prime Minister Julia Gillard justifies the projected possible decreases in the country's defense budget by arguing that a return to a government budget surplus is critical to underwriting Australia's defense posture, leading Defense Minister Stephen Smith to refuse to rule out further reductions.

While the government has embarked on a $150 billion procurement program, which includes not only the submarines, but surface ships and fighters, the budget for the high-priced items is already facing a shortfall of $25 billion, along with cost overruns and delivery schedule delays.

The fiscal uncertainty is leading the Australian navy to develop contingency plans to retain its current fleet of Collins submarines until the government's defense financial priorities become more stable.

Analysts predict that given the submarine programs $36.8 billion price tag, the government's decision about the program may be the most important defense issue to face the Labor government before the election, which will probably be next month.

The May budget will be expected to unveil the government's plans for future defense spending, especially planned procurements, although some elements are expected to leak out before the budget is presented to the legislature.

In the interim, Smith has promised that "core capabilities" will be delivered, with his wish list apparently including the F-35 Joint Strike Fighters, the submarines and, possibly, a third air warfare destroyer.