ESSENTIALS

— AUKUS Pillar II: Refocused or scaled back?

— Fossil fuel carrot in Coalition migration plan

— High Court throws spanner in works of coal mine

POLITICO and Netflix are hosting an exclusive screening for Playbook subscribers, of new episodes of The Diplomat, starring Keri Russell and Allison Janney. It’s next Wednesday, Oct. 14. Drinks from 6:00 p.m., screening from 7:30 p.m. Seats are first-come, first-served: RSVP here.

DRIVING THE DAY

AUKUS IS GETTING AWKWARD

The second half of AUKUS — beyond the nuclear-powered submarines — is floundering, forcing officials to consider drastically narrowing the scope of the project.

The Pentagon, in a statement to POLITICO, said it has “restructured AUKUS Pillar II to accelerate progress, focusing on clearly-scoped projects rather than broad working groups with amorphous lines of effort.”

The U.K. and Australian Defense Departments, and ministers Richard Marles and Pat Conroy declined to comment to Playbook (Conroy was happy to chat subs, see below).

The Trump administration — whose export controls on sensitive technology make some Pillar II transactions difficult — now wants to put the focus almost squarely on drones and missiles.

Another reason for needing that new focus: a munitions crunch generated by the massive demands of the Iran war.

Defense Department First Assistant Secretary David Nockels said in June that Australian officials have been seeking to narrow the “Excluded Technology List,” and update the Missile Technology Control Regime, to reduce the costs and increase the speed of technology transfer. “We’re currently running an advocacy program into the U.S. system, I’ve met with U.S. Congress staffers, we’ve got a full court press there.”

Currently covering eight workstreams, “Pillar II” focuses on everything from uncrewed submarines (underwater drones) to artificial intelligence and quantum computing. A significant amount of AI work has already been shifted to NSA and ASD to handle separately, meaning that under the new missile and drone priorities there are five deprioritized workstreams.

Anyone working in these fields faces a tangle of export control rules, regulatory headaches, and complex existing weapons programs. The problems have become so bad they have prevented weapons from coming off production lines in all three countries according to five current and former military officials involved in the project that POLITICO spoke to.

PRESSURE MOUNTING: Pillar II “is now looked on with a fair degree of skepticism by industry here,” said one Australian official who, like others, was granted anonymity to speak about internal deliberations. “They haven’t been seeing the contracts flow.”

With a need to resupply dwindling arsenals, and a lack of cash to pull from other parts of federal budgets in all three countries, policymakers are now focusing on a handful of more doable programs tied to autonomous systems and mass-produced weapons that already exist, the Australian official said.

SLOW HORSES: A U.K. parliamentary commission said in April that progress on Pillar II had been “inadequate” and was “rapidly losing credibility.” An initial four key areas had expanded to eight and officials started flirting with adding other nations — including Japan — to the deal.

“Yes, industry in all three countries are frustrated by slow progress,” said a person close to planning for the pact. Pentagon policy chief Elbridge Colby last year conducted a review of the three-nation pact, which a former U.S. defense official said set the program back by months.

RED TAPE: “Even if all three countries agree they wanted to buy the same thing, there’s no real mechanism,” the former official said. “We’re all on different budget schedules. There’s laws about who can do repairs. There’s questions of intellectual property.”

“I hear stories all the time about regulatory barriers that [officials are] running into,” said Sen. James Paterson, shadow defense spokesperson told Playbook in a recent interview. “I don’t think we’ve nailed it yet. And I think we’re at risk of not achieving the full potential of Pillar II.”

TRUMP’S MIDTERM AUKUS BUMP: Better news over in AUKUS Pillar I — the subs — with the U.S. President pledging $9.5 billion to take a 40% stake in a new Baltimore shipyard, where Virginia-class submarines will be built.

Defense Industry Minister Pat Conroy told Playbook: “All three AUKUS nations are committed to boosting their respective industrial bases and this is another step in that direction.”

UP ON AI

Australia’s biggest data center developer, Firmus, will front the joint select committee on AI at 10:30 this morning. The company is targeting the Australian sharemarket’s second-biggest float, at around $44 billion, later this month. It already operates data centers in Melbourne and Singapore, and wants to spread its footprint to Tasmania (where it’s facing significant blowback) and beyond.

Its message: The more Australian data center operators you support, the more tax revenue and jobs you keep onshore.

Read between the lines: We’re the key to Australia getting a foothold in the global AI supply chain.

What Firmus wants: AI data centers as a distinct infrastructure category, national benchmarks for energy use, prioritization for projects in the national interest, a coordinated national AI infrastructure strategy.

STATE OF THE NATION

COALITION MIGRATION TARGET ‘IMPOSSIBLE’

Angus Taylor has been out selling the Coalition’s migration policy to cut net overseas migration to 100,000 for two years, then 130,000, then 160,000.

‘Trust us’ on costings: Taylor can’t get his lines straight on the economic impacts of the policy. And he won’t show us the Parliamentary Budget Office homework until election time.

On Tuesday, Taylor claimed on ABC 7:30 “we have revealed the costings” and also said the package was “budget neutral.” Yesterday he’d nuanced this to having released the “outcome,” which he claims is a $260 million boost to the budget over four years.

When you’re competing against One Nation, who used the pages of the Australian Financial Review to assert that eliminating net overseas migration would save renters between $2,000 and $4,300 a year — why would you bother with PBO costings?

What detail there is: Basically, it’s a table showing the four-year impact on the total number of people on various visa categories, with the biggest cuts to bridging and temporary protection visas (down 394,700) and temporary graduate visas (down 261,200). The Coalition suggests there will be 60,400 more temporary skilled workers in the country and 45,000 more from bringing back project visas.

WHY 100,000 TARGET IS “IMPOSSIBLE”: Former deputy secretary of the Immigration Department, Abul Rizvi, told POLITICO that “based on the policies they’ve announced, net overseas migration of 100,000 is impossible. I think their outcome would be closer to 200,000 than 100,000.”

Please, explain: Faster processing of people on bridging visas either doesn’t reduce net overseas migration because they move onto another type of visa, or isn’t possible because there aren’t enough permanent places for parents and partners, who are already onshore.

FOSSIL FUEL CARROT IN MIGRATION PLAN: The Opposition’s proposal to bring an extra 45,000 temporary skilled workers into Australia for major projects is designed to boost developments including the gas fields at Beetaloo.

The Coalition’s shadow home affairs minister Jonathon Duniam told POLITICO the major projects visa will be used to fix labor supply bottlenecks and complements an earlier policy to fast-track national strategic priority projects including fossil fuels.

HIGH COURT THROWS COAL PLANS INTO DOUBT

The High Court has thrown an extra obstacle in the way of future coal projects, ruling in favor of a climate group opposing MACH energy’s expansion of a coal mine in Muswellbrook, in the NSW Hunter Valley.

In a nutshell: To comply with a NSW law, the court ruled planning authorities need to factor in emissions caused by fossil fuel exports overseas — known as scope 3 emissions — when approving new coal mines.

Yes, but: This is not a constitutional ruling, meaning the NSW state government could amend its planning laws or intervene to approve this specific mine. The Minerals Council and Angus Taylor have both called for a legislative fix.

Not so hasty: NSW Labor stressed the ruling applied to one decision made through the approval process under the former Coalition government. “It does not mean the expansion cannot be reconsidered or that coal mine extensions cannot be approved,” Finance Minister Courtney Houssos said. “MACH Energy has indicated it will continue to pursue options for the project, and we will engage closely with the company as it does so.”

Not our problem: Environment Minister Murray Watt stressed this was about “a very specific requirement” under NSW state laws.

Albo’s awkward timing: The court ruling exposes a long running tension in Labor’s climate and industry policies. The party wants to cut emissions, and it also wants to host heavy industries that increase emissions. The court ruling makes it harder to pretend that more of one will not come at the cost of the other.

The prime minister, who supports the coal mine, wanted to spend this week’s pre-COP meetings in the Pacific showcasing Australia’s efforts to curb climate change. That’s harder to pull off if he decides to keep backing a mine that is helping to put those nations under water.

Just as: A senior energy analyst accused him of “gaslighting” the Pacific, and his handpicked climate tsar, Matt Kean, urged him to go faster on renewables to meet his 2030 targets. Full details from Rosie Lewis in The Australian.

GREEN SHOOTS

The High Court decision boosts the combative stance toward Labor of the new Greens leadership team, Sen. David Shoebridge and Sen. Steph Hodgins-May. “In true form, the prime minister said he wanted the coal corporation to win this case,” Hodgins-May said. “You cannot claim to be serious about climate action, to lead climate negotiations at COP, all while continuing to approve new fossil fuel projects.

VICTOR’S VERDICT ON AI IN THE PUBLIC SECTOR

Former NSW Digital Minister Victor Dominello says working in politics gave him a lot of angst, but policy gave him joy. He’ll be expressing that joy at the launch of a new book, co-authored with Daniel Nellor, this afternoon at Sydney’s Salesforce tower.

Since leaving politics in 2023, Dominello has been focused on calling governments not just to catch up with technological changes, but to get ahead of the times. His new book, “Government 3.0: A Vision for Public Service in the Age of AI,” offers a new approach to public sector thinking.

Some key points:

— Take the razor to the ERC: (Kind of). Traditional government funding models don’t work in the age of AI, instead allowing digital systems to degrade before they come to the attention of Expenditure Review Committees. NSW set up a $2.2 billion fund that allowed for fast approvals of digital works, on the proviso that projects benefited more than one portfolio.

— The cause is also the solution: Digital technology can help people displaced by AI. Dominello imagines two court translators displaced by real-time translation on smart glasses. “Worker A holds her qualifications in a Skills Wallet issued by training providers as verifiable digital credentials, cryptographically signed, and instantly checkable. AI analyses her skills, scans the market, and recommends targeted micro-courses. Within weeks, she is back in work.” Worker B, whose qualifications are on paper only, has a much harder go of it.

— Keep politics out of the sandbox: Build bipartisan support for innovation. The COVID-19 pandemic forced states to innovate. While NSW Digital Minister, Dominello was able to get public servants to establish a digital border pass for drivers crossing between NSW and Victoria within 36 hours. The crisis mindset enabled this.

— Predictive maintenance: A public housing development could install an AI system that continuously analyzes data from sensors so that every washing machine, every light in a corridor and every solar panel could be monitored. The AI could identify factors causing assets to fail.

THE PLAYBOOK INTERVIEW

FATHER PAOLO BENANTI — WILL AI EVER GET A SOUL?

Father Paolo Benanti, is a Franciscan friar who became the Vatican’s go-to adviser on artificial intelligence. Amanda Copp sat down with Father Benanti in Canberra.

This interview has been edited for length and clarity.

How does a Catholic friar, who lives in a monastery, get involved with something like AI?

The Franciscan order and science have always been tied together. My background is an engineer, and then I studied philosophy, and a PhD working at Georgetown University in Washington, D.C. about ethics and technology.

How are AI companies doing on ethical behavior?

Ethics means a lot of things. If you talk about values … I’m Catholic, and Catholicism has a high value connected to marriage. But I didn’t marry anyone myself, so a value cannot be for everyone. Religions now represent the majority of living people on the earth. If we have principles that are workable among the differences in religions and in human beings, well, that could be used to help social coexistence with autonomous technology.

You advise Pope Leo XIV on artificial intelligence. Why did he choose to write on artificial intelligence as his first encyclical?

Pope Leo in his first speech, he said, “I take the name Leo because another Leo before me, Leo the 13th, lived in a moment when the Industrial Revolution changed society.” I feel that we are in a similar moment, but what is changing now is AI. What does the Church have to offer to the world? Well, the wisdom that is given inside the social doctrine of the church and simply to reflect with everyone — what does it mean to be human in a time of AI?

Are you worried about what the future holds with AI?

I’m a man of faith, by contract, I have to be positive! It’s not a doom. We can’t be naive. If a lot of capital is going in that direction, there is a lot of interest and a lot of power. But it’s not a doom. Every one of us has to request the direction that we would like to go in the future. And so the core question is what kind of society we would like to give to our next generation of citizens?

Would AI models benefit from having some kind of religious framework built in?

No, not at all. Society has a huge benefit if it remains open to personal conviction and the difference of religions, and so an AI that would like to be respectful of human society has to be open in the same way in which society is. It’s not a matter to include the 10 Commandments inside the AI. It’s a matter of making an AI that is respectful of the different human beings living on the earth.

How could AI help the world?

Absolutely. It’s a long journey. 70,000 years ago, when a member of our species took a club stick in his hand, was it a tool? Or a weapon? There are a lot of tools that could be AI-driven. If we are keeping the human in the loop and able to drive the process, we will see a lot of benefits that will come from AI.

CANBERRA MEETS WORLD

WILL TRUMP ICE HOCKEY? Former Australian ambassador to the U.S. and Trump golfing buddy Joe Hockey let fly on corruption in Washington on the ABC’s 7.30 last night.

“There’s just too much of a blurred line between the financial interests of various administrators — including the Congress — and the private sector,” he said.

Is he talking about Trump? “That’s not for me to comment on.”

Hockey was also frank in his assessment of Trump’s chances at the upcoming U.S. midterm elections. “In my view, it’s highly likely he’ll lose control of the House and even the Senate,” he said.

POSITIVE SPIN

The government has faced criticism over the lack of world leaders attending pre-COP, but Energy Minister Chris Bowen feels misunderstood: “I said we wanted to bring the world to Tuvalu. Yesterday we did!”

As the ABC’s Stephen Dziedzic points out, that’s news to Australian officials who told foreign officials “only world leaders were welcome.”

That’s something! Playbook has been told Bowen will sign the 35-by-35 pledge, committing to 35% global electrification by — you guessed it — 2035. He’ll sign with Turkish COP31 President Murat Kurum. Turkey’s leader Recep Tayyip Erdoğan didn’t travel to Tuvalu.

LOCAL CANBERRA

SEEKING PERPETUAL INDULGENCE: Is the Catholic Church the key to Canberrans finally getting their new stadium? Finance Minister Katy Gallagher seems on board. Read — and see — the full details from the ABC.

Independent senator for the ACT David Pocock warns the current stadium location in Bruce, off main public transport routes and near a hospital, could impede access to emergency services on game day. “This feels like a unique opportunity to end a decades’ old impasse,” Pocock said.

Nick Tyrrell, Liberal Senate candidate for the ACT, is also backing the plan.

Parking poopers: ACT Planning Minister Chris Steel has questions about how thousands of Canberrans could access a site near Civic.

PLAYBOOK FEEDBACK

A reader with a keen eye read Playbook’s interview with Coalition frontbencher Dan Tehan, lasering in particularly on this claim about the Australia-EU free trade agreement facing choppy waters in the Senate: “So there’s that — plus the fact that climate has been brought into a free-trade agreement, something we avoided when we were in government.”

Our reader points out that the 2021 Australia-U.K. free trade agreement trumpeted by nickname-loving PMs BoJo and ScoMo included a “commitment to address climate change” including under … the Paris Agreement.”

This FTA was signed by Australia’s then trade minister. His name? Dan Tehan.

BIRTHDAYS

Former Nationals leader and deputy PM Warren Truss, European Union Commission President Ursula von der Leyen, London Mayor Sadiq Khan, iconic Australian actor Paul Hogan.

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What if subs are the easy part? AUKUS tech pact narrows focus to drones and missiles.